Written answers

Thursday, 23 September 2021

Department of Housing, Planning, and Local Government

Local Authorities

Photo of Seán CanneySeán Canney (Galway East, Independent)
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236. To ask the Minister for Housing, Planning, and Local Government if he will consider increasing the Local Government Fund to address the ongoing lack of funding to Galway County Council. [45772/21]

Photo of Peter BurkePeter Burke (Longford-Westmeath, Fine Gael)
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The funding system that applies to local authorities is a complex one, as authorities derive their income from a variety of local sources including commercial rates, Local Property Tax (LPT), charges for goods and services and funding from Central Government. It is a matter for each local authority as to how it can maximise local income sources and manage its own spending, in the context of the annual budgetary process.

Central Government funding of local authorities similarly presents a complex picture, with transfers, both current and capital, coming from a wide range of Departments and Offices, not solely from my Department, for a variety of purposes. Some streams of funding are delivered directly from funding departments to local authorities, while others are routed through departmental agencies.

Most of the funding sourced from Central Government and provided to local authorities must be used for specified services. These can be grouped into 5 broad programme categories: recreational, education, environment, housing and transport.

In 2019, total transfers of funding from all central government sources to local authorities exceeded €2.6 billion. Additional detail on Central Government funding of local authorities is provided in the Comptroller and Auditor General's Annual Report, accessible at the following link:

www.audit.gov.ie/en/Find-Report/Publications/2020/2019-Annual-Report-Chapter-2-Central-government-funding-of-local-authorities.pdf

Across all schemes and funding sources my Department provided €51.1m in 2019 and €82.9m in 2020 to Galway County Council. The increase in 2020 was due to an increase in capital funding for housing, the Covid Rates waiver and for additional expenses and lost income due to the Covid pandemic. The payments in 2020 also included a once-off allocation of €1m. This funding was linked to the operation of municipal districts and was subject to a small number of requirements, including that the funding be divided equally among the municipal districts.

LPT was introduced to provide a stable and sustainable funding base for the local authority sector, providing greater levels of connection between local revenue and associated expenditure decisions. LPT broadens the tax base by reducing the level of central funding required by local government.

Local retention of LPT was introduced in 2015 and since then, 80% of the estimated LPT liability in each local authority area for a given year is retained in that area to fund public services, notwithstanding any local variation decisions. The remaining 20% of LPT is currently re-distributed via the Local Government Fund to provide equalisation funding to those local authorities that have lower property tax bases, due to the variance in property values and density across the country.

My Department recently confirmed provisional LPT allocations to local authorities for 2022 amounting to €528m, notwithstanding any local variation decisions. The €34.3m shortfall between the 20% contribution from all local authorities and the total amount required for equalisation is met by the Exchequer. Local authorities may vary their LPT rate by up to 15%; authorities that increase the rate retain 100% of the additional income, while local authorities that decrease the rate bear the full reduction in income. I note that Galway County Council has not opted to avail of this opportunity since 2018.

The Programme for Government 'Our Shared Future', commits to bringing forward LPT reforms. These reforms will involve bringing new homes, which are currently exempt from LPT, into the taxation system as well as providing for all money collected locally to be retained within the county. This will also be done on the basis that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer, as is currently the case.

When detailed information on the new LPT yield, becomes available following the revaluation process, my Department will review the allocation process.

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