Darren O'Rourke (Meath East, Sinn Fein)
Link to this: Individually | In context

92. To ask the Minister for Housing, Planning, and Local Government his plans to improve the fairness in local government funding to individual local authorities; and if he will make a statement on the matter. [52990/25]

James Browne (Wexford, Fianna Fail)
Link to this: Individually | In context

Local authorities are entirely independent corporate entities having full responsibility under law for the performance of their functions and the discharge of their governance and other responsibilities. They provide in excess of 1,000 services on behalf of over 30 public bodies. Accordingly, the funding system for local authorities is a complex one, as authorities derive their income from a variety of sources including commercial rates, charges for goods and services, Local Property Tax (LPT) as well as funding from Government Departments and other bodies. 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 for a variety of purposes. 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.

I acknowledge the current financial environment in which all local authorities, are operating, and the pressures facing them in respect of general inflation and higher costs. Every effort has been made to provide support to the sector in the delivery of its functions.

In 2024, funding from central government to local authorities totalled around €8.6 billion, of which my Department provided just over €5 billion across all schemes and funding sources. Central government funding to local authorities has more than doubled since 2019. Local authorities vary considerably from one another in terms of size, population levels, population distribution, public service demands, infrastructure and other income sources, all of which must be taken into account when comparing levels of funding in different local authority areas. The criteria for the distribution of central government funding varies by the scheme in question and is determined by a range of factors.

Central Government has traditionally provided non-programme funding to local authorities; in the form of an annual contribution towards meeting the cost of providing a reasonable level of service in their area. Up until 2014, this was in the form of a General Purpose Grant (GPG), and in 2015, it was replaced by Local Property Tax allocations, which were linked, to the most part to the GPGs.

It is important to note that while LPT is an important source of own-use funding, it was just 6% of the overall current income of the sector in 2023. Annual funding allocations from LPT are decided in accordance with Government approved distribution policies, and are based on estimates of the yield and the baselines in individual local authority areas. Under the LPT allocation model, every local authority has a minimum level of funding available to it, known as the baseline. A review of baselines was completed by a working group in 2023, and it identified that the baseline funding of some authorities needed adjustment according to the criteria of population, area, local income, deprivation and achievement of National Policy Priorities. The Government agreed that these adjustments be applied, and furthermore that every local authority would receive a minimum increase of at least €1.5m. The intention is to carry out a similar review every 5 years.

Building on the baseline increases of 2024, there will be a further increase of €42m in 2026, which will ensure that any benefit from the revaluation of LPT will go directly to the sector where it is needed. In addition, the allocation model for 2026 is changed to allow those authorities with an LPT income above their baseline to retain a greater portion of the surplus for their own use, increasing from 22.5% to 31% of overall yield.

Both changes together will lead to an increase in own use funding in the overall sum of €85.4m; a substantial increase in recognition of the challenges facing local authorities in respect of increasing demands and higher prices.

In line with commitments in the Programme for Government, a Local Democracy Taskforce has been established to reform and strengthen local government. The work of the Taskforce is focused across four themes. One such theme is the funding of local authorities. The Taskforce will bring forward proposals for Government consideration, including in the area of enhancing local authorities’ fiscal autonomy. I look forward to engaging across Government on these matters of importance to local democracy in advance of any proposals being finalised.