Dáil Éireann - Volume 616 - 08 March, 2006

Priority Questions. - Local Authority Funding.

  3. Mr. McCormack asked the Minister for the Environment, Heritage and Local Government if he intends to instruct local authorities to initiate a review of development charges due to the inconsistency at which they are levied from county to county; and if he will make a statement on the matter. [9783/06]

  Mr. Roche: Development contributions are levied as a condition of planning permission in accordance with development contribution schemes adopted by the elected members of planning authorities after a public consultation process. This approach was endorsed by the Oireachtas in the context of the Planning and Development Act 2000. It enables local authorities to estimate the cost of infrastructure and community facilities needed locally and to recoup some of that cost from developers.

Due to the fact that development contribution schemes address different local needs and circumstances, contributions associated with these schemes may vary between local authorities. However, a developer can establish in advance the contribution that is likely to be levied on a particular development.

Planning authorities have been advised by my Department that while developers should make an appropriate contribution towards the costs of public infrastructure and facilities, care should be taken to avoid development contributions that are excessively high. They were also advised to be mindful of the policies adopted by other authorities in their immediate area so as to avoid a major divergence in the level of contributions charged. It is manifestly in the interests of all local authorities to protect their local competitiveness.

My Department recently established an interdepartmental committee to look at issues raised [512] by different interests in respect of development contributions. The committee is examining the existing guidance issued to planning authorities. I will consider the report of the committee in deciding whether additional guidance should be issued to planning authorities before they next review their schemes. I anticipate that the committee will report within the next two months.

  Mr. McCormack: I welcome the fact that an interdepartmental committee will be established to examine development levies. Up to €500 million was collected in development levies last year. Where is the transparency regarding how this money is spent? It is all very well for the Minister to say that elected members of local authorities have a say in this but the reality is that they have very little say in how development levies are spent. While development levies are collected in one area, they can be spent in another area.

Does the Minister accept that the introduction of development levies has added to the price of houses, particularly for first-time buyers? It has added greatly to the cost of houses for young people who find it very difficult to acquire houses today. Recent statistics show that the average price of a house for a first-time buyer is €250,000 but a person would not be able to get a house for that price in Dublin or Galway. Does the Minister accept that the imposition of development levies adds greatly to the cost of new houses, particularly for first-time buyers? We do not know where the money from development levies is spent and there is no transparency in the process.

  Mr. Roche: I agree with Deputy McCormack that the process for dealing with development levies is not as transparent as it should be. Before the recent local authority estimates were produced, I wrote to all the county managers informing them than I expected them to be open and transparent as to the amount of money they were collecting in levies. It is a matter for local authorities and local councillors to demand a full account of where the levies are spent. Members of local authorities are elected to carry out this specific task.

However, I do not agree that the burden of all development should fall on the general taxpayer. We must remember that the levies are intended to recoup some of the costs of public funds and servicing land and to provide for future developments. Deputy McCormack was correct in stating that the amount of money collected in the form of development levies last year was approximately €500 million. It is very important that local authorities and their members demand that the figures are made available to them. By way of assisting in the local public debate on this matter, I have decided that in future I will publish on my Department’s website a full report on all development levies throughout the country. I will do so because I believe that Members of this [513] House, as well as members of local authorities, frequently do not know the level of levies contributed.

If we believe in local democracy, it is a matter for local councillors to take charge of this issue in their individual councils and require, by way of motion if necessary, that their managers are open and transparent about the way in which the levies are dealt with. Deputy McCormack is aware that the levies are supposed to be hypothecated and ring-fenced for specific purposes. It is very important that councillors ensure that this happens.

  Mr. McCormack: The levies are supposed to be ring-fenced but different levies are applied in different counties. The Minister’s county of Wicklow had one of the highest levies in the country. Is it fair that I, who live in an estate house in Renmore, can receive services without paying any development levy while a first-time buyer is forced to pay it? First-time buyers are being penalised by the Minister’s theory that services should not be free. There should be the same playing pitch for everyone. Everyone has paid for these services several times over due to the stealth taxes introduced by the Government. Does the Minister accept that the only people who are now being penalised in respect of services enjoyed by everyone are first-time buyers? These people must pay a development levy which has added greatly to house prices. The Minister has avoided acknowledging that the imposition of service charges and other measures such as the increase in VAT have added to the cost of buying a house for first-time buyers. How high are development levies in the Minister’s county of Wicklow?

  Mr. Roche: I am very pleased that Deputy McCormack raised the issue of contribution levies in County Wicklow because, as he is aware, his colleagues on the county council reduced the levies before the local elections and increased them after the elections. This was an extraordinary example of levying a stealth tax. It was extraordinary behaviour on the part of councillors, who made the decisions to both lower and raise the levies. If Deputy McCormack has problems with that, he might like to speak to the leader of the Fine Gael group in Wicklow County Council. I certainly disagreed with the approach that was adopted.

Development levies are not simply levied on individual households. Community facilities and some funding for necessary infrastructure are supposed to be covered by levies. I am not sure if Deputy McCormack is suggesting that he would completely abolish levies were he to enter Government. If so, he would pass the cost on to general taxpayers and be forced to tell them where it came from.

[514] We can all play games with the issue of levies. The most important thing we can do in respect of levies is to ensure that they are transparent. I agree with the general thrust of Deputy McCormack’s question, which is that levies should be transparent, that local authority members must have full information and that local communities must see where the money is spent. That is the only way for local councillors and communities to see whether they are getting value for money.

  4. Mr. Gilmore asked the Minister for the Environment, Heritage and Local Government his views on the conclusions of the Indecon report on the financing of local government that between €16 million and €2 billion per annum additional resources will be required by local authorities between now and 2010 to maintain the existing level of service; the way in which he proposes that such additional funding will be provided; the cost of producing and publishing the Indecon report; and if he will make a statement on the matter. [9610/06]

  Mr. Roche: The cost, including publication, of the recently published study in the financing of local government was €291,100. On the basis of different methods of projecting expenditure, the consultants identify that by 2010, local authority expenditure will increase by €1 billion to €2 billion in nominal terms over 2004 levels. Funding this expenditure will be met by a combination of the buoyancy in the existing funding system, some additional funding and the achievement of efficiencies over the period.

As regards the existing funding system, there is significant natural buoyancy in the current revenue sources of local authorities. For example, at local level, the valuation base has grown rapidly as a result of major commercial developments. This produces revenue which is paid directly to local authorities. In addition, revenue from motor taxation, which is paid directly into the local government fund, continues to increase without any increases in the rates of this taxation. In 2006, the fund will amount to some €1.4 billion. I was in a position to announce record levels of general purpose grants to local authorities from the fund amounting to €875 million for 2006. This was an increase of 8% on the 2005 allocation and 2.5 times more than the allocation in 1997.

To supplement the existing income sources, a number of initiatives will be pursued. I am considering ways of bringing issues such as planning fees, which are fixed by regulations, into line with the economic cost of dealing with planning applications. I will introduce legislation to make commercial properties liable for rates from the date of valuation as opposed to the beginning of the following year. This simple move will generate an [515] additional €25 million in revenues for local authorities per annum.

To boost income to the local government fund, I am tackling tax evasion. A number of issues must be dealt with here. Additional revenues will be complemented by a range of efficiency initiatives. In partnership with local authorities, I propose to examine the scope for greater sharing of services between local authorities. I will develop a standard costing system for the sector to deliver enhanced management information, particularly on unit costs. I intend to develop proposals to enhance arrangements for local audit committees, which councillors will welcome. I will continue to ensure that the value for money unit in my Department undertakes in-depth analyses of local authority activities and identifies best practice.

The availability of good information is a key to good decision-making and I have started a process of publishing key financial data on my Department’s website. I am gratified by the fact a number of people have welcomed this initiative.

Additional information not given on the floor of the House.

I have set aside €2 million this year for an innovation fund to identify ways of delivering further efficiencies and to disseminate best practice in this regard to all local authorities. I will be announcing details of this during the year.

  Mr. Gilmore: I take it from the Minister’s reply that he accepts the conclusion in the Indecon report that between €1 billion and €2 billion extra will be required by local authorities by 2010. I want to explore with him where the money will come from. By how much will Government grants to local authorities increase, or will any of the additional money come from the Government? I understand from his reply that he envisages a combination of increases in motor taxation, commercial rates and service charges which are made by local authorities, and perhaps new service charges by local authorities to bring in the bulk of the €1 billion to €2 billion extra which will be required by local authorities. What is the Minister’s estimate of the amount by which grants to local authorities will have to increase to finance this extra expenditure?

  Mr. Roche: As the Deputy will recognise, there is a significant variation in the calculations provided by Indecon. It is suggesting that if expenditure is kept to 3% of GNP, one will get the higher estimate of €5.8 billion by 2010. However, if one bases it on population trends, which is probably more realistic because it is what determines the costings of local authorities, the figure would be €3.8 billion.

With regard to the specifics on where the funding will come from, there has been a significant increase in the resources made available by the [516] Government to local authorities. For example, in 2000——

  Mr. Gilmore: I am talking about the future.

  Mr. Roche: I am talking about continuing a very good trend which the Government has set.

  Mr. Gilmore: I want the Minister to project, not reminisce.

  Mr. Roche: In 1994, when the Deputy’s party was in Government, it allocated €236 million. I acknowledge that this had increased significantly by 1997 to €339 million and it has increased even more significantly to €875 million in 2006. While one cannot project exactly what the figures will be, if the trend continues, significant amounts of money will be involved.

On a number of the specific issues, there has been significant buoyancy in local authority funding, particularly as a result of the increase in commercial rates to local authorities, even without increasing rates. This year, local authorities achieved wonderful things by coming in at approximately 4% — in fact, rates were cut in Limerick city. This efficiency can drive the agenda much more than has been the case in the past. We must squeeze more value for money out of the funding to local authorities. This year, local authorities will spend in the order of €9 billion. If we can get just 1% efficiency out of it, it will be the equivalent of another €90 million. If we can get 10%, it would meet that whole issue.

There are aspects of the report which I do not intend to pursue. I have been up-front about this because I do not believe one can fund local government by levying a penalty on people who have holiday homes in Galway, Wexford, Wicklow or wherever. I do not think that would be a logical decision, nor do I intend introducing new taxes such as rates or stamp duty. However, if there is more efficiency and if we see the kind of growth that we have had, we will meet the difference projected by Indecon.

  Mr. Gilmore: The Minister did not answer my question, which in itself gives me an answer. There is an estimate in the report that up to €2 billion additional moneys will be required by 2010. What is the Minister’s estimate of the amount of that €2 billion that will come from Government grants? As he has not answered the question, I will give him another opportunity to do so.

In his main reply, before he began to waffle in his reply to my supplementary question, he identified motor taxation, planning fees, commercial rates and local charges as the areas from which buoyancy will arise. I want to ask him on behalf of the motorist by how much does he estimate motor taxation will increase to meet the €2 billion? By how much will local charges increase? By how much will commercial rates increase, [517] which will be of interest to the business community throughout the country? They will form their own conclusion when they hear the Minister’s answer to the specific question on the estimate. Given that he has had the report since last October, I presume he has estimated the increases that will be necessary to meet the additional funding to local authorities.

  Mr. Roche: I am pleased the Deputy has given me an opportunity to be more specific. In the area of motor tax, the Government has been able to grow the motor tax revenue into the fund for local authorities without changing the taxation base. This is also my intention for the foreseeable future.

  Mr. Gilmore: Is the Minister saying there will be no increase in motor taxation between now and 2010?

  Mr. Roche: I am saying there have been remarkable improvements in this area. I am saying something else in regard to motor tax, with which I am sure the Deputy will assist me, because I will come before the House at some stage to deal with the issue of dodging motor tax. Efficiencies in collecting motor tax——

  Mr. Gilmore: The Minister should stick to the question. He is waffling.

  Mr. Roche: The Deputy should allow me to answer the question. If we can deal with the issue of dodging motor tax, it will bring in an extra €40 million, which is a huge amount of money.

  Mr. Gilmore: Is this in motor taxation?

  Mr. Roche: I said what I said.

  Mr. Gilmore: What was that?

  Mr. Roche: I said that in 2005, for example, we were able to increase——

  Mr. Gilmore: Will there be an increase in motor taxation between now and 2010?

  Mr. Roche: I am saying that natural growth buoyancy, at which the Deputy sneered, has produced 7% more in 2005.

  Mr. Gilmore: I did not sneer at it.

  Mr. Roche: It produced 10% more this year and my projection is that it will continue to produce that level of growth. If we deal with the issue of dodging, we will be able to put another significant amount of money into the fund.

  Mr. Gilmore: The only dodging is the Minister dodging the question.