PAC Meeting | June 25, 2015
Department of the Environment, Community and Local Government called and examined
Deputy John Deasy: Mr. McCarthy and his officials are welcome. I seem to remember that the first time he appeared before us the household charge, which was the local property tax subsequently, and what percentage of that would be channelled back into local government arose as an issue.
There was a bit of debate nationally. The figure that was bandied about at the time was approximately 85% or 90%. According to Mr. McCarthy, the hope was that 85% would be thrown back into local government generally. Of the funds collected so far, how much has gone back into local government?
Mr. John McCarthy [Secretary General, Department of the Environment, Community and Local Government]: As the Deputy knows, local property tax, LPT, is collected by the Revenue Commissioners, after which the Minister for Finance moves an amount across into the Local Government Fund equivalent to whatever has been collected from the LPT. In effect, the full 100% of proceeds in 2015 are returning to local authorities.
This comprises two elements: 80% of the LPT in each local authority area returns to it while the balance of 20% is used for equalisation purposes in respect of the 17 or 18 local authorities that are otherwise at a loss by virtue of the introduction of LPT.
Deputy John Deasy: Everything goes back.
Mr. John McCarthy: Yes.
Deputy John Deasy: And has gone back. No one else has stuck a hand in and grabbed any part of the 20%.
John McCarthy: No. Some local authorities, by virtue of the way the formula works, are in receipt of a significant windfall gain. In terms of that windfall gain, those local authorities can keep the equivalent of 20% of the LPT proceeds in their area and they are expected to use the balance towards funding housing and roads programmes that would otherwise have been funded by the Exchequer.
Deputy John Deasy: Who has got the most money?
John McCarthy: It would be the Dublin local authorities because they would have the stronger residential property base.
Deputy John Deasy: It is as simple as that. The next issue came up with the Department of Public Expenditure and Reform. One of its most recent reports suggested that the abolition of town councils would be reviewed in some fashion.
I had a discussion with Mr. Robert Watt about how that would play out. Town councils have been abolished. I hear both sides of the argument regarding the Department's position. Some people are making the case that services have diminished as a result of the abolition in particular locations.
Some people tell me they have seen no difference. Does the Department have a plan to determine how people feel their services have improved or disimproved since the abolition of town councils?
John McCarthy: We are just coming now to the first anniversary of the new arrangements coming in since the town councils were merged with their counties.
The Minister has said that first anniversary provides an opportune time to see how those new arrangements have worked out in the first 12 months, acknowledging at the same time that the significance of the changes that were introduced are likely to take longer than 12 months to really come to fruition.
He has established a group to look at this, working with selective representatives to start to get a sense of the extent to which particularly the new municipal districts in place of town councils are working out in practice.
Deputy John Deasy: Can Mr. McCarthy flesh that out for me? How does this work? Getting feedback from councillors is fine. What exactly is the proposal? Is it piecemeal? Has it not been though through yet? Is there a definite plan with regard to surveying?
John McCarthy: The modalities of how it actually works will need a little more time to work their way through. It is not a sense that we are in the business of reintroducing town councils, but-----
Deputy John Deasy: I am not suggesting that.
John McCarthy: Absolutely, I know that. It is really to try to get a sense of the extent to which the new arrangements are or are not working out well in practice. We just need to work through how that will actually be done.
Deputy John Deasy: Is it right that there is no specific plan in place to determine whether there has been improvement or disimprovement when it comes to the abolition of town councils and the restructuring of local government generally?
John McCarthy: Yes, we are looking at that at the moment.
Deputy John Deasy: I think the Department should. This committee deals with how money is spent. The change was so transformational with regard to the local authorities and those living there that there should be a plan for how to determine that on an ongoing basis to see if things are working or not working.
Some people already have very definite opinions about the weaknesses in the system one year on. The Department should take a more proactive approach in determining whether this is working considering the amount of money we spend on local government. It is a fairly basic request when it comes to the provision of services for citizens trying to find out if they are getting value for money. I think it is fundamental.
John McCarthy: One of the other pieces of work that will be important as part of that is the work the National Oversight and Audit Commission is doing on performance indicators for local authorities in order that we are in a position to be able to track performance under a range of headings between local authorities and over time. That will feed into it as well.
Deputy John Deasy: I do not know if the Department of Public Expenditure and Reform has moved that on at all. I do not know if Mr. McCarthy knows what I am talking about. It was discussed when Mr. Robert Watt last appeared before the committee.
John McCarthy: I am not familiar.
Deputy John Deasy: That is fine. By the end of 2013 there was an estimate of €103 million in expenditure on the Mahon tribunal. In September 2014 a final estimate was put on the planning tribunal at roughly €159 million. Where are we at with the tribunal right now? What is the estimated price tag?
Mr. John McCarthy: The estimate for the overall cost of the tribunal remains at the figure the Deputy outlined there. It was just over €158.5 million, almost €159 million. By the end of 2014, up to the end of last year, €111 million had been spent.
The balance of about €47 million is to be spent over this year and, it is hoped, next year, but the ultimate timescale for when the cost will finally crystallise will be partly determined by the resolution of a number of ongoing legal cases. The tribunal has confirmed, however, that the overall cost estimate of €158.5 million, about €159 million, remains valid.
Deputy John Deasy: That remains. I obtained some information from Waterford County Council which is probably applicable to every local authority. It suggested that the allocation for roads in Waterford was 40% less than the allocation made in 2008. I do not know if that strikes Mr. McCarthy as being correct.
Those are the figures I obtained. It indicated there had been a massive drop since 2008. I am not quite sure why 2008 is chosen, but we know there has been a drop. We have had a couple of pretty benign winters. The case it is making to me and others is that it is not feasible to provide the appropriate road infrastructure with current levels of funding. Can Mr. McCarthy assist me with that?
Mr. John McCarthy: I cannot really assist the Deputy on that one because the roads budget comes through the Department of Transport, Tourism and Sport now. I would not have-----
Deputy John Deasy: The local government fund was part of that.
John McCarthy: There is a payment out of the local government fund that goes across to the Department of Transport, Tourism and Sport and it makes the allocations to individual authorities. How they would have changed between authorities or over a period of time---
Deputy John Deasy: Does Mr. McCarthy consider that the Department of the Environment, Community and Local Government has no role in the allocations?
John McCarthy: There was an arrangement in place as to how that share of the local government fund was to go the Department of Transport, Tourism and Sport, but after that we would not have any information on how that is used.
Deputy John Deasy: So that is a big "no". That is okay.
John McCarthy: I regret I cannot help the Deputy on that one.
Mr. Seamus McCarthy [Comptroller and Auditor General]: If Deputy Deasy wants to look on the screen, he will see a figure from the chapter that may illustrate the point of drawing together from the various sources the funding. He can see what happened nationally to funding provided to local authorities for transport.
The Deputy can see the funding for national roads. As the Accounting Officer has said, there is a payment from the local government fund to the Department. The Department then pays out voted funds.
Some of those funds go through the National Roads Authority and so on, and then on to local authorities. The figure for national roads transfers has gone down from €1.5 billion to probably about €250 million. The amount for regional and local roads has not gone down by quite as much, but it is still down.
Deputy John Deasy: That is a massive drop when it comes to the national roads.