Éamon Ó Cuív accuses Equalisation Fund of starving Galway

The problem with the present system of distribution of the Equalisation Fund is that it is neither open, transparent, or equitable. Persistent questions by me over the years have failed to get the rationale behind the present system. This has left a number of councils underfunded, even with the distribution under the Equalisation Fund, and they now have an ensuing crisis in services and staff levels and is seriously inhibiting the work of the council. The report of the Expert Committee set up by the previous minister to examine the amalgamation of Galway City and County Council came to the conclusion that both local authorities in Galway were underfunded and that this issue needed to be addressed forthwith. In fact, even though they were in favour of amalgamation, they said that the funding crisis had to be dealt with first. Particularly in Galway County Council, where the crisis is more extreme, it has left virtually no staff to look after planning enforcement in the whole of the county. It has left a situation where the planning officers dealing with planning applications have to deal with twice as many plannings as equivalent planning officers in the neighbouring county. It has left a situation where we have no staff or not totally inadequate staff to deal with the housing adoption applications, the mobility aids, etc. Other sections of the department where there are more and more grants being offered to local authorities under various schemes, both rural and urban. Other sections are finding it very hard to progress their applications in a suitable way, thus timing the development of the county. Now, Minister, Galway County stretches from Ballinasloe. In fact, on my way home tonight, I will be halfway home when I get to Ballinasloe. It stretches from Ballinasloe to Inishboffin, Clegan, Clifton and Ballykinealy, which are 160 kilometres apart. And actually, you have to go through, and uniquely when you are driving there, you have to go through another local authority to get to the west of the west half of the county. It also stretches from Milltown and Dunmore in the north to Gort and Portumna in the south. So a huge area of land is losing out and it is literally creaking under the present system. I want to pay tribute to the staff who have soldiered on, but we are now at breaking point. The reality is that it is very hard sometimes to get the staff through no fault of their own, they are just too busy trying to firefight, getting planning permissions out and the whole lot and getting planning decisions. So Minister, I am sure you have been given a very fancy script. I had a parliamentary reply today on the same answer and it gives me a lot of trouble about 15% and the LPT and so on. What I am saying to you, you go back to the department, examine how they arrived and how they distributed the Equalisation Fund and if you crack that one, you will have cracked a greater mystery than I have ever seen anywhere else written by Agassiz Christie or anybody else. Sherlock Holmes, the whole lot would not crack the mystery of the Equalisation Fund distribution that goes back about 10 years and has left Galway literally strapped for cash. I want to thank the Deputy for the question. I just want to thank the Deputy as well for giving me the opportunity to outline today the Government's support for local authorities with particular reference to Galway County. As the local authority budgetary period will shortly be underway, my department has notified Galway County Council and all other local authorities of local property tax allocations for 2022 and of a separate allocation as a contribution towards additional costs that will arise in 2022 as a consequence of the national pay agreements and the unwinding of the FEMPI legislation. The allocation in respect of building momentum, a new public service pay agreement 2021-22 is £4.44 million for Galway County Council and it is subjectivist to reduce the cost of pay and pensions next year. In light of the Deputy's concerns about staffing, I trust it will be welcomed. Turning to the funding position more generally, LPT was introduced to provide a more stable and sustainable funding base for the local authority sector, helping provide 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 the LPT began in 2015 and since the overall principles and allocation methodology have broadly remained the same, currently 80 per cent of LPT is retained in the area it is collected, with the other 20 per cent supporting the equalisation for local authorities with LPT bases lower than their funding baseline. The programme for Government, our shared future, commits to bringing forward LPT reforms, including 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. The Finance Local Property Tax Amendment Act of 2021 gave effect to a package of measures in line with the commitments in the aforementioned programme for Government to address the future of the LPT. In accordance with this legislation, the Revenue Commissioners are currently conducting the first LPT re-evaluation exercise, with returns from property owners due to be returned by early November. As the timeline for the re-evaluation exercise does not fully align with the local authority budgetary timelines, including the municipal district budgetary process, LPT allocations for 2022 have been provisionally based on the 2021 LPT yield, with no change next year to the allocation model, that is the 80-20 model. All other elements will be also based on the 2021 figures, including LPT baselines, the equalisation contribution and self-funding of housing and roads from surplus LPT. The Government has signalled its intention that the move to 100% local retention of LPT will be introduced over the 2023-24 budgetary cycles. Any changes to allocation process and funding baselines may be considered in that context. My Department recently confirmed LPT allocations to local authorities for 2022 amounting to £524 million, a figure which includes the impact of local variation decisions. The allocation to Galway County Council from LPT is €14.5 million. This includes €2.7 million of equalisation funding, as the 80% of the LPT retained locally in Galway's case is lower than the baseline or minimum funding level. It is relevant in this context that the elected members of Galway County Council have the option to increase or decrease the LPT rate, which, as with all budgetary matters, is a reserve function of councillors. Galway County Council has not opted to avail of this opportunity for 2021 or 2022. The Council would have benefited from an additional €2.2 million in 2022 if the members had applied the 15% upward variation next year, in the same way as many other authorities have done. Eleven local authorities in a similar position to Galway County Council have decided to maximise their benefit from the upward variation mechanism next year. Separate to any general examination of baselines, it is the longstanding position that the Department will not allocate additional LPT funding to local authorities that have declined to use the revenue-raising tools available to elected members. Across all schemes and funding sources, our Department provided £51.1 million in 2019 and £82.9 million in 2020 to Galway County Council. The increase in 2020 was due to an increase in capital funding for housing as well as funding in respect of the COVID-19 commercial rates waiver and for additional expenses and lost income linked to the pandemic. Galway County Council also received a once-off allocation of €1 million for 2021. 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. My Department is currently reviewing correspondence issued by the Council in respect of this funding to determine if each of the conditions have been complied with. Thank you very much. Minister, in the publication of the Local Authority Times by the IPA, two researchers came to the following conclusion. Equalisation is a key element of a country's intergovernmental fiscal arrangements, where functions of funding are decentralised to sub-national government. Although Ireland is a highly centralised country with limited responsibilities and powers devolved to local authorities, horizontal fiscal imbalances exist and persist. Ireland has a system of equalisation transfers, but we believe that the current model is not fit for purpose. And then they go on to outline why they constructed a more equitable and more logically based fiscal model. Now what you seem to be saying to me here today is, we know it's unfair, we know there's no justification, there is no justification given to me today as to how you arrived at the equalisation fund, but we're going to blackmail you into making people for the same value of house pay more money in Galway, before we undo an objective injustice. And that's what you're telling me here. And I have to say that that is totally unacceptable. It would not also solve the problem of the inequity because it's much deeper than that. And the second thing is, that mechanism of raising it was actually meant for for extra services, all other things being equal, not as a maximism to cover up for a non-fair system coming from the custom house. And in the end of the day, it wouldn't address the fundamental issue is there is no basis in logic to the present system. And if it was an individual being suffered this way, you would have already had a case taken to the ombudsman, and the equity would have been put right. Now the programme for government, our shared future commits to reform in funding of local authorities. Can you tell me what has been done to date, rather than tinkering at the edges? Because the LPP reform has nothing to do about funding local authorities, it's about how much the public pay. We need comprehensive reform now, and not at some date in the future, that is constantly deferred. Already the cumulative damage done to Galwag County is very, very serious indeed. Thank you Deputy. Anthera. As has been said out in the circles from the Department, with additional information on the updated LPT yield is available, the process will be re-examined. While it is unfortunate, the process cannot take place in the advance of the local authority budget process in November, the timeline involved takes account of the needs of property owners and revenue commissioners in conducting the re-evaluation. As part of this process, my Department will review relevant material including the report compiled by the Whitaker Institute of National University of Ireland, Galway and other reports on local authority funding that have been published in recent years. The Department will also engage with relevant stakeholders. Notwithstanding that, I should emphasise that any examination of funding following the LPT re-evaluation exercise is not intended to be a substitute for the statutory role of elected members and the responsibilities under local government acts. Just in the time remaining, I think it is important that the Deputy has raised a really critical point about the future funding of local government and revenue raising abilities, where you see in other countries where local authorities have the ability to set up energy supply companies and be involved in actual revenue raising activities. I think those mechanisms, I cannot give an update from Minister Bourke's work within local government on where those, I am here on his behalf, where those elements are, but I do think it is important that we consider those issues. The other issue is that in terms of the LPT, we should be given consideration to participatory budgeting, where members of the public have a say in how their LPT is spent. I think all of those elements are critically important in taking ownership of the revenue that is raised by local government and how people can have a say in how it is spent in their own communities. In my own local authority we issue a newsletter to every household and inform members of the public of how their monies are being spent and how revenue is being spent and the projects and the really important work that they are doing in communities. I will take back the comments made by the Deputy to Minister Bourke. Thank you.