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BQ AMAI 2012
Comhgháirdeachas ar bhúr gcéiliúradh 100 bliain
I want tp affirm your work for the citizens of your towns
STRUCTURE OF PRESENTATION Local Government finance
◦100 years of achievement ◦Problems◦Possibilities & challenges
BQ AMAI 2012
124 municipal councils ....2012......2014?......
objectives of the AMAI defined as:
‘securing greater powers for municipalities and urban district councils to deal with every-day subjects affecting their localities.’ Prominent issues for municipal authorities 1912
◦ Finance for social housing◦ ‘Need to concentrate on municipal affairs and strictly
avoid party controversies’
1912
BQ AMAI 2012
The receipts for the purposes of local government in Ireland during the financial year 1912-13, excluding loans, and grants provided by Statute, and making the necessary amounted to £4,742,023, an increase of £18,533, as compared with the preceding year.
Of this amount ◦73 per cent, was raised directly by rates assessed on lands, buildings, &c.,◦ 12 per cent, was derived from tolls, fees, stamps, and dues,◦ 6 per cent, came from rents of property in lands, houses, &c., ◦9 per cent, was made up of various miscellaneous items of local income classed as other receipts
LG receipts 1912 (EPPI)
BQ AMAI 2012
• Reductions• Demands
Finance
• EU• National
Regulation • Reduction• New tasks
Staffing
2012 issues For Municipal authorities – ??????? the future
BQ AMAI 2012
Local Government finance – the
problems
BQ AMAI 2012
“…functions often carried out elsewhere by sub-national Government tiers are the responsibility of local sections of national organisations in Ireland, e.g. primary education, health, social services and public transport” (Fitzpatrick Associates, 2006, 105).
“Ireland is one of the most centralised states in Europe with local government having few responsibilities and commensurate resources (2.2 % of tax revenues).” (European Commission, 2007 p167).
Centralisation of public service delivery
BQ AMAI 2012
Minister Hogan ‘[b]y international standards, the revenue base of local authorities in Ireland is relatively narrow, with local authorities being disproportionately dependent on central government funding’ (Dáil debates, June 28th 2012).
BQ AMAI 2012
Sources of Local Govt Funding 2012
BQ AMAI 2012
◦ on central government AND on commercial sector
Income from Commercial Rates rose from 25% (1999) to over 29% (2010)
In contrast, income from General Purpose Grant fell from 19.96% (1999) to 16.7% (2010).
Local Government dependent……..
BQ AMAI 2012
19 of 26 county councils receive 50+% of funding from central government
► disconnect between receiving services and paying for them
No objective basis for the allocation of government funding to county councils:
Dependence on central government for funding
BQ AMAI 2012
How does this compare?
BQ AMAI 2012
Subnational public sector expenditure – Dexia 2012
Country € billion € per capita
% of GDP % of public expenditure
Denmark 88 15,877 37.6 64.3
France 228.7 3,527 11.8 20.9
IRELAND 10.7 2,391 6.9 10.3
Poland 53.1 1,391 15.0 33.0
BQ AMAI 2012
Source: CoE, 2011
BQ AMAI 2012
Tax Autonomy
0
10
20
30
40
50
60
70
Can
ada
Uni
ted
Stat
es
Switz
erla
nd
Spai
n
Belg
ium
Ger
man
y
Aust
ria
Swed
en
Switz
erla
nd
Den
mar
k
Finl
and
Nor
way
Japa
n
Fran
ce
Luxe
mbo
urg
Spai
n
Belg
ium
Italy
Kore
a
Ger
man
y
Portu
gal
Hun
gary
Uni
ted
King
dom
Net
herla
nds
Gre
ece
Cze
ch R
epub
lic
Aust
ria
Irela
nd
States/regions Municipalities
% of total revenues
BQ AMAI 2012
Declining income
BQ AMAI 2012
Allocations €m
2010 €m
2011 €m
% Diff
Water Capital 508 435 -14%
Housing Capital 880 520 -41%
Combined Capital Allocations 1388 955 -31%
Recession - Capital Funding 2010 - 2011
BQ AMAI 2012
2008 2009 2010 2011 2012 Reduction Change %
Gross Revenue Expenditure
€5,224 €5,237 €4,847 €4,724 €4,482 -€742 -14%
Financed by
Commercial Rates €1,341 €1,403 €1,357 €1,366 €1,399 €58 4%
Government Grants/Subsidies
€1,272 €1,255 €1,105 €1,129 €956 -€316 -25%
General Purpose Grant
€1,000 €937 €774 €705 €645 -€355 -36%
Pension Related Deduction
€0 €0 €79 €78 €79 €79
Goods and Services €1,600 €1,632 €1,518 €1,424 €1,380 -€220 -14%
Miscellaneous €11 €10 €14 €22 €23 €12
Gross Income €5,224 €5,237 €4,847 €4,724 €4,482 -€742 -14%
Recession - Current Expenditure 2008 – 2012
BQ AMAI 2012
Ideal Tax autonomy structure
Taxes which are growth-enhancing at sub-national level are the same as the ones which are growth-enhancing at central level
But, there are some additional requirements :◦ Link between taxes paid and public services received
◦ local taxes should be non-mobile Non redistributive Non cyclical Tax base should be evenly distributed across jurisdictions
◦ So, how do they do it elsewhere?
BQ AMAI 2012
Caveats in Comparison
National & local contexts Political system and structures Role of local government (LG) LG functions Size and scale of LG Terminology
BQ AMAI 2012
Denmark
Local income tax = c.50% of local income◦ tax rates vary between local authorities◦ limits agreed between CG and LG
local property/land tax service charges % of corporation grants grants from central government
BQ AMAI 2012
The Netherlands
High level of transfers decentralised responsibility & small degree of
autonomy restricted ability to raise extra resources only about 10% is raised locally
◦ property tax◦ service charges
annual ‘angst’ equalisation mechanisms ‘specific’ grants for education, policing etc.
BQ AMAI 2012
Conflict of principles?◦ Local Autonomy v centrally set standards
Local income tax yields about 33% ? Tendency to recentralise Recent tension re equalisation difficulties in assessing income & needs review underway
Sweden
BQ AMAI 2012
Spain
Significant reform at all levels
Pactos locales 35% of LG income
from taxation mandatory taxes
◦ property tax◦ business (fixed &
variable elements)
Optional taxes◦ construction taxes◦ capital gains
significant state transfers (general and specific grants)
budget stability before recession
BQ AMAI 2012
What are the options for Ireland? Increase transfers (? Also discretion) Increase own resources Both HOW? ‘Big bang’ or piecemeal reform? One local tax or a ‘basket of taxes’
BQ AMAI 2012
‘The whole local authority model needs to be reworked to put
them on a sound financial footing going forward as follows: ◦ voluntary redundancy program model implemented using a
skills based approach to calculate sustainable staffing levels and detailed cost benefit analysis carried out;
◦ introduce pension fund mechanism;◦ set up debt collection unit; ◦ introduce a Local Authority Clearance Certificate to ensure
those who have not paid local taxes to not be able to receive state grants.’
From Grant Thornton Independent financial appraisal of Sligo County Council, August 2012
Assessment from an observer
BQ AMAI 2012
Options
Taxation of property (domestic and commercial)
water and waste charges
a new system of planning fees
a review of housing rents.
local income tax poll
taxes/community charges
local sales taxes
BQ AMAI 2012
Options...........
Local Business Tax Many variations buoyant Problems
◦ basis for assessment ◦ competition between
LG units◦ acceptability to
business?◦ Ability to pay◦ Uneven distribution
‘Mixed Bag’ Spain, France &
Belgium reduces
vulnerability complex tension between LG
and CG accountability
issues
BQ AMAI 2012
Local tax options & issues
PROPERTY TAX simple option? political
implications? Problems
◦ determination of bases
◦ lack of buoyancy◦ social ‘blindness’◦ Unpredictability◦ Administration issues
LOCAL INCOME TAX simple equitable Problems
◦ calculation local/national
◦ base determined nationally
◦ local and national tax policies not easily discernible to public
BQ AMAI 2012
Issues to be considered
Principles on which reform is based
Revenue raising potential
decision-making structures
ease of administration transparency needs & opportunities social dimension capacity
Political will◦ national - increased
discretion◦ local - make tough
decisions
attitudes◦ public - willingness
to pay◦ political - willingness
to take responsibility
BQ AMAI 2012
“annual budgetary allocations to local government are only to a small extent based on objective criteria such as population or tax base per capita.”(OECD, 2008, 246)
Ireland Inc.
BQ AMAI 2012
Reform of local government will only succeed if it is part of a broader reform of the public service
Different services are best delivered at different scales
We need structures that reflect settlement patterns and have capacity for revenue raising that will endow units of local government with the capacity to prioritise and deliver services effectively and equitably
Where do we go from here?
BQ AMAI 2012
Should we continue to have town councils for which less than 1/5 of the population has a vote?
BUT what are the alternatives?◦ Widening of the town council model to all towns ?◦ Abolition of town councils and replacement by
revamped Area Committees?◦ Total reconfiguration of our local government
system to a system of population-related connected models at area, district and regional levels that are a vehicle for delivering ALL public services via a streamlined, strategic system
BQ AMAI 2012
As local representatives, councillors need to be ready to take hard decisions, adopt an objective rather than clientilist attitude to implementation and evaluation of policies
You have the mandate to lead the way in achieving and effective, efficient and equitable system – ◦ engage in debate and deliberation◦ Gather the evidence◦ Lead the change - local government has led the
way in the efficiency drive (840 million) - let it also be pro-active in achieving a system appropriate to 21st century needs.
BQ AMAI 2012
IT
It’s about more than taps and taxes ! It’s about people’s quality of life.You have the power to make change happen...
Go n-eiri libh
