Dr. Bríd Quinn

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:

Prominent issues for municipal authorities 1912
‘securing greater powers for
municipalities and urban district
councils to deal with every-day subjects
affecting their localities.’
◦ Finance for social housing
◦ ‘Need to concentrate on municipal affairs and strictly
avoid party controversies’
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
BQ AMAI 2012
For Municipal
authorities – ??????? the
future
•Reductions
•Demands
Finance
Regulation
•EU
•National
•Reduction
•New tasks
Staffing
BQ AMAI 2012
BQ AMAI 2012


“…functions often carried out elsewhere by subnational 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).
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
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).
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:

BQ AMAI 2012
BQ AMAI 2012
Country
€ billion
€ per
capita
% of GDP
% of public
expenditur
e
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
States/regions
Municipalities
BQ AMAI 2012
Ireland
Austria
Czech Republic
Greece
Netherlands
United Kingdom
Hungary
Portugal
Germany
Korea
Italy
Belgium
Spain
Luxembourg
France
Japan
Norway
Finland
Denmark
Switzerland
Sweden
Austria
Germany
Belgium
Spain
Switzerland
United States
Canada
% of total revenues
70
60
50
40
30
20
10
0
BQ AMAI 2012
2010
€m
2011
€m
Water Capital
508
435
-14%
Housing Capital
880
520
-41%
Combined Capital Allocations
1388
955
-31%
Allocations €m
BQ AMAI 2012
% Diff
2008
2009
2010
2011
2012
Reduction
Change %
€5,224
€5,237
€4,847
€4,724
€4,482
-€742
-14%
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
Grant
Purpose
€1,000
€937
€774
€705
€645
-€355
-36%
Pension
Deduction
Related
€0
€0
€79
€78
€79
€79
€1,600
€1,632
€1,518
€1,424
€1,380
-€220
Miscellaneous
€11
€10
€14
€22
€23
€12
Gross Income
€5,224
€5,237
€4,847
€4,724
€4,482
-€742
Gross
Expenditure
Revenue
Financed by
Goods and Services
BQ AMAI 2012
-14%
-14%

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
National & local contexts
 Political system and structures
 Role of local government (LG)
 LG functions
 Size and scale of LG
 Terminology

BQ AMAI 2012

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




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
BQ AMAI 2012




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
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
BQ AMAI 2012




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
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
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








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)
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
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
BQ AMAI 2012