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Local Government Finance

Local Government Finance. 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. 1912.

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Local Government Finance

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  1. Local Government Finance Dr.Bríd Quinn

  2. Comhgháirdeachasarbhúrgcéiliúradh 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

  3. 1912 • 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’ BQ AMAI 2012

  4. LG receipts 1912 (EPPI) • 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

  5. 2012 issues For Municipal authorities – ??????? the future BQ AMAI 2012

  6. Local Government finance – the problems BQ AMAI 2012

  7. Centralisation of public service delivery • “…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). BQ AMAI 2012

  8. 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

  9. Sources of Local Govt Funding 2012 BQ AMAI 2012

  10. Local Government dependent…….. • 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

  11. Dependence on central government for funding • 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

  12. How does this compare? BQ AMAI 2012

  13. Subnational public sector expenditure – Dexia 2012 BQ AMAI 2012

  14. Source: CoE, 2011 BQ AMAI 2012

  15. Tax Autonomy BQ AMAI 2012

  16. Declining income BQ AMAI 2012

  17. Recession - Capital Funding 2010 - 2011 BQ AMAI 2012

  18. Recession - Current Expenditure 2008 – 2012 BQ AMAI 2012

  19. Ideal Tax autonomy structure BQ AMAI 2012 • 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 • localtaxes should be non-mobile • Non redistributive • Non cyclical • Tax base should be evenly distributed across jurisdictions • So, how do they do it elsewhere?

  20. 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

  21. 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

  22. 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

  23. Sweden • 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

  24. 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

  25. 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

  26. Assessment from an observer ‘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

  27. Options 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

  28. 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

  29. 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

  30. 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

  31. Ireland Inc. • “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

  32. Where do we go from here? • 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

  33. 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

  34. 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

  35. ITIt’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-eirilibh BQ AMAI 2012

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