Local Government (Financial Provisions) Bill, 1997: Second Stage.

Thursday, 8 May 1997

Seanad Éireann Debate
Vol. 151 No. 9

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Question proposed: “That the Bill be now read a Second Time.”

Minister for the Environment (Mr. Howlin): Information on Brendan Howlin Zoom on Brendan Howlin This is a Government of achievement. When we came into office two and a half years ago, we set ourselves a series of objectives for the social and economic development of this country. We are achieving these objectives. One of our primary goals was the development of an innovative, enterprising economy which meets the demands of international competition and shares the rewards of effort, initiative and success. We can be very proud of our record on that front.

This Government has carefully nurtured the economic development of this country and our success is evident in the emergence and sustained development of our “celtic tiger” economy which [783] is the envy of many of our EU partners, and other countries worldwide. For example, inflation rates are at an all time low and are remaining low. The number of people at work is at an all time high and continues to grow. The national debt ratio continues to fall. This is firm and concrete proof of the success of this Government's policies on the economic front, a success which is unprecedented in recent experience. Furthermore, the ESRI report published last week forecasts a continuation of growth and prosperity into the next century.

However, strong economic performance is not the only criterion by which to judge a country's performance. We all know that social and other such considerations are as important if we are to achieve a balanced development nationwide where every sector of society benefits equally. As such, in tandem with our economic objectives, this Government is also committed to the implementation of policies to promote the best quality of life for the people generally through measures, for example, to promote health care, justice, housing and education. Our record in these areas is one of solid achievement.

For instance, in the area of social housing, which is a good example of any Administration's commitment to improving the quality of life of its people generally, our record is outstanding. In A Government of Renewal, we promised that public housing and social housing starts would be increased to 7,000 annually. As Minister for the Environment, I am proud that this year the total provision for housing amounts to £400 million. This represents an increase of 9 per cent on the 1996 provision and will allow us, once again this year, to meet the commitment to 7,000 starts. Taking into account the local authority housing programme and the full range of social housing measures, the needs of over 10,000 households will be met in 1997.

I am also proud of our achievements in the environment field. As promised, I have met the goals set in A Government of Renewal on the preparation of a national sustainable development strategy to address all areas of Government policy which impact on the environment. I have also successfully introduced major legislation in relation to waste management.

The policy agreement made a number of commitments concerning local government funding. We all know how contentious the issue of service charges has been over the past ten years or so. However, as Minister for the Environment, I have not been afraid to tackle this issue. In A Government of Renewal, we gave three specific commitments which had direct relevance to service charges. Our first commitment was to amend the 1962 Sanitary Services Act to delimit the power of local authorities to disconnect domestic water supplies for non-payment of service charges. Our second commitment was to grant a tax allowance at the standard rate up to a maximum of £150 in respect of service charges [784] paid in full and on time which was implemented in the 1995 Finance Act.

Our third commitment was to commission a professional study on local government funding to see how a fair, equitable and reasonable system of funding could be introduced. Within months of being appointed Minister for the Environment, I engaged KPMG management consulting to carry out this study. It carried out an in-depth analysis of local authorities' existing and future funding requirements and evaluated the capacity of the system to meet these requirements. It examined a range of funding options. Its underlying conclusion is that there is no one right way of funding local government. Instead, it was a matter for me, as Minister for the Environment, to weigh up the pros and cons of the various options to decide which one was the best fit to the Irish context now and in the future.

As I said, this Government is one of achievement. In just over two years, we have met the three specific commitments we set in relation to local government funding. That is no mean feat. However, we were not prepared to rest on our laurels. Further work was necessary if the overall issue of local government funding was to be comprehensively tackled once and for all to enable this important sector realise its full potential.

Last February I addressed this House on the issue of local government financing and I put on the record my proposals to deal with this issue. As I said previously, I was not daunted by this challenge — it has been one of my top priorities since my appointment as Minister for the Environment. I stated that I did not want this issue to be seen in negative terms as a thorny issue or a political minefield. My objective was to turn the area of local government funding and the focus of local government around so that it would be thought of and seen in a positive light in terms of opportunity.

It is just over two months since I told this House about my plans on local government financing and I am back here presenting the Bill which will give legal effect to these plans. The Local Government (Financial Provisions) Bill, 1997, has two major objectives. First, it will provide local authorities with their own viable source of finance to enable them to carry out the range of functions demanded by their customers in the 21st century. Secondly, it will ensure that local authorities make the best possible use of these resources.

Local government financing has been a problem for a number of years with the local authorities experiencing a long-term decline in their fortunes. The effects of too narrow a funding base, compounded by the conferring of new functions without any change in their finances, created a financial stranglehold for local authorities. This position could not be allowed to continue. Already we have seen its effects. In a number of cases services have had to be cut back or have been cut out altogether. We know only too well the reaction of the public to such cut backs [785] in services. Local authorities cannot continue to provide a sufficient level of services if they do not have adequate resources.

This Government acknowledges the important role the local government sector has to play in our society. It is one of the most obvious manifestations of democracy — people power. A local government system which is able to meet the needs of its public in an efficient and effective manner has a pivotal role to play in this context. This is because local authorities are in the best position to identify and respond to local needs. I acknowledge the actions of the local authorities in this context. They have already taken great steps in recent years to improve the way they do business to better meet the needs of their customers. However, we need to build on their work if we are to be confident that this sector will evolve and take on the new functions and services needed for local development into the next century. Local authorities must re-examine their methods of operation and their relationship with the public generally. They must ensure they provide the public with the services it wants as effectively and efficiently as possible. They must suit the needs of their customers rather than themselves. Quality customer service is the key.

I have already taken steps to assist the authorities in the realisation of these objectives. Last December I launched a major new programme for the reform of local government: “Better Local Government — A Programme for Change”. This is a comprehensive programme of specific action for the future development of local government. Its objective is to reshape the general approach of local authorities in order to build a new local government which is sharper, more independent and powerful. Central to this strategy is the provision of proper funding for local authorities. The Bill before the House provides the necessary statutory basis for the new local authority funding system. Three key issues are addressed. First, domestic water and sewerage charges are being abolished with effect from 1 January this year; second, the rate support grant which my Department pays to local authorities is being terminated; third, the income foregone from these charges and the rate support grant is being replaced by assigning the full proceeds of motor tax income to the authorities to provide them with their own independent source of income fully protected by legislation.

While the Delimitation Act, 1995, dealt with the issue of water disconnection, it was also necessary to review the fundamental raison d'être of service charges. Charges can be good as they can encourage the optimum use of resources and promote conservation. Theoretically, if one has to pay for the amount of the service one uses, it is logical that under normal circumstances one will cut down on the amount used to save money. However, this theory does not hold true where the level of the charge bears no relation to the amount used. Unfortunately, this has been the [786] case for domestic water and sewerage charges where local authorities applied either a flat rate charge or a charge related to broad rateable valuations. As a result, the level of usage never entered the equation. It did not matter how much water was used, people were still liable for the same amount in charges. Therefore, an individual living alone in a small house was liable for the same amount in domestic water charges as a family living in a large house with, perhaps, two or three bathrooms.

This was unfair but what could be done to overcome it? Metering domestic supplies was not a viable alternative. We have heard much about this in recent days and weeks. I commissioned KPMG to examine the issue and it published its report last June at which stage I held a press conference about it. KPMG examined the potential for metering supplies and concluded that it was not viable in view of the costs involved and the income generated. The costs were £200 million capital investment and £8 million per year thereafter to monitor, read and maintain. As a result, the Government logically concluded that, as charges for domestic water and sewerage services could not be economically related to usage, they were, therefore, taxes and should be incorporated into general taxation.

Section 12 removes the power of local authorities to levy charges for the supply of water for domestic purposes and for the disposal of domestic sewage with effect from 1 January 1997. A domestic supply in this context means a supply for ordinary household purposes to a dwelling or to a group water scheme. A supply for commercial, agricultural, industrial or other purposes does not constitute a domestic supply. Where a supply is mixed, serving both domestic and non-domestic purposes, local authorities will be expected to apportion between the two. Domestic water and sewerage charges levied before 1 January 1997 remain valid and I expect the authorities to pursue outstanding amounts due to them. Charges linked to usage are a useful and good way of encouraging efficient use of resources. As such, they can have an important role to play in environmental policy generally. Commercial service charges can be related to usage through the use of meters and these charges are, therefore, remaining. So too are refuse charges as these can also be related to usage. For example, a number of local authorities operate a “tag a bag” payment system. Refuse charges are also important in promoting the “polluter pays” principle, which is an important element in our national waste management policy.

Under section 3, the full proceeds of motor tax income are assigned to local authorities to replace the income lost through the abolition of domestic water and sewerage charges and the rate support grant. I wish to clarify that these proposals do not involve any new tax but a redirection of existing taxation, which will remain local rather than being paid to the Exchequer. This will provide local authorities with full ownership of the proceeds [787] of a single buoyant tax fully protected by law. They will have full control over this resource and it will be a matter for them to decide how to distribute it. This is what real local government should entail and I am very proud to introduce it by means of this Bill. All local authorities will benefit from this new arrangement and the inbuilt buoyancy will ensure this. For example, the 1996 Estimates revealed that the income from motor tax would exceed the income from domestic water and sewerage charges and the rate support grant combined by approximately £12 million and I believe the difference will be greater this year.

Another reason for using motor tax income is its practicality. Local authorities already collect motor tax on behalf of the Exchequer. All we are doing now is allowing the authorities to retain the income they collect, subject to the payment of a certain amount into the new equalisation fund, the purpose of which I will outline. The new system will, therefore, be relatively simple and practical to implement. It will also introduce a greater degree of certainty into the funding of local government. As a result, the authorities will be able to estimate with greater accuracy how much income they will receive over a period of years rather than relying on the annual Estimates decisions of Government. Forward planning of services will be greatly facilitated. Section 11 allows local authorities to deduct the expenses incurred by them in collecting motor tax before paying into the equalisation fund and before sharing the moneys collected among other local authorities.

The national rates of motor tax are set by central Government and there has been no increase in these rates since 1992 when the Labour Party came into Government. However, is it right that central Government should have such total control over the system of local government funding? It will be recalled that, under the Local Government (Financial Provisions) (No 2) Act, 1983, local authorities had complete discretion over whether to levy domestic service charges and their amount. Such local discretion is essential for the concept of local democracy. If we are to have real, effective local government capable of responding to local needs, it must have some discretion over how it raises the finance necessary to fund its activities.

This is now being provided for under section 9 which provides motor tax authorities with the power from next year to increase the national rates of motor tax on cars and motor cycles by up to 6 per cent, subject to a maximum of 3 per cent next year. Local authorities, at their own discretion, will be entitled to increase motor tax rates for cars and motorcycles by 3 per cent next year and by 3 per cent the following year. After that, they will not be entitled to any further increase unless the base is moved by central Government. This is designed to strike the right balance between the need to give local authorities discretion [788] in raising finance on the one hand and, on the other, the requirement not to impose any significant new form of taxation. Some 6 per cent is the limit to the increase above the national base. Section 9 also provides for consultation between county councils, urban district councils and individual local authorities on the extent of any variation in rates where one collects on behalf of another on foot of an agreement.

Section 4 provides for the establishment of an equalisation fund. The resources of the fund will be used to replace the income from domestic water and sewerage services and the balance will be allocated as equitably as possible, having regard to the needs and resources of all authorities. All local authorities will benefit from this new system. No authority will lose out.

Under section 5, local authorities will be required to pay into the fund 20 per cent of the motor tax collected on cars and motor cycles, in addition to all other motor taxes, driver licence fees and other miscellaneous fees and duties. It was decided, following consideration of each authority's income from rate support grant, domestic water and sewerage charges and each licensing authority's motor tax income, that local authorities should retain 80 per cent of motor tax income on cars and motor cycles. We concluded that this was the optimum retention rate if the authorities were to be allowed to retain the maximum amounts possible of motor tax income collected by them, while at the same time making sure there would be sufficient resources in the equalisation fund to enable it achieve the objective for which it is being established.

The purposes for which moneys may be paid out of the equalisation fund are set out in section 6. These may include contributions towards the expenditure of local authorities in performing their functions generally, payments in respect of any expenses incurred in promoting the delivery of quality and efficient local authority services and in respect of expenses incurred with the collection of motor tax. Section 6 also provides for the establishment of a committee to advise the Minister on payments to local authorities from the fund.

Given the pivotal role of the equalisation fund in the future of local government funding, it was important that we gave due consideration to how this fund should be managed. Initially, the fund will be managed by the Minister for the Environment. However, as local authorities ultimately own the money in the fund, it is only right that they should have a major role in deciding on its use. If we want real local government capable of responding to local demands and initiatives, the authorities must be able to decide how this money should be distributed. To facilitate this, section 7 provides for the establishment, by order, of a Local Government (Equalisation) Council. This council will manage the fund and decide on payments from it and may also carry out additional functions allocated to it. I expect the council to be established some time next year.

[789] The Bill was carefully drafted to ensure all situations are covered. Motor tax authorities operate only at county or city level. However, the rate support grant was paid to all authorities. Furthermore, all authorities in 1996, with the exception of two, levied some combination of domestic water and sewerage charges. In addition, some authorities collect motor tax on behalf of other authorities. However, all authorities should have a legal right to their fair share of the proceeds from motor tax. It was, therefore, necessary to make provision in the legislation to ensure all authorities enjoy the benefits of the new funding system and that the tax which is not paid into the equalisation fund is shared out on an equitable basis. These requirements are met by section 10 which provides for the sharing of retained motor tax among all authorities. Section 10 also empowers the Minister for the Environment, or the equalisation council when established, to give directions to the motor tax authorities as to how the tax should be shared.

Hand in hand with the provision of a new funding system for local authorities, this Bill also introduces measures to ensure the authorities realise the best possible return from this new system. We must ensure local government is operating as efficiently and effectively as possible so that it continues to aid the development of this country into the next century. With this in mind, we must ensure local authorities have greater regard to the three tenets of efficiency, effectiveness and economy. Of necessity, local government has already become far more professional in its operations over the past number of years.

In this Bill, I require the authorities to go even further along this road by opening up their operations to a greater level of scrutiny and comparison. In particular, the core requirement of value for money is being strengthened in all local government operations. While a value for money — VFM — unit has been in operation within my Department since 1993, section 14 will now formally establish the unit on a legal basis and provide for its role and functions. Section 15 provides that, in addition to the normal regulatory audits, from now on local authorities will also be subject to VFM audits similar to those currently carried out by the Comptroller and Auditor General. Furthermore, the unit will be required to publish full details of the results of its work. A range of performance indicators will also be developed for local authority operations to identify best practice and encourage the authorities to improve their performance.

Section 17 aims to address a serious anomaly in legislation which has existed since 1993 and, in spite of an amendment in 1995 and action in the courts, has not been successfully rectified. I am referring to section 20 of the Finance (No. 2) Act, 1992, under which liability for licensing and payment of motor tax arises from the date of registration of a vehicle in the State. Several Senators will have encountered this difficulty in their constituency clinics. A number of cases have arisen [790] which are clearly anomalous, where the vehicle was never on the road yet the individuals concerned, through no fault of their own, paid arrears in addition to the cost of a tax disc. The amendment proposed in the Bill will ensure motor tax is only payable when the vehicle is first used in a public place, provided the individual, on or before the application for a tax disc, produces evidence that the vehicle was not so used.

This Bill is designed to provide local authorities with a proper financial system to enable them to carry out the range of functions demanded by the general public. In tandem with this, it will also require the authorities to realise the best return from the resources awarded to them. It is, therefore, important legislation of which I am justifiably proud. Its beneficial effects will continue to be felt long into the next century.

I am pleased to present the Bill and I strongly urge Senators to agree its provisions.

Mr. D. Kiely: Information on Daniel Kiely Zoom on Daniel Kiely Since the abolition of water charges many problems have arisen with regard to discrepancies among group water schemes and the funding of local authorities. The Minister, with good intent, seeks to give autonomy and an independent source of funding to local authorities. However, the method he has adopted is poor.

Everybody knows why water charges were abolished. County Kerry introduced water charges long before 1983. People were willing to pay them because they knew the local authority needed the extra funding to make up the shortfall in funds from central Government. Indeed, the county went a step further and introduced sewerage charges, which people were also prepared to pay. It is difficult to introduce a scheme for which people must pay and, when they are paying for a service and are happy to do so, it is foolish to abolish it because it will be difficult to introduce a new type of taxation in the future to service local authorities.

The Minister had an ideal opportunity on a previous occasion to allocate 80 per cent of motor taxation to local authorities to deal with county roads while, at the same time, leaving the service charges in place. That would have been a means of dealing with the problem of potholes in county roads. The Minister has increased the allocation of funding for county roads this year and that is greatly appreciated. However, prior to that, this and previous Administrations have ignored the problem of county roads even though they were falling apart.

When I first entered local government 20 years ago roads were surface-dressed every eight years. That has changed now to once every 40 years. If a road in your area is being tarred and you have a young child you should bring him out to see the tarring machine because it is possible he will not see one again for 40 years.

The Minister had an ideal opportunity to give 80 per cent of motor taxation to local authorities who do their business properly, run a good house, [791] provide accountability and balance their budgets. Some authorities spend and spend and are completely out of control. The local authorities who run their business well are being penalised.

Why should people in Dublin not pay water charges when people in rural Ireland who have bad services, bad roads and no transportation have to pay more than those who have all these services at their fingertips? It is time equalisation was introduced into the system.

Over the last number of years I have listened to Members talk about the west. Everybody thought the west started in Mayo and ended in Galway until Minister Carey brought Clare in by the back of its neck. They have forgotten about County Kerry. They do not think it is part of the west. I was taught that the west started from one point in the north to the southwest of Cork.

If local authorities had been given the 80 per cent funding from motor taxation for even one year the Minister would have been able to take care of all the problems with county roads. The Minister is asking people who pay motor tax to contribute to the upkeep of group water schemes, sewerage schemes and all local authority services. He is asking this of people in rural Ireland who need a car to get to work because there is no public transport — the Minister knows this coming as he does from rural Ireland. A one car family is no longer viable. People living in rural Ireland need two cars; the woman needs a car to get the children to school, the man needs a car to get to work. He may not be able to get a job locally and so has to travel 40 or 50 miles to his place of work. This is what we are faced with.

The Minister has used much fancy phraseology about how he can juggle the equalisation fund so that no county will lose out. Somebody has to lose. Unless you give back what has been collected somebody will lose. What is happening is that large amounts of money are collected in Dublin through motor taxation; in other areas there would not be that many cars, and the mileage of county roads is not taken into account.

I will baptize my own child first. In Kerry we have something like 2,500 miles of county road, roads that have been falling apart for the last ten years. How can we support the upkeep of those roads? There has been some improvement this year. People talk about the improvement in roads. They have improved in certain areas, but certain parts of the road network are disimproving. The Minister will have to look seriously at the secondary primary routes. The national primary roads come under the aegis of the National Roads Authority. The secondary routes are being completely ignored. Many of these routes are the main arteries to counties.

When you come to Kerry from the west Limerick side you have to take the road through Limerick, Foynes and Tarbert. There is a secondary route on to Tarbert, where there is a car ferry which takes people from County Clare, and the route carries on for 28 miles into Tralee, the centre [792] of our industry, even though there are no jobs available there. The amount of money allocated to the upkeep of that road for this year is £500,000. That road is in a deplorable state. Many county roads are in better condition than the secondary primary route. Where will the money for the upkeep of the secondary primary routes come from in the future?

New sewage treatment plants have been installed in Kerry. Where will the money for the upkeep of these sewage plants or new ones come from? Where will the money for new group water schemes come from? I live in an area in Kerry where we have no running water. An application has been before the Minister's Department for the last number of years for the damming of the Smeala River in Listowel at a cost of £22 million. I am led to believe that £18 million of this money will come from cohesion funding and the Government will have to come up with the remaining £4 million.

An application was lodged with the Minister's Department by a group water scheme in Kerry. It is one of the biggest group schemes ever undertaken in Kerry and comprises over 500 people. That application is lying somewhere in the back of somebody's drawer and has not been looked at. We have been told repeatedly that if an industrialist came into Kerry tomorrow we could not even entertain him because we have no infrastructure or water supply. We need an extra two or three million gallons of water daily for an industrial site. We have 800 acres of industrial land, with no infrastructure, on the Shannon Estuary purchased many years ago at enormous expense to the taxpayer. Where will the money for these group water schemes come in the future? How will the Minister share the equalisation fund? He says nobody will lose out.

We have a very good record in Kerry for the collection of water service charges. Ninety per cent of our customers were paying up. What is the Minister's response to the announcement from his counterpart in Europe of cutbacks because of the lack of services? I have listened very carefully to the Minister. He says the money will go into an overall pile and will be available. It is the taxpayer who will make up the 5 per cent shortfall. We will not get the same amount of grants from Europe due to cutbacks in water charges. The 5 per cent will come out of the booming economy. I am very worried about this booming economy. The boom will be over in a couple of years and all the money coming from Europe will be absorbed also.

We need millions of gallons of water in north Kerry for industry, which could be helped by the damming of the River Smeala. We have no industry in north Kerry; the factories we have there are closing down. The new county manager in Kerry told me that if an emergency arose and an industrialist came on the Shannon Estuary to build an oil refinery or smelter, they could get water across the River Shannon from Clare on a temporary basis where there is a surplus of water. [793] That is something I put before the Department of the Environment some time ago. If County Clare has a surplus of five million gallons and are only a mile away from us by water, then why can we not bring water to the people who are without it and who are prepared to pay for it?

I am sure the Minister has heard of the village of Asdee through song and folklore and stories of moving statues. It is a village without running water. The people living there are waiting for the establishment of the group scheme and paid their contributions years ago, even under the Fianna Fáil Administration. The local authority has used its own funds to conduct surveys for the application, which seems to be at a standstill.

While everything is rosy at the moment, one always has to worry about the future. I know the local government system better than anyone else. People paying road tax must have a good road beneath them. If we are asked to increase road tax by 3 per cent or the ceiling on it by 6 per cent over the next two years, county managers will use the easy way out to balance their books, which happened when they added an extra £10 or £20 on service charges to meet the increase in rates. Where will the additional money come from when there are breakdowns in treatment plants and other services? Something will suffer somewhere along the line. The road tax payer will ask why he or she should pay for the water rates of a family in a local authority house with no car when he or she does not have the benefits of good roads? These problems cannot be worked out overnight.

I know what the Minister said in the other House about how he intends to implement the equalisation fund. He continuously says no local authority will have less funding for services than last year. This is easy to say regarding local authorities who never collect service charges — they will not pocket anything from the equalisation fund because they never paid into it in the first place. I am worried about the well-run authorities. What will be done about the people who owe money to local authorities since last year and those in Dublin who never paid a shilling? How will fish be made of one and flesh of another?

The holding of by-elections is good in getting people back on a level playing pitch and giving them a sense of reality. The recent election in Britain displayed the power of democracy. People can remove one person from office and replace him or her with someone else. I know our spokesman on the Environment in the other House is dying to take the Minister's place.

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin God love him.

Mr. D. Kiely: Information on Daniel Kiely Zoom on Daniel Kiely He predicted to me today that he will be there in six week's time.

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin I hope it stays fine for him.

Mr. D. Kiely: Information on Daniel Kiely Zoom on Daniel Kiely He is optimistic and is getting good vibes from the people on the ground. I am [794] a former chairman of the General Council of County Councils and one of the front runners in promoting autonomy for local authorities. I am still a member of the General Council and I was glad to speak in last night's Adjournment debate on councillors' pensions. Councillors are deprived representatives of this country and are used as pawns. It is time they were recognised.

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin Is this a Seanad campaign?

Mr. D. Kiely: Information on Daniel Kiely Zoom on Daniel Kiely Of course it is. I listen to the Minister campaigning every day — he never stops. I admire him as he is the best in the business. He takes every opportunity on television, radio or in the House. That is why he is where he is today.

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin Where I will remain.

Mr. D. Kiely: Information on Daniel Kiely Zoom on Daniel Kiely The people will decide.

Acting Chairman (Mr. R. Kiely): Information on Rory Kiely Zoom on Rory Kiely Will the Senator please speak on the Bill?

Mr. D. Kiely: Information on Daniel Kiely Zoom on Daniel Kiely They are waiting for the Minister in the tall grass. I want to put him on his guard so he will not be completely shocked, like Mr. Major in Britain.

I am worried about the future of local authorities. We are all looking for autonomy and further power for them. The road tax was like the three card trick — now you see it, now you don't. If one has 100 per cent in one pocket and one transfers 80 per cent to the other, 20 per cent is missing. If the Minister, like Houdini, told me there would be 20 per cent equalisation but local authorities would not be at a loss, I would be like Thomas the apostle — I would have to see it. I know the way the system works. When there is a shortfall the local authority and the people on the ground suffer. If one talks about autonomy and giving meaningful power back to local authorities, they should be given proper funding. This cannot be done by motor taxation.

The Minister is waiting for an all party agreement on the restructuring and funding of local authorities. This would be good for the country. Everyone could pay their fair share, including the people of Dublin. People in rural Ireland are finding it more difficult to live everyday. They have bad roads, bigger repairs to their cars and longer distances to travel to work. Some of them are unemployed and do not have great services. The North Kerry stage IV group water scheme is waiting for £22 million from the Department of the Environment for its implementation. These people are prepared to pay for their services. They want water and cannot get it.

Where will the funding from these schemes come from? There may be a capital allowance, but one has to look at the running costs and servicing afterwards. Problems with water mains may have to be dealt with, as well as poor quality water and pollution. These problems have to be dealt with by the local authorities.

[795] I cannot see the motor taxation measure working. If the Minister is considering equalisation, he should look at the county roads in poorer counties which need to be enhanced. For example, in Kerry tourists visit and spend their money in hotels etc., However, they travel on roads which are disintegrating. The primary route from Castleisland to Killarney around Farranfore Airport has improved in the past number of years. This part of the county is helped by this route. However, at the other side of the county secondary routes are ignored. They will have to be restructured, upgraded to national primary route standard and receive equal funding. The secondary route from Tarbert to Tralee is falling apart. It is the main route from west Limerick and is the location of the car ferry. Finance will have to be provided for it. I cannot see this happening under motor taxation. Where will the funding for these schemes come from?

Mr. Hayes: Information on Brian Hayes Zoom on Brian Hayes I apologise to the Minister for missing his contribution. I also apologise to Senator Dan Kiely because I was only here for a small part of his enlightening tour de force around Kerry.

The Local Government (Financial Provisions) Bill, 1997, has the absolute support of this side of the House. It is a measure which all parties on this side of the House have been seeking for some time and it gives effect to a Government commitment to restructure the entire financing system of local government.

I said in another forum last week that cynicism in politics is understood purely on the basis that works which should be done by local authorities cannot be done because of lack of funding. If we are serious about enhancing local government we must seriously address the issue of funding. The Government, under this Minister, has done that. The Minister is to be commended and congratulated on the stance he has taken. The legislation we are debating this evening is part of a process of reform which we are only beginning to embark upon. It will necessitate a huge cultural change within local authorities and among councillors, officials, the Department of the Environment and the public. That change has started under this Government and it is something of which we are intensely proud.

As regards funding local government, the real issue is to provide it with an adequate source of revenue year in and year out which will ensure that local services and functions provided by councils can be delivered in an efficient and effective manner. It is worth revisiting the KPMG report published last year. It outlined, in very stark terms, the real challenge for local government over the next five years. That challenge arises from the fact that many new infrastructural projects have been put in place with EU money over the past five or six years and these must be serviced by the councils concerned. That will necessitate an expansion of moneys to local authorities.

[796] There has been a radical change in our road network. That has proved to be a tremendous opportunity for those who use our roads but, equally, significant extra money will be required to ensure that the road system is serviced.

There have been fantastic new infrastructural developments in water supply, sewerage and the environmental issue of waste disposal. Those infrastructural projects must be funded over the next five to ten years. That is at the heart of the issue. If we are serious about servicing infrastructure which has been put in place through EU funds we must be serious about looking for ways to fund that into the future. I am particularly pleased that this Government has addressed the issue in that context.

Five key principles highlighted in the KPMG report are central to this debate. Any new system of funding must be accountable; in other words those responsible for spending taxpayers' money must also be responsible for raising revenue. Under this legislation councillors are directly responsible in respect of motor taxation revenue.

The second principle highlighted by the KPMG report was one of practicality. Any system must be simple, straightforward and manageable. The previous system of funding water charges was anything but straightforward and practical. Large numbers of people in my county council area did not pay water rates because of the difference between Dublin Corporation as compared with South Dublin, Fingal and Dun Laoghaire County Councils. This new form of funding is practical. It is a source of revenue which is already at the disposal of local authorities.

The third issue highlighted was that of local variability. There are two of the five worst urban areas in the country in terms of deprivation, unemployment and poverty in my area. Any system of funding must allow for the fact that there must be a variability in terms of the amount of money which can be raised from each local authority area. That is also provided for in the Bill.

The fourth issue highlighted concerned acceptability. The previous form of rates and water charges were not acceptable to large sections of the community. The fifth issue highlighted concerned certainty. There must be an element of certainty in any form of funding. We have seen four changes in funding local government over the past 20 years. In 1978, the disastrous decision to abolish rates was taken. In 1985, we saw charges abolished which were reinstated in the early 1990s and which have recently been abolished again. I hope we finally have a degree of certainty about the amount of moneys which can be provided to corporations and county councils.

I am articulating the views of many PAYE people particularly in my area of Dublin. There is a feeling that the £70 charge operated by South Dublin County Council was the thin end of the wedge. Nobody in the Dublin Corporation area was paying water rates whereas people in other county council areas were obliged to pay. That [797] was not an equitable system and many argued that it was double taxation.

I want to nail the lie on water metering which has come to public attention over recent weeks. Are we seriously proposing that every household will install a water meter? Are we seriously proposing that we will dig up pavements and streets in order to put water meters in place? That is the reality. Who will pay for the capital costs involved in installing these water meters? Who will install them? We had a major debate in this House last year about the devastation which will be caused as a result of installing the Luas transport system as that will necessitate the digging up of a number of streets. What will happen if we have to dig up every single street, pavement and road throughout the country in order to put water meters in place? That is simply not practical.

An argument has been advanced in relation to the fact that water is a scarce resource. Of course water is a scarce resource but there are many other scarce resources within our community. We must educate people to use water sparingly and seek to ensure that water may be reused in other ways. I saw recently in Britain where water coming from washing machines was used to water gardens. That ingenious system has been put in place by a number of local authorities in Britain. We must look at the different ways in which we can use water more sparingly and re-educate people about its use. We must also repair the present system of pipes. I am glad to see that a structure of funding has been put in place by the Minister in Dublin to change the old system which is losing something of the order of a quarter or a third of the city's water supply as the pipes are not working particularly well.

On the equalisation fund, a view has been put forward by many people within the local government sector that local authority members must have a strong and dominant representative role on the council which is being set up. That is important. If we are to have an equalisation fund which will channel money to counties which are losing money as a result of the new funding system, it is important that the people who make up local government are represented on an equalisaction council. I would like to hear the Minister's views on that.

It is important that we ring fence the amounts of money which are raised in the equalisation fund and that this money is not hived off into the Exchequer. The Minister's view is that this money should remain locally and I am sure it will. We need to examine the criteria established to deal with the equalisation fund. What are the priorities which the equalisation council will call upon local authorities to make in terms of their budgets?

I am glad to see in section 14 that the Minister is proposing to establish a value for money unit. It is very important that local authorities are given advice on a regular basis about spending and controlling money. A value for money unit must be established because the way in which local government [798] has spent its money over recent years has not been transparent. We had the situation where we agreed a budget in late autumn or early winter but had to depend on the Minister and the Government to release funds for the budget in the spring. It is important that this be changed and I know the legislation will achieve this.

This side of the House welcomes the Bill which is in harmony with what Members on this side have been saying from some time. We look forward to its speedy passage through the House.

Mr. Quinn: Information on Fergal Quinn Zoom on Fergal Quinn I welcome the way the Minister took on this challenge since coming to office, the prompt manner in which he asked KPMG to present him with a number of options and the effort he is making in restructuring local authority finances.

Senator Kiely impressed me with his depth of experience of county councils at local and national level and he raised a number of issues. However, I do not have that experience and I would like to focus on the issue of charging for water.

The existing system was ill conceived. A flat rate tax on every home, regardless of the amount used, is daft. It is right to abolish that approach but it is wrong to rubbish the idea of paying for water. People who take that line are replicating the ghastly mistake of 1977, to which Senator Hayes referred, when, in order to win an election, domestic rates were abolished. We have been suffering from that decision ever since. The phobia about rates has been a millstone around the neck of local government financing ever since that time and is the reason there is a problem about financing local authorities. It also illustrates how a mistake made in the heat of an election can haunt the country for a generation, and certainly for 20 years.

I am saddened to see the same kind of mistake being made 20 years later. It is not a mistake to get rid of flat rate water charges but it is a mistake of gigantic proportions to do so in such a way as to make it politically impossible in future to introduce any charge for domestic water. If we make that mistake we are turning back to the 19th century rather than heading towards the 21st century. We are turning our backs on Europe rather than harmonising our approach with that of our partners. I know this will be hurtful to the Minister, but we are also turning our backs on environmental concerns.

A month ago the Government with the avid enthusiasm of the Minister published with fanfare its environmental strategy based on the concept of sustainable development. If anybody can take credit for this the Minister can in the context of the number of Bills he has introduced in recent years. However, when the ESRI published a report outlining the consequences of the present policy the Government ran for cover. In the Dáil the Minister treated the report with derision. Perhaps this was because proposals for taxation are [799] not the kind of thing to be promoting particularly before an election.

The idea of free domestic water originated in the 19th century and was born out of the public health situation of that time. A national priority of Westminster was to encourage people to use water in that era when disease and infection were rife throughout Britain and Ireland in order to keep themselves and their surroundings clean. Water was free because health authorities were afraid poor people would not use enough if they had to pay for it.

The provision of free domestic water was a correct and imaginative response to the challenges of that time. The challenges faced today are totally different. For example, it is clear that even in Ireland water has become a scarce resource. There may be a feeling that it rains constantly here but we do not have enough water to use in the wasteful manner which has now become a habit.

The environmental issue surrounding water is not just about ensuring it is clean but it involves properly stewarding an increasingly scarce and therefore very valuable resource. I know the Minister is aware of this as he has made a similar point since coming into office.

The attitude we are now parroting appears peculiar to our partners in Europe and we will pay dearly for it in hard cash if we persist with the policy. Across Europe water is regarded as a scarce resource. Some years back the President of the Commission, Jacques Delors, said that wars of the 21st century will revolve around resources. Among the world's scarcest resource is water. I cannot see the member states of the EU coming to blows about water but in every other European country people pay for water according to the amount they use. Any other system strikes mainland Europeans as unbelievably wasteful.

Waste is the central issue. We are careful about what we pay for but we are not careful about things we get for free. The extent to which we waste water is an environmental scandal. We design our bathrooms so that every time we flush the toilet we use up to three times the amount of water necessary. We spend so little on maintaining our water distribution system that in some cases up to 60 per cent of water disappears through leakage before it reaches the customer.

Senator Hayes made a strong point but he then said it was not practical to place meters measuring water consumption. However, I am not talking about doing it this year. We seem to be closing the door for all time on the idea. It is not practical to continue wasting as much water as we are.

By providing free water we encourage waste when we should be encouraging the careful use of this scarce resource. There is no doubt that this situation will have to change, if not with this Bill or this year then in the future. We should not be looking to the 21st century with anything else in mind. Everybody in this House knows the policy [800] will have to change sometime and I am disappointed we are not making that change now.

I praise the courageous exception of the Progressive Democrats Party, who have no representatives here today, in saying change is necessary. I am disappointed they are not here to support this stance. Nobody seems to be willing to stand up and admit the truth. I do not see the political difficulty surrounding this question. There is no problem admitting that the present flat rate system is wrong, something the Minister accepts. That aside, why can we not say that the flat rate system is inequitable and unworkable and that it is going to be abolished but that some better method will have to be found to charge for domestic water? I think the people would accept this because it would have a ring of honesty. However, telling them that they will never have to pay for water is like offering them a free lunch which everybody knows is too good to be true.

I support what the Minister is attempting to do and the concept behind the Bill but I am deeply concerned that we seem to be closing the door for all time on the issue of water charges. I would like some way of leaving the door open.

Mr. Calnan: Information on Michael Calnan Zoom on Michael Calnan I welcome the Minister and his document, Better Local Government — A Programme for Change. I am a member of Cork County Council and I know many discussions have taken place at local level regarding funding of local authorities. A special meeting of the county council was called some years back and all sorts of ways and means of funding local authorities were discussed. They ranged from what is being proposed now — that motor taxation collected locally should be retained locally — to the suggestion that a certain amount of VAT should be kept for local spending. Some even advocated that a proportion of all taxes collected in the area by central Government should be kept in the local area for use there. While many of these proposals were unmanageable, I am glad to see the Minister has come up with a good solution for funding local government.

We want to look at the functions of local authorities. The services provided by local authorities are many and varied. As any member of a local authority will know, they meet the needs of people in the locality. The authority's functions cover water supplies, sewerage schemes, waste management, environmental protection, housing, repairs, grants, roads, beaches, piers, the fire and library services, veterinary care, national monuments, court houses, the register of electors and many other aspects.

I welcome the abolition of water and sewerage service charges for domestic users because some people were paying while others were not. That was totally wrong. People avoided paying and there was a big problem in enforcing payment in certain areas. When some local authorities took it upon themselves not to charge at all because they had money from other sources, that threw petrol on the fire and there was no way out of it. [801] In respect of water and sewerage charges one is talking about having to pay a big sum of money at once. If one is paying £1 a week it is not missed too much but if one receives a bill for £52 a year, which still amounts to only £1 a week, it is a lot of money to have to pay out in one go. That is another negative aspect that hit local authorities. As Senator Hayes said, the cost of metering would be huge. It would mean that not only would people be charged for water but they would also be charged a rental for the meter.

The idea of local authorities using motor taxes is a good one. Local authorities collect the money, so administration costs are there already. In the past the money went into the local authority and was transferred to Central Exchequer funds. Under the new system local authorities will have a ready cash flow because when the money is paid in they will not be waiting to get grants back from the Department of the Environment. The money is there to be used immediately, giving the council a cash flow. That, combined with October budgets, means councils will be able to begin their work earlier in the year instead of waiting for sanction from the Department by which time the good summer weather has gone. Council works frequently have to be rushed through the bad autumn and winter weather conditions. All these points support the new situation.

Those in favour of charges should come out and say so clearly. As regards the idea of free water, other services are also free. For example, in education, tuition fees for primary, secondary and third level education are free.

Some people have difficulty with the equalisation fund. In his speech, the Minister said the 1996 Estimates revealed that income from motor tax in the year would exceed the income from domestic water and sewerage charges and the rate support grant by approximately £12 million.

Mr. D. Kiely: Information on Daniel Kiely Zoom on Daniel Kiely Because nobody would pay them.

Mr. Calnan: Information on Michael Calnan Zoom on Michael Calnan That money is there already. By holding back 20 per cent plus the commercial vehicles, it can be distributed more fairly to counties where there is not as big an amount of money coming in. Some counties will have a surplus and others will not, so the equalisation fund will balance the situation. The Minister and his departmental officials have already seen to this.

I welcome the Minister's handling of the group schemes and the way in which he has dealt with the problem both for urban and rural dwellers. He has introduced the £1,600 grant for people who want to sink their own wells because they cannot get a mains water supply otherwise or because their existing water supply is poor. Those grants were abolished in 1987 and nothing was done to replace them until now. I am glad to see they have been restored.

[802]Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald The Minister made a very good election speech. I congratulate him on it.

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin I thought it was quite good.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald At the outset he spoke about everything except water. It is only fair for him to be given that opportunity, but I would argue that when he came into Government the country's finances were in pretty good shape.

Mr. Hayes: Information on Brian Hayes Zoom on Brian Hayes Fair point.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald I am not biased, but the Minister should graciously acknowledge that the finances were in pretty good condition.

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin True.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald Nothing is free because somebody is always paying, no matter what it is. With regard to water charges, we pay for them in our taxes. I will be supporting the Bill on behalf of my party so it will receive a free passage through the House. However, certain aspects of it worry me. I cannot understand why we should bow to those who want free water. Some 40 years ago my mother was paying five shillings per week water rent. It was metered and the meter is still there to this day. I do not agree with those who put such a tag on metering water. It is the only way people will respect the amount of water they use. It would surprise some people to learn that they are using 1,000 gallons a day and not 100 gallons as they may think.

In the past people lived on a couple of buckets of water from the well every day and they got by on that because it was metered in a way; people were careful not to waste it because they had to draw it from the well and carry it to their houses. Water should not be wasted and the only way of ensuring that is by metering its use. I do not support Senator Hayes' idea that it would be necessary to dig up the whole place to do so.

The “Beyond 2000” programme showed a device which is connected to a water pipe and monitors the flow using a couple of wires connected to a meter. Everyone is treated the same way by monitoring the flow of water through the pipe. We already have electricity meters. Telephone meters can be situated in the exchange or in a person's house to see what units are being used. As time goes by the problem of metering water will become less difficult due to small and simple devices which can be fixed to a pipe and wired electronically to do the monitoring.

While water is essential television is not, yet people pay for a colour television licence. I forget how much I paid, I think it was nearly £80. If I had to choose, I would rather have water which is essential than television. Every house in Dublin has a television. I do not want to reduce this to a discussion about Dublin versus rural areas, but I must point out to Senator Hayes that the light outside my door is my light. I paid for it. Nobody else put it there and while it is lighting. [803] all night, I am paying for it. In addition, I paid for the driveway to my house. There are lights throughout the streets of cities and towns and the people enjoy free lighting outside their houses. Footpaths are provided free and there are good roads; but I come out on to a bad potholed road, the only good part of which is my driveway. Why are we complaining? We are bowing to a minority group.

Mr. Hayes: Information on Brian Hayes Zoom on Brian Hayes The cost of housing and living.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald Senator Hayes rightly said that many of these measures were introduced in the past by parties trying to better each other before the electorate. This is a similar case. It is about an election. We saw what happened in Dublin West when my neighbour, Mr. Joe Higgins, who lived only 200 or 300 yards from me, was nearly elected. He gave everybody the fright of their lives. Now he is bound to be elected because he is now on a pedestal——

Mr. Hayes: Information on Brian Hayes Zoom on Brian Hayes At the expense of Fianna Fáil.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald ——and they will say “That is the man who gave us free water. Only for him we would be paying for it”.

Many people who live on the Dingle peninsula, County Kerry, operate bed and breakfasts and my wife and I have three rooms for that purpose. How much water charges will we pay? We paid £212 last year for water simply because we were categorised as a guest house, even though I told Kerry County Council that it is not a guest house, because Bord Fáilte inform all bed and breakfast operators each year that if they use the term “guest house” they are breaking a law because a guest house is a place which provides accommodation and full board. Will I and everybody operating bed and breakfasts benefit from my water rate? The reason I am looking to be treated like everybody else is that we paid tax on the bed and breakfast business. It is all above board and anybody can check it out. I and all those registered operators of bed and breakfasts are entitled to complain because we are doing a great deal of good for the economy. For instance, there are 52 restaurants and two hotels, with 130 and 25 rooms respectively, in Dingle and Senator Calnan would know of towns in west Cork in similar circumstances. The restaurants are kept going by people who use bed and breakfast accommodation and new restaurants open every year. I welcome that, but bed and breakfast operators are making a contribution by paying taxes.

I hope the tourism season will get longer. We will be lucky to stretch it to seven months, but there are only two people, my wife and I, living in the House for five or six months of the year because the children are only at home at weekends. What kind of charge will be levied on people like me?

[804] Senator Calnan mentioned people who have their own water supply. What will happen in their case? Will they be subjected to the increased level of motor tax like everybody else? What about businesses which have three lorries on the road and which use water only to make tea for the employees? Will all those people suffer? I hope not.

The Minister made reference to refuse. People have wheelie bins and pay a refuse charge, but refuse turns up everywhere. When I look down a street of 60 houses, I see only about ten wheelie bins out for collection. Why does the council not knock on the door of the people who do not pay for a refuse service and ask where they put their refuse, because there is no official dump for refuse in Dingle? Where are the people who do not avail of the wheelie bin service putting their rubbish, because they are the culprits? Some sort of levy should be imposed on them because they must generate refuse. To where does their ordinary domestic refuse go? I guarantee that only half the people in Irish towns avail ol' a refuse collection.

I have dealt with a number of queries and I do not want to hold up the show.

Mr. Hayes: Information on Brian Hayes Zoom on Brian Hayes The Senator is not packing them in.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald The Minister said that local authorities should retain 80 per cent of motor tax income on cars and motorcycles. Does that include tractors, lorries, etc.?

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin No. Motor tax on commercial vehicles goes directly into the equalisation fund.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald I wanted to ask a few questions and I got them off my chest. I hope the Minister will answer a few of them. I suppose the Bill makes a start. I can see problems with the measure down the line, but let us wait and see. I will not condemn it until then.

Minister for the Environment (Mr. Howlin): Information on Brendan Howlin Zoom on Brendan Howlin I am delighted to respond to the debate and I thank Senators for their positive contributions. As I learn every time I come back to the Seanad, where I spent four years as a Member, it is always worth listening to the practical experiences one hears about in this House.

Senator Kiely wanted to leave the service charges as they are. No other Senator argued that particular point. There is a general acknowledgement that the flat rate service charge which was in place was just not fair. It was not related to the cost of producing water or, more importantly, to the volume of consumption. Whether one used little or much, one paid the same flat rate and people in some local authorities paid nothing. That was a bone of contention for years and it was a niggling battleground at local authorities. Local authorities with budgets of millions of pounds ended up having major rows, occupying huge tranches of time at meetings on the estimates [805] about a few thousand pounds in water charges. Now this matter has been dealt with and it has been removed from the agenda, which is a good thing.

With regard to Senator Kiely's comments about county roads, he is obviously aware of the county roads programme I have put in place. I acknowledged the problem with county roads when I assumed office. From that time a large volume of money has been invested in county roads, including £173 million State funding and £77 million of county council funds during the current year. Therefore, the better part of£250 million has been spent to upgrade non-national roads. This would have been considered impossible in the not too distant past.

The Senator stated that if local authorities were given the motor tax pool for one year it would solve all their problems. I must inform him that I have made provision to do so. The total motor tax pool amounts to £258 million, £243 million of which will be given to local authorities in the coming years. We are building a fund to tackle the problem of potholes, once and for all. Most local authorities have acknowledged the work carried out. In this year alone, 10,000 miles of non-national roads will be resurfaced which will be a a major boon to people living in rural areas.

Senator Kiely also made a number of points about north Kerry. In terms of infrastructure, that area is extremely well catered for and has been for a considerable period. This is due mainly to the pivotal and influential role played by a senior Deputy from north Kerry, namely, the Tánaiste. There is no Department which does not cater for the area in question and the infrastructure is there to be seen. Therefore, Senator Kiely will plough that furrow aimlessly.

The Senator asked how the new sewerage schemes will be financed. The EU and national Government will be responsible in this regard. Approximately £150 million, the largest such allocation in the history of the State, will be spent on water and sewerage schemes. I expect this figure to be increased because of an understanding on the European Union's part that Ireland will be obliged to upgrade its infrastructural standards to European norms. For this reason, we are spending the enormous sum of money to which I referred. The local authorities will maintain these schemes with the revenue I am providing. Commercial charges, which traditionally form the bulk of funding obtained from commercial use of water and sewerage, will be unchanged by the provisions I have introduced. These will also be put towards the cost of maintaining the schemes. There will be no difficulty maintaining the schemes.

I acknowledge Senator Hayes' point about the central issue of funding. The KPMG report is a good document and its drafting involved much work on the part of the General Council of County Councils, the municipal authorities and the officials of my Department, whose input I heartily salute. The report is a blueprint for the [806] genuine and meaningful reform of local government. However, this process will be meaningless unless a funding mechanism is put in place and the legislation sets out to achieve this. The Bill is a practical measure.

The Senator also referred to water leakages, which goes to the nub of the issue raised by the Progressive Democrats earlier in the week, and by Senator Quinn during this debate, about placing a practical value on water. Acknowledging that the current system is inequitous and should be abolished — Senator Kiely stated that the old system should be retained but there is no cogent argument to support his assertion — I accept that there is an argument in favour of considering the introduction of meters. I did so last year, but obviously the Progressive Democrats were asleep or were not interested at that stage. I asked KPMG to investigate the introduction of water meters and, in its independent report, it stated that it was not a viable option. I was informed that it would cost £200 million to install a metering system and a further £8 million to maintain it. The total income from domestic water charges last year was approximately £53 million. How could one justify imposing a cost of £30 million per year to introduce water metering? The Progressive Democrats want to impose that cost in respect of a leaking water system. That is not the logical way to do business.

If I had £200 million to spend, would it not be better to use it to provide water to those areas which do not yet have a water supply? A sum of £32 million has been allocated to Dublin to plug the leaks in the system which will save 22 million gallons of water per day. That is a more socially progressive environmental action to take rather than seeking to save water by charging people. I took a practical not an ideological decision in respect of this matter. I sought independent advice, which I accepted, and was informed that the introduction of meters was not viable.

I usually listen with great care and respect to comments made be Senator Quinn because he is normally a very practical man. However, he knows the first rule of business, namely, one has to be sensitive to the needs of one's customers. If one's customers are opposed to a certain measure, regardless of whether one believes it to be correct, there is no point flogging a dead horse. I had a discussion with the Senator about plastic bags. He informed me that his company tried to stop using plastic bags but customer resistance to the move was such that they had to be reintroduced. He knew it was right to stop using these bags but customer pressure obliged him to reverse his decision. I do not believe the political system is any different. We must be responsive to the needs of our customers, namely, the people and there has been great resistance to water charges in the past.

Senator Quinn referred to the ESRI report on green taxes, the general thrust of which I strongly support. However, I would not support every detail of the report. I have argued with the Minister [807] for Finance, Deputy Quinn, and encouraged him to consider the issue of green taxes. It is my ambition that, during our next term in Government, we will move towards the introduction of additional green taxes. It would be a progressive measure to put in place clearer “polluter pays” principles. However, we must temper our actions in the interests of practicality.

If I had decided to introduce water meters to every household throughout the country there would have been chaos. It is wonderful that people can posit these ideas in theory. However, the practical consequence of placing a meter in every household is that people would physically resist such action. They resisted paying water charges in the past and one can imagine the reaction if council workers arrived to place meters in people's homes. Some individuals would offer physical resistance. We must ask when charging would begin. Would charges be put in place when meters were placed in some homes or would we be obliged to wait until all meters were in place? In the interim, colossal sums of money would be spent. Therefore, it was not viable or practical to introduce a metering system and everyone is aware of that fact.

When the proposed infrastructure is in place, we can consider this issue again. We may have to revisit these issues but that will not be until some time in the next century. As already stated, I have no ideological objection to the introduction of water meters — my objection is a practical one. I believe the hallmark of my actions during my four and a half years in Government is that I have been practical. There is no point proposing measures which are clearly impractical.

The Progressive Democrats have been disingenuous on this issue, which they discovered late in the day, and they did not take part in the debate when I published the KPMG report last June. They entered the debate because Deputy Molloy had a rush of blood to the head and stated that we should pay £23 million for group water schemes. His assertion sent such a shock through the Progressive Democrats' culture base that the party's leader, Deputy Harney, stated that we should return to the old system. However, that did not suit party sensibilities so they proposed the introduction of metering. The Progressive Democrats' current position, which was voiced in the Lower House last evening, is that it would introduce metering but would not charge for it until 2012. I know of no one who previously suggested a solution whereby a system of funding would be put in place but charges in respect of it would not be introduced until 13 to 14 years later.

The Progressive Democrats know this suggestion is impractical. The proposals before the House are designed to meet current challenges and needs. They are aimed at providing local authorities with the strength to reform their structures and giving them the devolved responsibilities they have sought for some time.

[808] I thank Senator Calnan for his support for the measure and I join him in acknowledging the work of local authorities. Group schemes with private wells are important and the measures which the Government has promulgated acknowledge their work for the first time. I am proud of the individual wells grant because it will be of great benefit to many isolated individuals in rural Ireland. I am pleased to be able to provide that and I thank the colleagues in Government for enabling me to do so.

I acknowledge the contribution of Fianna Fáil in Government with Labour prior to 1994 in the improvement in our finances; a great deal of work was done. They were in a desperate state when Fianna Fáil was in office on its own and with the Progressive Democrats.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald Do not spoil it.

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin They were in a dreadful state in 1992. We turned the ship around together and there has been a remarkable improvement over the subsequent four years during both Administrations. We must maintain a steady course and not allow extraneous forces with odd ideas divert a successful ship off course. I am sure there will be other avenues to argue that in the coming weeks.

Senator Fitzgerald made a number of specific points. Metering makes people respect water. However, it is not practical for the reasons given. I will not spend £200 million over the next number of years when I want to spend it on plugging leaks and providing a water supply. If I had £200 million and came into the House and asked Senators to decide whether I should spend it on their water schemes in Kerry, Cork or elsewhere, or on meters for all, what response would I get? I would be told that I must provide water for the people and that is what I intend to do. It is the correct social, economic and environmental course of action to take.

The Senators referred to bed and breakfast accommodation. Commercial enterprises will be charged commercial water rates but where one is associated with a domestic dwelling, the local authority will apportion the cost between the two. Every household will have a domestic allowance so they will not be charged for that. That applies to farms where there is a dual domestic and commercial supply also. There will be an apportionment between the two and the domestic supply will be free.

Mr. Fitzgerald: Information on Tom Fitzgerald Zoom on Tom Fitzgerald The season lasts for only half of the year. Will that be taken into account?

Mr. Howlin: Information on Brendan Howlin Zoom on Brendan Howlin That is a matter for the local authority and I have every confidence the Senator is in a strong position to argue the case with the local authority concerned as it is practical. Commercial water charges will remain. Where the commercial operation is clearly a small element of the total usage, a minimal charge would apply.

[809] Senator Fitzgerald also referred to commercial road tax. I will explain how the equalisation fund will apply. The fund will be provided to ensure the commitment I have given — that every local authority will benefit — will be delivered. Certain local authorities generate a great deal more revenue in car tax than they do in rates support grant and charges. I do not propose that they should keep this huge windfall and the only way to prevent that is to take a slice off the top, create a new equalisation fund and distribute it. Every penny of commercial and domestic motor tax will stay with local government — 80 per cent of domestic motor tax will stay in local government and 20 per cent will go into the fund, while all commercial motor tax will go into the fund. The pool will be distributed to ensure the top up meets everybody's requirements.

How do I know that each local authority will do better? It is a simple mathematical formula. The total money from rates support grant and water charges is less than that available from motor tax. It is a buoyant pool and has increased considerably this year over last. It would have meant a benefit of about £12 million over and above last year had it been in operation last year and I expect it to be even more this year. I want the equalisation fund to be controlled by local authorities, not by the Department of the Environment or, especially, the Department of Finance, and I am establishing an equalisation council to do that. If times get bad during a future Administration, I do not want this to be seen as a nice pool of money to grab. The way to do that is to establish a separate funding mechanism and this Bill will enable me to do so by order.

I look forward to the enactment of this Bill and to coming back as Minister later in the year or early in the new year with the next Bill on local government reform. It will implement the remaining parts of this programme and will coincide with the centenary of local government in 1998.

Question put and agreed to.

Agreed to take remaining Stages today.


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