IBEC on Local Government Reform

Tuesday September 06, 2005 14:09

by ABTA

Also, government should immediately deliver equity by broadening the revenue base to include other users of services. The lack of domestic charges flies in the face of the 'polluter pays' principle and is contrary to sustainable development.

The business and employers organisation, IBEC, said today 'that we cannot go on having a system of local government in each county that is answerable to nobody, wastes vast sums of money and is funded in a most unfair way. At a time when business costs are spiralling out of control and significant jobs are being lost in the manufacturing sector local government charges are making Irish businesses less competitive on the world stage. IBEC is calling -as a first step- for local charges and rates on business to be capped at the rate of inflation.

Turlough O'Sullivan, Director General of IBEC, said: 'Although our 34 local authorities spent €3.6 billion last year, they are not subjected to the sort of public scrutiny that is applied to government departments. Consequently, their combined spending has risen by 50% over the past 4 years, far ahead of a general inflation rate of just 23%. Employment numbers have increased from 30,000 to 35, 000 over the same period and payroll costs have been rising at 10% per annum. Most unfairly, the cost of this mismanagement has been largely picked up by business. As we are hearing in recent weeks of increasing job losses in the manufacturing sector, it is particularly appropriate that we look at how local authority charges are crippling Irish business. Unlike local authorities private companies must absorb rising costs and the manufacturing sector is operating in an environment where the prices it receives for its products have fallen by 13% since 2000. This goes some way to explaining the 30,000 jobs lost in the sector over the past 3 years.

'Over the last three decades, the financing of local authority current spending has shifted from local electorates, to central government and now increasingly to the business community. These charges apply to every enterprise and impose unwarranted extra costs which damage competitiveness and threaten Irish jobs. The charges are clearly inequitable. While accounting for a mere 8% of properties and 15% of water connections, business alone pays rates, water charges and development levies. Revenue from rates will exceed €1,000 million in 2005. Irish waste disposal charges are five times the UK level and are Europe's highest. Average water bills have risen by 75% since 2000. Some councils have seen development levy income rise 400% since last year. Ever spiralling charges, selectively applied to one sector of society are neither equitable nor sustainable and must be changed.

'Charges do not reflect the cost of providing the service but simply fill the gap between local authority revenue and spending. Charges are escalating and there is nothing to indicate that this mismanagement will not go on indefinitely. Local authorities are monopolies, answerable to nobody, and simply impose whatever charges they like on business.

'In the long term, we need radical reform so that power and responsibility go hand in hand. Both sides of the Dáil should apply their minds to devising coherent proposals. In the meantime, the very least that could be done is to cap increases in local authority charges at the general rate of inflation. Also, government should immediately deliver equity by broadening the revenue base to include other users of services. The lack of domestic charges flies in the face of the 'polluter pays' principle and is contrary to sustainable development. IBEC is sending a submission to the Joint Oireachtas Committee on Enterprise and Small Business requesting them to examine the issue of local government charges.

'Local authorities must take practical steps now to improve their performance: it is unacceptable for business to pay ever rising charges to fund inefficiencies. What is currently being delivered is well below what is required for a modern, efficient and growing economy.

IBEC is proposing a series of actions including the following.

1. Significant consolidation of structures; the 80 town councils and boroughs must be merged with relevant county councils to remove duplication and overlap.

2. Services should be tendered for and delivered on a national basis. A range of functions should be outsourced and a much greater role given to the private sector in delivering services

3. Performance related indicators, highlighting local authority efficiencies, must be developed and league tables measuring performance between local authorities produced. An efficiency fund should be established by central government, whereby marked improvements in local authority efficiencies are rewarded.

4. Waste collection, water supply and treatment must be funded by all users, including those in the domestic sector.

5. Efficiency measures and, where appropriate, financial support must accompany central government decisions that increase the cost base of local authorities. It is not acceptable for local authorities to pass such costs onto business.

6. The cost of all services provided to government departments or agencies should be fully recouped by local authorities from the appropriate department.

'Increased competition from low cost economies and rising international energy prices are just two of the many challenges that threaten the survival of Irish companies. Sustaining these firms and the employment they bring must clearly be a priority for all. A few short months ago the Taoiseach echoed the call of the Enterprise Strategy Group to put the needs of business at the heart of policy making. Welcome words, but unfortunately the reality is different as rising inefficient and inequitable local government charges continue to damage business.

According to Mr O' Sullivan funding of local authorities must be fair.'Seeking excessive revenue from business cannot be sustained. We must ensure local authorities operate to the highest levels of efficiency. The base must be broadened to include all who benefit'. Failure to act risks killing the golden goose.'he concludes.