Tuesday, 17 August 2010

Local Government Reform

Nat O'Connor: A lot of people have heard of 'bord snip nua' and the various recommendations it made for cutting or changing public services. However, the Report of the Local Government Efficiency Review Group, published in July, got a lot less attention. It sets out a range of areas where costs could be reduced, but it also reviews local government services  in more general terms.

For anyone stuck for summer reading, there's 209 pages of detail. But for quick reference, its 106 recommendations are listed from page 171 to page 180.

Interesting items include:
  • Ending the situation where towns strike different commercial rates from their counties (Rec. 4), which businesses may welcome;
  • Reducing the number of city/county managers from 34 to 24 (Rec. 8), which is in effect a merger of those local authorities at the top managerial level;
  • Putting tolls on national roads (Rec. 56), which is madness;
  • Full cost-recovery for planning to be sought, especially for major developments (Rec 68), which is logical but could deter higher density development;
  • A €10 handling fee for non-online motor tax payments (Rec 75), which further punishes those who don't have Internet access, especially those who already pay the higher tax  rate charged quarterly.
In all, the recommendations are designed to raise €511 million a year.

Different recommendations will no doubt strike different readers. But a couple of general points surface for me.

Firstly, the local government estimated spend in 2010 will be €8.5 billion, including €4.7 billion current. The total efficiency savings amount to 6 per cent of the total, or 10.9 per cent of current spending. I suspect that a lot of the savings are from initiatives that were planned by local authorities anyway (at least, by the more efficient ones), and some suggestions won't be taken up for various reasons. So, that leaves a relatively modest level of cost savings to be squeezed out, on top of the job losses that have gone on across the local government sector over the last few years. And the suggestions do not resolve the long-standing issue of fixing the broken system for funding local government.

Secondly, the report's terms of reference were linked to the state's tax revenue crisis. However, there is more sophisticated analysis that could have been done about the economic value of local government. Is there a difference in terms of business activity between towns of comparable size that do or do not have a town council? If so, is it good for business? There are reasons to imagine that having some kind of local, elected representation could be good for local businesses. This leads on to the question of why some major towns (like Swords) don't have a town council, whereas for historical reasons, very small towns do. If there is an economic value in having representation, the equal representation of all towns, above a set size, might be a more significant reform to consider. And it could have positive economic outcomes in using local government to foster and support enterprise locally.


Rory O'Farrell said...

Interesting point about the €10 penalty for motor-tax.

Perhaps the government should look at the efficiency with which it collects money more closely, and I suspect a lot of what is raised is merely spent on administering the payment system.

I heard a spokesman from the AA who was against tolls on national roads. This was perhaps predictable, but he also suggested a better way to raise money would be to scrap the tolls and just increase duty on petrol and diesel. Could this also be done for motor tax? Scrap it and recuperate the money by increase excise duty. I can't think of how this would affect different groups, but perhaps someone can inform me? I suppose those who use vehicles more intensively (like taxi drivers or people doing deliveries) would be affected more, but these activities cause more wear and tear on the road.

Finally, I think the whole payment system in Ireland needs an overhaul. In Continental Europe cheques are obsolete. You can do almost everything on the internet, and if you don't have the internet you can use special fancy ATM type machines to do your transactions. It seems to me that Irish banks (and the government) are behind in terms of electronic banking. The easy money they were making during the good times most likely deterred investment in electronic banking.

Nat O`Connor said...


Motor tax is adminstered by local authorities and is money that goes to the Local Government Fund. We'd have to reform the funding of local authorities as part of any move away from it, and there might be some loss of revenue due to (a) people buying fuel up North - if added tax pushes prices up too high - and (b) no revenue from vehicles seldom used.

Also, motor tax is used as one way of checking that people's insurance is up to date. So we'd need a new mechanism to do that.

Conversely, in agreement with your point, having so many local authories collecting the tax probably incurs much higher administrative costs than other systems would.

Brendan Quinn said...

Budgeting in local government is a sham also. Zero budgeting needs to be brought in to ensure projects have ROI or cost-benefit analysis and proper procurement procedures.
Currently, many if not all local governments use up budgets to ensure more of the same in the future. Not a sustainable way to run public services.

Nat O`Connor said...


Your point about local authorities using up their budgets to avoid a cut the following year is a very important one. The same is likely to happen in hospitals and all sorts of other state bodies.

Some of the blame for this has to lie with central Government, because they will cut the budget of state bodies who under-spend!

What we saw in recent budgets is that the Government doesn't seem to have sufficient data to make sophisticated cuts. Instead they just cut the same proportion from every Department.

Possible solutions include more multi-annual budgetting and much better generation and analysis of data about every programme of state activity.