Funding local government has been a perennial problem since Fianna Fail abolished domestic rates 20 years ago. The rate support grant meant to replace these rates never kept pace with inflation and this left local authorities in a state of constant financial difficulty, much like Mr Micawber.
The councils had to increase commercial rates year after year and, from 1985 on, to impose annual service charges on households for supplying water and collecting bins. These charges proved controversial, particularly in urban areas.
Successive governments paid little or no attention to the problem, at least until Mr Brendan Howlin took over as minister for the environment in late 1994. He commissioned a consultancy study to examine local government funding, and then came up with his own solution.
In an attempt to mollify householders, voters, in other words, he agreed to abolish water charges altogether. Instead, the local authorities would be able to retain 80 per cent of the revenue they collected from motor taxes and spend it as they saw fit; it was not just for maintaining county roads.
Shortly after taking office last June, the present Minister made it clear he would revoke the power given to local authorities to increase the level of motor tax by up to 6 per cent a year. But Mr Dempsey promised that the new arrangements would not result in financial losses.
The reform package he announced yesterday amounts to more than merely juggling with the figures. Its most important feature is the commitment to establish a £270 million local government fund that would be ringfenced from interference by central government and also "inflation-proof".
The remainder, amounting to about £320 million a year, will be raised from motor taxes - after they have been increased by 3 per cent later this year and by a further 3 per cent in 1999. These increases will more than offset the reduction in vehicle registration tax in last month's Budget.
But unlike Mr Howlin's measure, the local authorities are being given no discretion on how the motor tax revenue is to be spent; it must be invested in the repair or renewal of county roads. In essence, it will replace direct Exchequer funding, such as the programme to eliminate potholes.
One of the great advantages of motor taxation is its buoyancy; with record numbers of cars being sold, it may be expected to increase year after year. But whether it is environmentally sustainable to rely so much on a revenue source that depends on putting more cars on the road is a moot point.
"Money talks, and what is being announced today speaks loudly of the Government's commitment to local government," Mr Dempsey said, adding that the coalition deal between Fianna Fail and the PDs had made a commitment to restore "real decision-making and power to local authorities".
But this hardly squares with another essential element of the funding package, the intention to introduce a "cap" on the ability of local authorities to increase commercial rates - especially as revenue from such rates has been their only source of revenue for discretionary expenditure.
Though the business community will welcome such a cap, it could have serious implications for large local authorities such as Dublin Corporation, which will levy a commercial rate of £37.18 in the pound this year. Details of how the cap will operate were not announced yesterday.
Mr Liam Kenny, director of the General Council of County Councils said the proposed cap on commercial rates indicated that the funding of local government was becoming "more centralised than ever".
It was also waiting anxiously to see how the additional money would be allocated between counties.
However, he said "any genuine net increase in funding is welcome" and he was particularly pleased about Mr Dempsey's assurance that the Government would take account of changes in the functions of local authorities - such as the Control of Horses Act - in determining the level of increased funding.