Local authorities will need up to €1.5 billion a year extra to pay for "existing and emerging demands", the Government has been warned.
Proposing water charges for all properties, holiday home taxes and greater council efficiencies, Indecon consultants said raising existing charges would not be enough to fill the gap. Local authority revenues are likely to rise 19 per cent in the next four years, but bills alone will jump by a third, while other costs will rise by just under 20 per cent.
Even if existing charges rise in line with inflation, Indecon warned that local councils would still be short of between €420 million and €1.5 billion by 2010. "This gap will need to be addressed by a combination of efficiencies, increases in charges, new sources of local revenues or increases in Exchequer funds, commercial rates, or motor taxation, or a reduction in services," said the consultants.
The Minister for the Environment and Local Government Dick Roche, however, rejected the report's main point, that more money should be raised locally.
He insisted he would not levy water charges on any house, including holiday homes, nor would he impose a special tax on holiday properties. Local revenues were buoyant, he said, because more commercial properties were paying rates, motor tax revenue was booming while €500 million a year was raised by development levies.
Responding to Indecon's warnings, he said: "I'm confident that with prudent use of central Government funding, natural buoyancy in revenue and the pursuit of efficiency, local authorities will be well placed in facing demands in 2006 and beyond."
Motor tax revenues could rise by €40 million annually if every motorist paid. "I don't mind paying my motor tax, but I don't want to be paying for somebody else," he said.
But he said planning fees should rise dramatically to cover the real costs local authorities faced in dealing with them. In 2004, local councils spent €195 million on planning, including development planning and enforcement of building regulations, but raised just €83.5 million in charges. Taxpayers, he said, should not have to pay for planning bills so that "speculative developers can make millions".
Meanwhile, Government grants to local government have jumped 2½ times since 1997, though the report notes sums paid to local authorities vary significantly, while locally levied charges in the State amount to 2.3 per cent of all taxes raised, compared with an EU average of 9.8 per cent. Backing extra local taxation, Indecon said local authorities would spend almost twice as much on public water and sewerage projects as they had in 2004. Waste management costs have increased three times since 1996 and will increase further.
"Despite higher charges, there is a projected widening gap to be funded by either commercial rates or the Local Government Fund," Indecon said in its 250-page report. "Charging can bring many benefits such as efficiency, transparency and consistency with the 'polluter pays' principle," said the consultants, in a document drafted in association with the University of Birmingham's Institute of Local Government Studies. Indecon said local charges should cover local costs, that some services, such as water, should be supplied by regional bodies, or by authorities working in co-operation. It said domestic water charges should be paid by all, though it acknowledged the political and public resistance that exists.
In a first step, holiday homeowners should pay such charges, while commercial properties' water use should be metered.
The report said some local services, including street-cleaning, should be contracted out. Each local authority should be required to publish performance league tables so that conduct could be assessed.