ANALYSIS:Any shortfall in payment of the household charge will hurt all local authorities but some will feel more pain than others
DEPENDING ON whose assessment of the number of households in the State one accepts, the rate of payment of the household charge is either just above or just below 50 per cent.
Some 886,000 householders had registered for the charge by close of business for Easter.
Paul McSweeney, chief executive of Local Government Management Agency, the body responsible for collecting the charge, expects a substantial rise in this figure as collection of the charge becomes more focused. Citing the experience of the television licence, which has a 12 per cent evasion rate, McSweeney believes the issuing of warning letters will have an encouraging effect.
Minister for the Environment Phil Hogan has suggested he would “incentivise” local authorities that “pull out all the stops” to collect the charge by giving them a greater allocation of the money generated.
However, no matter what success rate is ultimately achieved, unless 100 per cent of the charge is collected, local authorities will face an unprecedented gap in their funding.
The household charge is intended to replace the exchequer element of the Local Government Fund, set up in 1999 as one of the funding sources from central government to local government. The fund is made up of motor tax receipts and exchequer money. The motor tax element, which is the largest component of the fund, will not be affected by the introduction of the household charge, but the exchequer element will.
In 2011 exchequer funding was €164 million; in 2012 this was to be replaced by the household charge to the tune of €161 million. The cut of €3 million was not unexpected, given the economic situation. However, while local authorities could rely on their allocation of the €164 million, the same will not be true of the household charge.
While all local authorities will be anxious to see how much money is taken in from the charge, the outcome is more crucial to poorer and largely rural county councils. The fund is not shared out equally among local authorities. An “equalisation” method is used by the Department of Environment to ensure the needs of local authorities are met “in a balanced way”, it said.
At its most basic level, this means rural local authorities that don’t have much of an income from commercial rates because there are few businesses in the county, and have the problems of providing services for a dispersed population, get proportionately far more central government funding than urban councils.
The differences are quite dramatic. In 2011 the Local Government Fund accounted for 6.7 per cent of Dublin City Council’s annual gross expenditure; in Leitrim it was 30.7 per cent.
Such stark differences aren’t just a Dublin versus everywhere else phenomenon. Waterford City Council’s Local Government Fund allocation in 2011 was 8.47 per of its budget; in Waterford County Council it accounted for 28.5 per cent. Similarly, in Galway City Council the fund accounted for about 7 per cent of the budget, but in the county area that rose to 20.8 per cent.
The Local Government Fund isn’t the only source of funding from central coffers. Specific grants and subsidies for things such as primary roads or higher education grants are also disbursed every year, and are generally of a higher value than the Local Government Fund.
However, these grants must be spent on the specific projects for which they are allocated, while councils have discretion over how they spend the fund, so it is the services provided through the fund that will be on the chopping board if the household charge doesn’t deliver.
The Office for Local Authority Management has said it is too early for speculation as to what will happen if the money doesn’t come in.
It anticipates that the payments will be forthcoming.
