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It is widely accepted that the existing system of funding for local government in Ireland is deficient. The abolition of domestic rates in 1977 left local authorities with limited income streams and made them excessively dependent on central government funding for core activities. Limited discretion remained to raise funds locally with an increased dependence on volatile income streams, such as development levies, but local authorities were also placed with an undue reliance on the business sector through the retention of commercial rates.

The advent of a residential property tax later in 2013 raises the prospect for local authorities of deriving some of their revenue base from the local users of services within the catchment area. Despite the well flagged introduction of the residential property tax this year, the imposition of the actual charge on each household over the course of the next few weeks will focus minds on the direct cost this will represent for the public. Frequently, people living outside of Ireland comment on the absence of a property tax to fund local services in Ireland and contrast this sharply with the scale and level of charge imposed by municipal authorities in other jurisdictions. These comparisons, while factually based, are unlikely to ease the perceived impact of this new charge on Irish householders.

One possible consequence of the introduction of the new residential property tax will be to focus the minds of the public on the extent of local services that will be part funded by the new tax. There is no doubt that local authorities will benefit from a more predictable and sustainable source of funding, but they should also expect that the public will exercise greater focus on the value for money proposition for services delivered by local authorities. It is impossible not to have some sympathy for local authorities operating in current difficult circumstances. For a start they have seen a sharp reduction in funding over the last number of years due to a combination of reduced levels of development activity and an increase in business failures impacting on commercial rates. In addition, funds allocated by Central Government have been reduced given the overall pressure on public finances. This has forced local authorities to radically address staffing levels and has led to an increased emphasis on outsourcing of services such as waste collection and parking management. At the same time, the demand for services from local authorities has not diminished to any great extent, even if looking forward some core functions in relation to water provisionare are now to be a function of Irish Water. However if the public are facing a new charge, which many are linking to funding provision for local authority services, there is likely to be an increased public focus on the scale, quality and level of service provision by local authorities. There would be an expectation that service levels and the scale and scope of local authority activity will increase to take account of new funding streams. In this context it would be interesting to see the extent to which the Government reforms in local government will embrace the opportunity provided by new funding mechanisms to facilitate an expansion of core service delivery by local authorities. Some might argue that over the last number of years local authorities, as a consequence of the reduction in resources available to them, have had to refocus their service provision to core elements of work and had less scope to fund initiatives at local level which facilitate and encourage broader community development.

An interesting challenge for local authorities in the new environment where funding is provided through a local property charge, will not just be to provide value for money for services delivered, but also to ensure that the public view local authorities as holding real potential to deliver a range of additional functions locally in an efficient, connected and effective manner. To achieve this objective the programme of local government reform introduced by the Government in the “Putting People First Policy” will need to see delivery on a stated policy objective to increase and support the role of local government as the primary point of contact between the Citizen and the State for a host of services.

While no one likes paying a new tax, the new residential property tax may become a more accepted instrument for funding government if the benefits of increased resource allocation at local authority level are evident to citizens through improved and new services in local authorities throughout Ireland.

This article appeared in the February edition of the Public Affairs Ireland Journal. For more information on how to subscribe to this Journal, click here.