May Researchers use council budgets website to highlight big differences in how taxpayers’ money is spent locally

• Large differences between local council spend and income, but as it should be as it reflects differences in localities and constituents
• Rural/urban divide remains a big and challenging issue, with cross-council fiscal disparities getting bigger since the last local elections
• An end to austerity with some big increases in council spending since 2014, both on the aggregate and at individual council level
• Based on data on commercial rates, local property tax, and local services that they fund, a need to reconsider the balance between business and non-business taxes

Friday, 17 May, 2019: Researchers Dr Gerard Turley and Stephen McNena from the Whitaker Institute at NUI Galway have developed an online platform that allows taxpayers to see how their money is spent locally. Initially designed for PublicPolicy.ie with funding from Atlantic Philanthropies, the www.nuigalway.ie/localauthorityfinances website shows local council revenue incomes and spending on local public services. Aimed at improving transparency and accountability but also at informing the public on how local councils raise and spend taxpayers’ money, the interactive web application can be used to readily access individual council income and spending budgets, but also cross-council comparisons with a view to identifying best and worst performing councils.

Using local authority budget data from the website, the researchers find big differences in the local authorities, in terms of both council spending (and changes over time) but also council income, and, in particular, commercial rates. Among other explanations, differences in local authority spending can be accounted for by variations in expenditure needs, arising from differences in the socio-economic and demographic profile of the area and its population. Of the eight functional areas that local councils provide, four service divisions account for 75 per cent of total current spending. These are housing (€351), roads (€208), environmental services (€152) and recreation and amenities (€102), with the national average spend per person in 2019 for each of these service divisions reported in brackets.

Across the 31 local authorities there are sizeable differences in terms of how much councils spend per person, with the highest and lowest spend per head in Dublin City Council and Meath County Council, at €1,751 and €635 per inhabitant respectively. More specifically, expenditure per person on housing ranges from €686 in Dublin City Council to €86 in Galway County Council. On roads, the range is €396 in Leitrim County Council to €92 in Fingal County Council. For environmental services, including the fire service and street cleaning, Dublin City Council spends €362 per person whereas Meath County Council spends €84 per person. On recreation and amenities, spending per capita ranges from €223 in Galway City Council to €44 in Meath County Council.

Dr Gerard Turley, Whitaker Institute at NUI Galway, says: “As for spending changes over time, in general it is the more urban, eastern local authorities that have witnessed the largest increases in day-to-day spending since the last local elections, with the more rural local authorities experiencing the smallest increases and even some recording reductions in spending since 2014. In contrast, all local authorities experienced reductions in current (and even more so in capital) spending between the local elections of 2009 and 2014, coinciding with the years of austerity. Notwithstanding the recovery in the general economy since the last local elections, the issue of the rural/urban divide remains a serious challenge for our policymakers, both local and national.”

Funding sources also differ, reflecting differences in tax bases and economic activity. These revenue income differences are particularly true for rural versus urban councils, with the more urban densely populated councils able to rely more on own-source incomes such as commercial rates, retained local property tax (LPT) and user charges, resulting in a greater degree of fiscal autonomy for these councils, while the rural less populated county councils have to depend more on central government grants to provide local public services.

Stephen McNena, Whitaker Institute at NUI Galway, explains: “As most tax revenue for local councils is in the form of commercial rates and not local property tax, we looked at the commercial rate called the Annual Rate on Valuation (ARV), for 2019. For those local councils that have not revalued the commercial rates base recently, the tax rate ranges from 79.25 in Kerry County Council to 56.77 in Tipperary County Council. Where local councils have undertaken a recent revaluation of industrial and commercial properties liable for commercial rates, the tax rate ranges from 0.2760 in South Dublin County Council to 0.1500 in Fingal County Council. Of the four Dublin councils, two of them are amongst the councils that levy the highest commercial rates in the country, but, on the other hand, the other two Dublin councils have the lowest rates nationwide. As for these cross-council differences in the ARV, the rate in 2019 in any local council is a reflection of that council’s rates levied in the past.” 

As a tax on business property, commercial rates account for about 30 per cent of total revenue income, as against the local property tax which accounts for only eight per cent of revenue income. Given the Government’s recent decision yet again, to defer the revaluation of residential properties for local property tax purposes, this imbalance between business and non-business taxes to fund local public services is an issue that requires more analysis and discussion, with the 2019 local elections an ideal opportunity for voters and policymakers to debate this and other local concerns. 

These cross-council differences in budget income and spending are not unexpected, given the variations in the profile, circumstances and choices of the different areas and their constituents. The argument in favour of decentralisation and having local councils (and elections) is to bring government closer to the people, so that citizens get what they want given their differences in preferences and willingness to pay, rather than the uniformity than comes with central government provision.

For more information on this research visit, www.nuigalway.ie/localauthorityfinances or contact NUI Galway economics lecturers Dr Gerard Turley or Stephen McNena at gerard.turley@nuigalway.ie or stephen.mcnena@nuigalway.ie.

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