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Aaron McKenna: It's time for a conversation about how local government spends our money

The notion that cutting local government spending wouldn’t save the country or bring justice to bankers, and therefore it shouldn’t be touched at all, is a logical fallacy, writes Aaron McKenna.

Aaron McKenna

AS IS THE fashion in government administration, there exists a quango to help oversee the bureaucracy of local government through the clever creation of further bureaucracy. The Local Government Management Agency seems to spend a great deal of its time acting as a sort of PR agency for local authorities, talking up their achievements and contributions to the national good.

One of their reports points out that between 2008 and 2012, local government managed to achieve cumulative savings of €830 million. Well done. What the quango failed to note was that this represents less than a four per cent saving on what local government spent in total over the period.

You may recall the economy collapsing during this period. Unemployment up 236 per cent and all that jazz. But local government has trundled onwards, with savings primarily coming from a handful of rather innovative efforts; such as not replacing people who retire or cutting down on junkets. During the first year of the Croke Park Agreement Cork County Council managed to cut its spending on travel by almost as much as the Department of Foreign Affairs. To read the report of the Local Government PR Agency on savings achieved you’d think they had moved a small mountain.

The straw man argument

Those who are most tied-in to the cash that swills around local government in Ireland will point out that, to be fair, if you eliminated all local government spending it wouldn’t even close our deficit between the taxes we take in and the money we spend as a nation. In so doing we would, not incidentally, cut off a whole bunch of not unessential services such as the provision of (usually) clean drinking water and social housing.

This is a straw man argument, which is very popular when discussing austerity: the notion that if you cut an area wholesale it wouldn’t save the country or bring justice to bankers, therefore it shouldn’t be touched at all.

Local government spending is particularly corrosive because of the manner in which it goes about raising its funds. We’ve all started to become painfully aware of local government since the introduction of the property tax, which is replacing central government grants to local authorities from the taxes we pay to Merrion Street. Up to now, and continuing into the foreseeable future, local authorities have already been levying a form of property tax on all businesses in the form of rates.

Rates are designed to get from businesses their contribution to the local area in which they operate. The unspoken truth is that it’s also politically easier to take money from businesses rather than families. Very few Managing Directors have chained themselves to radiators in tax offices over rates.

A corrosive tax

The trouble is that rates are a corrosive and highly unfair tax. They are levied not on profits or activity of a business, but on the space it occupies. Rates go up or down (and usually up) based on the amount that the local authority decides it wants to raise, rather than on the ability to pay of those it takes from.

In 2010, for example, commercial rates collected by local authorities totalled €1.36 billion. The corporate tax take by central government was €3.92 billion. Corporate tax, of course, is levied on the profits of a business. Tax on profits might reduce the amount a business can re-invest and slow down new job creation; but a tax that is levied on a business regardless of profitability or activity could be the difference between keeping someone in an existing job or not.

The reduction in government grants to local authorities – and 20 per cent of the property tax collected to supposedly replace it will not be passed on – has limited the scope of local governments to cut rates and keep up spending. Some authorities have managed cuts of around 5 per cent. Others have offered a token half a per cent.

This has been an issue running under the surface for quite some time, but now that households and individuals are starting to see where they’re paying more for local government directly I hope that a conversation will start about how local government spends our money.

Asking questions about local government

Is it right, for example, that many councils still have massive planning departments stuffed with people who have nothing to do since the building boom collapsed? Is it proper that councils are digging up roundabouts and roads in rather quizzical circumstances when people elsewhere are being asked to stump up cash to pay for much needed road repairs in their area? When was the last time you perused your local newspaper and failed to find a story with a local councillor calling for some new item of spending?

In the local elections to be held a year from now you will probably hear a lot about the choice that will be open to councillors to reduce the property tax in their area by 15 per cent. What the incumbent councillors will be less likely to tell you is that they have done little or nothing to curtail the spending in local government so that tax cuts can be delivered to date.

For every token press release from a councillor in the past five years about cutting rates, there are usually ten or twenty from them calling for some new item of spending or for some local interest to be sheltered. Councillors make a career out of going down to local greens that haven’t been cut in a while to look sad, get their picture taken and call on the council to chop the mop more often; regardless of cost, cutbacks or staffing levels.

We have a body of people, thankfully to be reduced from over 1,600 to 950 at the next election, who make a career out of calling for things to be done by the government appointed civil servant who is the executive of all local authorities. They’re not financially responsible and they hardly seem to have cared about creating the local government that you’re now going to pay for even more than before through your property taxes.

Don’t let them fool you when they show up at your door and look sad at the amount of money required of you and local businesses to fund their re-election bids.

Aaron McKenna is a businessman and a columnist for TheJournal.ie. He is also involved in activism in his local area. You can find out more about him at aaronmckenna.com or follow him on Twitter @aaronmckenna. To read more columns by Aaron click here.

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