Politics

Tuesday 22 July 2014

Coalition rift: Gilmore lets fly over FG property tax plans

Fionnan Sheahan and Niall O’Connor

Published 03/07/2014|11:52

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Eamon Gilmore

Tanaiste Eamon Gilmore has said government proposals to prevent councils from reducing the property tax bill for homeowners would represent a “fundamental breach” of the political agreement between Fine Gael and Labour.

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In an extraordinary intervention, Mr Gilmore has expressed his deep concern about a Fine Gael-led plan which would see homeowners in 11 counties and cities being robbed of local property tax bills.

The outgoing Labour leader has expressed his strong opposition to the plans, which were revealed in today’s Irish Independent.

Speaking at an event in Dublin’s North Inner City, Mr Gilmore said the plans represent a “fundamental breach” of the deal struck between Fine Gael and Labour.

“It would be a fundamental breach of the political understanding that was reached at the time the property tax was agreed and it would be something I would be very strongly opposed to.”

The intervention by Mr Gilmore exposes the deep rift in the coalition over the flexibility that should be given to councils to lower the property tax rate for homeowners in their districts.

A confidential government document shows people living in Dublin city, south county Dublin, Kildare, Wicklow, Louth, Meath, Galway city, Kerry, Clare and Cork city and county will lose out under the proposals.

Only Dun Laoghaire and Fingal county councils will still have enough spare cash left – even after their grants are cut – to pass on a property tax reduction to residents.

The other councils on the list will see their property tax windfall eroded by cuts in funding elsewhere.

A planned cut in the property tax for homeowners in these areas, where there will be a property tax surplus, is causing a deepening split in the Coalition. So far the Cabinet has failed to sign off on the plan.

Fine Gael wants councils who benefit from the bigger tax takes to use the extra money to pay for services currently funded by the Exchequer.

But Labour wants to give hard-pressed householders a break by reducing their property tax rates.

Speaking to independent.ie this morning, Mr Gilmore lashed out at the Fine Gael led plans.

He said that the tax was built on two principles – that there would be flexibility for each council to adjust the rate by up to 15pc and that 80pc of the proceeds collected would go towards the delivery of local services.

“I’m very concerned I have to say, at what I’ve read in your newspaper that there may be some departure from those two principles. Those two principles were key cornerstones of the way the property tax was designed.  That was first of all that when the property tax was going to be high, that local authorities would have the flexibility  to reduce it by up to 1`5pc, and I want to see that happening,” he said.

“Secondly, I am very concerned at the reports that  I am reading in your newspaper about plans to claw back the proceeds of the property tax from the delivery of local services in certain areas. If either of situations were to develop, it would be a fundamental breach of the way in which the property tax was designed. It would be a fundamental breach of the political understanding that was reached at the time the property tax was agreed and it would be something I would be very strongly opposed to.”

Next year, councils will keep 80pc of the property tax collected locally, with the remaining 20pc going into a central pot to be given to poorer councils.

Councils will also have the power to reduce or increase the property tax by up to 15pc to balance their books.

A detailed document from the Department of the Environment for the Coalition's |mini-cabinet, the Economic Management Council (EMC), sets out how much each area will make from the property tax.

The property tax will replace the Department's general purpose grant for councils.

Calculations show 13 councils will have a surplus when they get the 80pc of the property tax, compared to the sum they got this year. The paper then allocates the 20pc central pot to those councils who have a shortfall.

After that, the Department proposes to cut the additional funding the 13 councils got to wipe out their surplus, meaning they will have no spare cash left.

Councils get additional funding from a range of different government departments and agencies to pay for services, including housing, parks, roads, tourism and job creation.

The plans show that Dublin City Council's funding will be cut by €60m, while Cork County Council's goes down by €30m. South Dublin County Council starts out with a €25m surplus, which is cancelled out by cuts to its funding.

By the end of the process set out in the document only two councils still have spare cash.

Dun Laoghaire starts out with a €35m surplus and ends up with just €13m after funding cuts.

Fingal has got just €3m to pass on in a property tax cut.

The allocation of funding to councils was due to be discussed at a meeting of the EMC yesterday afternoon.

But the meeting of the EMC, made up of Taoiseach Enda Kenny, Finance Minister Michael Noonan, Tanaiste Eamon Gilmore and Public Spending Minister Brendan Howlin, was cancelled because the parties could not agree on the cuts.

It is not known when a final decision on the distribution of the funds will be made.

Yet Mr Kenny tried to play down the rift by claiming there was no disagreement.

Talks on the allocation of funding for local authorities are in “stalemate”, with Mr Gilmore refusing to sign off on the Fine Gael proposals.

Labour TDs are warning Fine Gael: “Do not rip off Dublin.”

Mr Kenny denied that the Cabinet is split on the property tax.

Following reports in the Irish Independent, Fianna Fail leader Micheal Martin said there was division among ministers.

Mr Kenny said the property tax was an alternative to increasing income taxes and the details of the funding model were still being worked out.

Mr Kenny said he was sorry to see Mr Martin acting on “the absolute gospel belief” of what he read in newspapers.

But Mr Martin said there was a significant split in the Cabinet.

“Government sources have stated that Fine Gael wants to charge local authorities more and when they get revenue from the property tax in 2015 they will be required to use it to pay for services and other public expenditure that central government will refuse to fund.

“In other words, people in urban areas who are paying higher rates of property tax will have to pay more for services that are devolved from central government,” he said, quoting this newspaper.

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