The start of a new year brought with it the launch of the Fund for Local Councils’ Capital Projects. The setting up of the fund and its operation is a very important aspect of the extensive reforms in local government that I, together with my colleagues at the secretariat, have initiated.

The underlying aim of the fund is to foster a culture of responsible planning for sustainable capital projects in localities. While encouraging local councils to come up with innovative ideas, the operation of the fund should also provide them with some breathing space in order to work upon the betterment of their financial situation.

For some time now, I have voiced my concern regarding the feasibility of the capital projects undertaken by local councils. The Auditor General’s report on local government for 2013 confirmed my worries that the capital spending policy of the previous administration was in fact ‘non-existent’ and the laissez-faire attitude led to the creation of various white elephants in localities.

Due to lack of proper planning and guidance, various localities embarked on capital projects that proved too big for their boots and, now, they are unable to see their plans materialise due to lack of funds. Local councils are now in the deplorable situation of begging for more financing from the central government in order to continue these projects and, thus, maintain the promises they made to the citizens of their locality.

These were promises that were not supported by well-thought-out plans in the first place. Also, the projects are not supported by feasible financing plans for their execution, let alone for their subsequent operation.

Due to their capital commitments, some local councils request extra financing in order to carry out their day-to-day operations. The situation is humiliating, to say the least, and encroaches on the dignity that local councils deserve.

Year in, year out, the Auditor General has drawn attention to various problems in local government. Not only has the Auditor General been repeatedly ignored, the previous administration launched various schemes that only made financial matters worse.

The Auditor General’s report mentions in particular the PPP scheme for roads as one of the main culprits of preceding years that led local councils into significantcommitments of “millions of euros”. Because of this, “a significant number of local councils ended this financial year [2013] in a deficit position while others are on the verge of facing liquidity problems if they do not curtail their expenditure” (National Audit Office, 2013, page 34).

“Furthermore, despite their precarious financial position, certain councils have still approved and contracted for additional capital commitments, reaching up to hundreds of thousands of euros, which expenditure is also to be met during the coming financial year...” (NAO, 2013, page 34).

This is part of the mess the Labour government has inherited with regard to local councils, a mess that we intend to clean up. We want to set up a framework that would avoid this from happening again in the future.

In fact, we have identified a gap in the local councils legislation with regard to capital projects.

The autonomy of local councils can only be achieved if their dignity is protected

The Local Councils Act lays down that the functions of local councils is to provide decent services to the citizens of the locality, which include the provision of fun and cultural activities and ensuring that proper maintenance and required cleanliness are upheld. In fact, the system through which the annual allocation of central government funds is calculated takes into consideration such factors as administrative requirements, maintenance and cleanliness. It does not cover capital expenditure. However, the supporting regulations then refer to capital expenditure.

The regulations require capital projects to be authorised by the central government and provide that such authorisation would only be given if the projects are supported by a proper budget plan and specific financial projections.

The regulations even encourage local councils to consider alternative sources of funds for their projects, in particular from the private sector, in the form of donations, sponsorships and even partnerships.

The manner in which this fund for capital projects in the localities is going to be administered will be in line with the already existing legal requirements with regard to capital expenditures. We shall be reminding local councils about the requirements of the regulations and re-enforcing these requirements relating to capital projects. Had such efforts beenseriously undertaken from the inception of local councils over 20 years ago, the present disastrous financial situation could have been avoided.

The existence of this fund will allow local councils to focus on their primary functions to the community and to make wise use of their annual financial allocation to provide the best service to the citizens.

We are asking local councils that have unfinished capital projects, or evenprojects that exist only on paper, to submit their plans to the committee that was the purposely set up.

Our aim is to help local councils to execute sustainable projects by encouraging them to be more innovative as to their financial planning so that they do not remain totally reliant on central government funds for their financing.

Local councils ought to appreciate the fact that any improvements in their locality would be beneficial to all residents - including those with a commercial interest. So why not entice the private sector to participate in this investment inthe country?

The give-and-take operation of this fund will also eventually see to fruition other purely social capital projects.

This government believes in the autonomy of local councils and this can only be achieved if their dignity is protected.

Efficient and effective local councils, financially stable and innovative, competing between themselves for the provision of state-of-the-art community services, this is my long-term vision for local councils, which vision is shared by all who sincerely have the citizens’ best interests at heart.

Stefan Buontempo is Parliamentary Secretary for Local Councils.