Waste Collection, User Charges and Local Finance

11/10/2005

Waste Collection, User Charges and Local Finance

Edgar Morgenroth (ESRI)
Embargo:00:01 a.m. Tuesday 11 October 2005.

This paper has shown that there are no strong reasons to provide a waste collection system through the public sector. Rather, than being a pure public good, waste collection is a merit good, the consumption of which should be encouraged. Thus, the charging for the public provision of this private good cannot be considered taxation and given the fact that tax relief is available for these charges it is wrong to consider waste collection charges a form of double taxation.

The private provision of the service is also supported by the literature on inefficiencies in the public sector. The inefficiency of the public sector can easily be hidden if the cost of a service is not immediately apparent. Thus, waste charges can yield more efficient services since they imply greater transparency. Substantial evidence exists that shows the efficiency benefits of contracting out waste collection services. For Ireland Reeves and Barrow (2000) have shown that the outsourcing and privatisation of waste collection service in Ireland has resulted in efficiency gains.

The changes in the waste collection regime should have implications for local finance. The paper shows that while local government receipts have increased strongly over recent years, the dependence of local authorities on central government is increasing. Thus, increased cost recovery has not made local authorities more independent from central government grants. Furthermore, even though the degree of cost recovery is increasing for local authorities, waste disposal, which is the main function left to local authorities since much of waste collection is now being undertaken by the private sector, remains a loss making operation.