The impact of the economic boom and bust on local government budgets in ireland

This paper analyses the effects of the economic crisis on local government budgets in Ireland. In this context, it also examines the preceding period, namely the impact of the economic boom on local government finances. We find that the budgets of local authorities, as with the national budget, increased greatly throughout the boom years. Although local authority spending increased, local governments were not as profligate as central government during this period. As for the economic recession, the evidence is of a lagged effect on local government budgets, with no dramatic change in 2008, unlike the impact at the central level. As with downturns elsewhere, the negative impact of this recession on local authority budgets began to impact only after it had affected the national budget. Falling local revenues combined with significant reductions in central government allocations to local government have resulted in expenditure adjustments as local authorities seek pay and non-pay savings. We also show evidence of much cross-council variation in finances, with particular regard to changes in rate income and central government grants.