I am pleased to be here today on a matter that I know is of great interest and importance to the Members of the House. I am sure nobody here will forget the economic conditions which prevailed in the 1980s, conditions which discouraged investment generally, and led to no investment at all in our less attractive urban areas in particular. There is no doubt that much of the development which the tax incentive based urban renewal schemes has brought about would not have occurred without the benefit of those incentives and it certainly would not have happened in the areas where it has taken place.
It is not an overstatement to say that the success of the various urban renewal initiatives taken since 1986 has far exceeded everyone's expectations. Much of the large scale dereliction and urban decline which prevailed until the late 1980s has been eliminated. Areas previously written off have attracted extensive investment in commercial and residential development, bringing new life to the core of cities and towns which were in serious decline. We must acknowledge, however, that we have been fortunate the later years of the urban renewal schemes have coincided with the strongest period of growth we have ever experienced. That is not to say that physical decline in urban areas is no longer a problem.
It is now reasonable, however, at this time of strong economic growth, high levels of investment, a booming construction industry and pressure on house prices, to question the need to continue with the tax incentive based urban renewal schemes. My response to that question is that, provided we start to look at urban renewal from a different point of view, then there is most definitely a very strong case to continue with the scheme. Such a new perspective is one which takes account of the social dimension to urban renewal policy.
The Bill before the House provides for a new urban renewal scheme, one of the key goals of which will be to nurture and enhance the social dimension to urban renewal. This requires the integration of issues such as community development, education and training, employment and local economic development opportunities into our future plans for physical urban renewal. The objective will be to ensure that the benefits of urban renewal accrue to the many less well off communities in disadvantaged urban areas and not just to developers, investors and new residents. This new policy focus is intended to be responsive to the deep rooted spatial, socio-economic divisions in many urban areas. It also forms part of the new public policy approach to tackling poverty and social exclusion — reflecting the growing view that marginalisation and poverty can only be addressed through changes in core policies and service delivery structures and systems.
Urban disadvantage and poverty can be linked in three ways. First, there is a higher risk of poverty in areas of urban deprivation. Almost one-third of all poor households live in public housing in our five main cities. Second, there is evidence that residents of urban areas with high poverty concentrations experience cumulative disadvantage in terms of long-term unemployment, educational disadvantage and social isolation. Third, the quality of life in areas of urban disadvantage is significantly inferior to that in more affluent areas in terms of crime levels, drugs, environmental conditions and socio-economic features such as access to banks and shops, local business activity and the provision of recreational amenities.
The Government's national anti-poverty strategy recognises that tackling poverty in Irish society cannot be left to social welfare mechanisms alone. Intervention across a wide cross-section of public policy measures is required. Disadvantage in urban areas is one of the five key themes of the strategy, with urban renewal identified as one of a number of policy actions which can make a contribution to achieving the objectives of the strategy. It is vital therefore that urban renewal programmes for the future identify the potential community gains arising from initiatives in this area, including measures to increase local employment, support the development of local economic bases and provide for social housing and environmental improvements.
In 1996, ten years after the first urban renewal scheme commenced, it was time to carry out a review — informed by an in-depth study — of the schemes as they have operated up to now. Such a study was commissioned from a team of consultants consisting of KPMG, Murray O'Laoire Architects and the Northern Ireland Research Centre. The report from the consultants suggested that physical urban renewal can no longer be seen to operate in isolation. The delivery of wider economic and social benefits under the scheme in future would require a more focused, integrated strategy. The consultants made the following statement:
Urban renewal must address the physical, economic, social and environmental regeneration of urban areas having regard to the local situation, the overall situation and any individual conditions. As such, the diversity of issues urban renewal policy must address, has led to the conclusion that, in the future, measures and programmes for renewal must be linked to area based integrated strategic planning.
Taking account of the recommendations from the consultants the key elements in the new approach to urban renewal which the Government has adopted are as follows: the new scheme will provide for a more targeted approach to the award of urban renewal incentives, both in terms of their scale and in the areas to which they will apply; under the new scheme designations for urban renewal will be based on the concept of integrated area plans, which will address not only issues of physical development such as appropriate use, quality of design and conservation, but will also cover wider issues of local socio-economic benefit, including training, education and social housing; integrated area plans will have to identify targeted, focused sub-areas for designation, justify the proposed designation by reference to the objectives of the plan and indicate the basis on which incentives are sought.
Shortly after the Government took office last year I appointed an expert advisory panel to assist me in preparing for the new scheme. The panel's terms of reference included the provision of advice on guidelines for identifying priority areas for which plans should be prepared and on the suggested content of plans. The panel has also been asked to assess the extent to which completed plans comply with the guidelines with a view to providing advice to me in the making of recommendations in relation to proposals for designation. Guidelines as finalised by the panel were subsequently issued to county councils and county borough corporations which were given responsibility for identifying and prioritising the most appropriate areas for which plans might be prepared having regard to the criteria laid down in the guidelines.
The criteria for selection of areas for which plans should be prepared included relevant development plan policies and objectives, the extent of physical decay and social and economic disadvantage in the area, the need for incentives to support development in the area and the capacity to benefit from such incentives, together with the potential for synergy with other area based plans and programmes.
On the important issue of the size of urban areas most likely to be suitable for consideration under the new scheme, the guidelines made the point that few towns of less than 6,000 population received designation under the schemes up to now and that such towns would be likely to have even greater difficulty qualifying under the criteria for the new scheme. This indicative population level has been the subject of debate since the guidelines were issued. My response has been that the guidelines did not seek to set a minimum population threshold as such for the new scheme.
The population level mentioned is of an indicative nature only and does not equate to setting a strict population threshold as such. It does, however, reflect the fact that the scheme is concerned with urban renewal and that it must therefore, of its nature, be confined to areas with strong urban characteristics. The indicative population level also reflects the fact that the successful implementation of a scheme of this nature in an urban area requires a minimum level of scale.
A number of requests to have the 6,000 population guideline reduced were received. The issue was considered by the expert advisory panel as part of its overall consideration of the guidelines for the new scheme. The panel's recommendation was that the 6,000 guideline should remain unchanged on the basis that while it is only a guideline, it provides a reasonable baseline indication of the minimum size of urban area likely to be able to meet the criteria for designation under the scheme. We must remember that we are talking about urban renewal, not village or small town renewal. No town will, however, be excluded solely on the basis of population. All the criteria spelt out in the guidelines will be taken into consideration.
The designation of an area for tax reliefs under the new scheme can only be considered if it falls within an urban area which the relevant local authority decides is a priority area for which an integrated area plan has been prepared. In that context, if a town with a population of less than 6,000 was considered to be a priority, the relevant local authority must, as in all other cases, demonstrate clearly how that area meets the criteria for the new scheme.
As regards the content of integrated area plans, the guidelines for the new scheme make it clear that these plans should create a vision for the future of the area to which they relate which balances physical development, economic and community development, conservation and environmental and amenity improvements. Within core urban areas in particular, conservation of the built environment is expected to underpin the strategy of any plan for such an area.
The consultants' report on previous urban renewal schemes recognised that a number of excellent conservation initiatives had been undertaken in designated areas under the schemes operating up to now. The report found that it was in those areas where conservation objectives have focused on the reinforcement of the essential character of an area that they have been most effective. However, in many designated areas the practice of conservation, according to the consultants, simply resulted in the gutting of buildings and the retention of facades. This may have been variously attributable to the difficulties of complying with statutory building and fire regulations, the misfit between new uses and old buildings or the widely cited problem of cost.
To facilitate reconstruction and improvement work on existing buildings, my Department has issued revised technical guidance on the national building regulations which took on board a number of suggestions from the Royal Institute of Architects in Ireland. The institute, in partnership with my Department, is currently working on a further special technical guidance document for work carried out on buildings of outstanding architectural and historic importance, including listed buildings.
The urban renewal scheme consultants also found that there was a tendency to concentrate on the retention of isolated historical features and facades. They were of the view that there is a need to evaluate the total spatial, social and historical context of each building in a streetscape. That is why the guidelines on the 1998 urban renewal scheme which issued to local authorities specifically addressed the issue of conservation and set out a basis on which the problems highlighted by the consultants' report might be addressed, while taking account of best practice in terms of both building and streetscape conservation.
The consultants' report also noted that, in the absence of a strategic policy on conservation at national level, it was not surprising that there have been mixed results from conservation initiatives in designated areas. However, since the time that report was published, the Government has made significant progress on the overall issue of building conservation, particularly with the publication last month by my colleagues, the Minister for the Environment and Local Government, Deputy Dempsey, and the Minister for Arts, Heritage, Gaeltacht and the Islands, Deputy de Valera, of the Government's proposals, entitled Protecting Our Architectural Heritage. These proposals will deliver on a commitment in An Action Programme for the Millennium by putting in place three significant measures.
The first of these consists of a proposed new planning Bill which will transform the legislative protection afforded to architectural heritage. The Minister for Arts, Heritage, Gaeltacht and the Islands will also bring forward a Bill to place the National Inventory of Architectural Heritage on a statutory basis. The inventory will act as a crucial database in identifying buildings throughout the State which are worthy of protection. Second, I am pleased that the Government has given approval for a new budget line of £5 million per annum from 1999 onwards to ensure that the package of measures can be fully implemented. Approximately £4 million of this will be available for grant aid for protected buildings. The remainder will go on the third measure, employment of the necessary conservation expertise to ensure that all buildings worthy of listing are identified, the legislation enforced and the grant scheme operated effectively. The employment of adequate expertise and knowledge by local authorities will be specifically supported with central guidance and support as necessary.
The new conservation measures being introduced by the Government will closely complement and help to underpin the approach to conservation required under the integrated area planned approach to urban renewal. There is strong emphasis in the guidelines for integrated area plans on preference for refurbishment of existing buildings for sustainable uses over new buildings. Plans are expected to show how incentives can be used to support investment in conservation and repair and adaptation to new use.
This Bill is directly linked with the provisions for tax reliefs for the new urban renewal scheme included in this year's Finance Act. The application of those reliefs is subject to the passing by the Oireachtas of an Act providing for the renewal of certain urban areas and the submission of integrated area plans in respect of areas identified on the basis of criteria drawn up by the Minister for the Environment and Local Government.
The Bill is divided into four parts. Part I is made up of mainly technical provisions dealing with matters such as the Bill's commencement and definition of terms used in the Bill. Part II deals with integrated area plans, including the functions of local bodies and the Minister in relation to these plans, and also with rates remissions. Part III clarifies and extends certain additional functions to the Dublin Docklands Development Authority, which was established under the provisions of the Dublin Docklands Development Authority Act, 1997. The opportunity is taken in Part IV to make specific statutory provision for the urban and village renewal grants which are being made to local authorities and certain other conservation bodies under the urban and village renewal sub-programme of the EU co-financed Local Urban and Rural Development Operational Programme. A number of amendments to the Taxes Consolidation Act, 1997, are also provided for in Part IV. While these tax legislation provisions are included in this Bill, the intention is to incorporate the provisions subsequently in the Taxes Consolidation Act via the 1999 Finance Bill.
Sections 1 to 6 deal respectively with the issues of the Bill's short title, various commencement provisions, interpretation of terms used in the Bill, the linking of the Bill with the relevant provisions in the Finance Act, the appointment of authorised companies for the purposes of the Bill's provisions and the payment of any expenses that may be incurred by the Minister in administering the Bill.
Section 7 provides for the drawing up by county councils and county borough corporations or companies authorised by them of integrated area plans, which I might later refer to as IAPs, for a part or parts of their areas for the purposes of the new urban renewal scheme, with provision for the inclusion of part of the area of another county council or corporation, with the consent of the latter. Section 7 also lists objectives which must or may be identified in an IAP. These objectives include the securing of the economic and social renewal of the area and its physical renewal with provision for addressing the various issues relevant to the renewal of the area. The section also requires consultation with a wide cross-section of interests in the preparation of lAPs.
Section 8 provides that lAPs may contain or be accompanied by recommendations from local authorities or authorised companies that parts of the area to which a plan relates should qualify for tax incentives or alternatively that the whole of the area to which a plan relates may qualify for certain of the residential incentives in certain circumstances. The provision allowing residential incentives to be applied throughout an area to which an IAP relates, where this can be justified, has been framed to take account of the recommendations in the Bacon Report on House Prices by confining this option to conversion or refurbishment of existing property in the case of section 23 type relief for rented residential accommodation and to residential property for owner-occupation. Section 23 type relief for new rented accommodation could only be applied in sub-areas within an IAP area where this can be justified.
Section 8 of the Bill provides that in recommending the application of incentives a local authority or authorised company must have regard to the following criteria: consistency between the types of development for which urban renewal reliefs are to be provided and relevant provisions of an integrated area plan; the significance of the reliefs to be provided in a qualifying area for the overall development objectives of such a plan; market conditions in the area covered by the plan; and the nature and extent of any impediments to the development of the type envisaged in the area in which the tax reliefs will apply.
Section 9 provides for the Minister for the Environment and Local Government, having considered an IAP, to make recommendations to the Minister for Finance that an area or areas within the area covered by an IAP should qualify for urban renewal incentives.
Section 10 allows rating authorities to remit on a sliding scale over ten years the rates leviable on premises constructed or improved over a period to be specified by order of the Minister, within an area covered by an IAP. This provision would allow rating authorities to grant rates remissions on this basis in any urban area covered by an IAP regardless of whether tax reliefs are applied in the particular case.
Section 11 provides that developments qualifying for the tax reliefs must be consistent with the objectives of the relevant IAP, with local authorities providing certificates to this effect.
Section 12 covers the putting in place of arrangements for monitoring and reporting for each year on the implementation of IAPs in cases where areas within the area covered by the plan become qualifying areas for the purposes of tax incentives.
In relation to the Dublin Docklands Development Authority, section 13 provides, for the avoidance of doubt, in response to legal advice given to the authority, that the authority may recommend to the Minister for Finance that one or more of the relevant incentives for the docklands as provided for in the Taxes Consolidation Act, 1997, may be applied to qualifying areas in the docklands area.
Section 14 provides that qualifying developments in the docklands must be consistent with the master plan for that area and that this must be certified by the docklands authority.
Provision has been made in section 15 to allow minor variations to the Dublin docklands master plan by the council of the Docklands Authority to take account of any changed circumstances that may have arisen since the adoption of the plan without the need to invoke the full review procedure in relation to the master plan provided for in the Dublin Docklands Development Authority Act, 1997.
Section 16 increases the present limit on borrowing by the authority from £50 million to £100 million to support the major investment to be undertaken by the authority in implementing the master plan. Section 17 makes specific statutory provision for the grants payable under the urban and village renewal sub-programme of the local urban and rural development operational programme.
Sections 18, 19 and 20 contain the provisions which will be incorporated in the Taxes Consolidation Act, 1997, at a later stage. Section 18 will have the effect that double rent allowances for lessees of buildings can apply irrespective of whether capital allowances were granted on a building. This is in line with the taxation provisions in relation to the new scheme under which the intention is that the Minister for Finance may direct that areas within the boundaries of an IAP shall be a qualifying area for the purposes of any one or more of the urban renewal tax incentives.
There have been ongoing consultations with the European Commission on the applicability, in the context of EU rules on State aids, of the various tax incentives for the new urban renewal scheme, the pilot rural renewal scheme for the upper Shannon area and for those in the Custom House area in so far as these schemes are of benefit to commercial and industrial development. I want to give the House some background information on the circumstances which have led to this. In May 1997 the European Commission wrote to the Irish authorities about the enterprise areas tax incentive scheme. The reason for its writing was the extension of the enterprise area scheme in the 1997 Finance Act to the regional airports and the press publicity generated by that decision. After lengthy discussions and examination, the Commission approved the enterprise areas designated in the 1997 Finance Act last December but retained the right to examine each airport enterprise zone designation on a case by case basis as they arose. As a result of these developments it has become necessary to obtain EU Commission approval for the new urban renewal scheme and the new rural renewal scheme, both of which will have to be notified to it.
The Commission is also examining a proposal regarding the extension of the capital allowances for buildings in the extended Custom House area beyond January 1999. Apart from some transitional cases, it will also be necessary to notify the European Commission about the tax reliefs in the wider Dublin docklands area; EU Commission approval is not necessary in the case of tax reliefs for residential accommodation. However, a problem has recently emerged in regard to the continued availability of the double rent relief for tenants of buildings in all tax designated areas in the context of the new European Union regional aid guidelines which are to come into force.
The Commission officials consider that this relief is not compatible with the new guidelines in the context of Ireland's improved economic position and, therefore, should not be granted, except in limited cases. The EU Commission's objections are not expected to arise in the case of the capital allowances for commercial and industrial development but these will be subject to the aid intensity ceilings, arising in 1999, under the new regional aid guidelines. There are still many issues which have to be resolved between ourselves and the EU Commission before the full picture with regard to the future availability of the various allowances becomes clear.
With a view to assisting in obtaining EU approval for the new urban and rural renewal schemes, certain changes in the existing taxation provisions relating to these schemes are provided for in section 19. The effect of the provisions contained in the section is as follows. In the area covered by the rural renewal scheme, double rent allowances for lessees of buildings will apply only for activities specified in regulations to be issued by the Minister for Finance setting out the circumstances in which those allowances would comply with the Commission's rules on State aids. In the new rural renewal scheme where double rent relief continues to be available, 50 per cent capital allowances will apply as heretofore to commercial buildings, but where double rent relief is no longer available 100 per cent capital allowances will apply. In the new urban renewal scheme, 50 per cent or 100 per cent capital allowances may apply for commercial buildings but 100 per cent capital allowances will not apply where double rent relief is also available.
The selective incentive specific designation process which is part of the urban renewal scheme will be operated in a way which ensures that the incentives for this scheme are applied in a way which complies with EU requirements.
Arising from delays in obtaining EU approval to an extension of the current deadline for the incentives in the Custom House Docks area and the EU objections to certain aspects of the incentives as they have applied to development in that area up to now, including double rent allowances in particular, it has become necessary to modify current legislative provisions relating to the incentives in that area. The proposed modifications are provided for in section 20. Specifically, section 20 extends, from l May 1998 to 1 August 1998, the deadline in section 409A of the Taxes Consolidation Act, 1997, by which a contract for the development of a building in the Custom House Docks area must be entered into if it is not to be affected by the £25,000 ceiling which has been placed on the amount of capital allowances which a passive individual investor can offset against non-rental income in any given year.
Section 20 also provides for the following variations as between particular termination dates for the different tax reliefs in the area: 24 January 1999 for double rent allowances; 31 December 1999 for the residential reliefs; and also 31 December 1999 for the capital allowances for the construction of commercial buildings. However, where at least 51 per cent of the qualifying expenditure is incurred before 1 January 2000, the capital allowances qualifying period will be extended to 30 June 2000. These changes will come into effect by way of an order to be made by the Minister for Finance.
In conclusion, may I say that the process of selecting areas and preparing lAPs has been ongoing since last year. The total number of lAPs received by my Department was 78 — well beyond the 50 or so we anticipated. Given that the urban renewal scheme applies in 35 urban centres at present and in view of the well signalled intention that the new scheme will be targeted at the areas where needs are greatest, it is clear that there will have to be limitations on the extent to which designation can be applied under the new scheme. Widespread and extensive designation would defeat the whole purpose of the new scheme. However, until such time as all the lAPs have been fully assessed by the expert advisory panel and recommendations made to me, no decisions will be announced. This process is continuing with a view to ensuring that decisions on designations can be announced as soon as the new scheme can be commenced, following the completion of the continuing negotiations with the EU. At this stage there is no possibility of a decision being made now by 1 August 1998. It is more likely to be late September or early October and that is assuming the European Commission does not make further objections.
I commend the Bill to the House and look forward to a constructive debate on its provisions.