I welcome everyone. We will consider the 2008 annual report of the Comptroller and Auditor General and appropriation accounts, Vote 15 — Valuation Office, chapter 14 — Valuation Output and Performance. I draw everyone's attention to the fact that while members of the committee enjoy absolute privilege, the same privilege does not extend to witnesses appearing before the committee. The committee cannot guarantee any level of privilege to witnesses appearing before it. Further, I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside of the House, or an official either by name or in such a way as to make him or her identifiable. Members are also reminded of the provision within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister or the merits of the objectives of such policies. I welcome Mr. Aidan Murray, chief executive and commissioner of valuation, Valuation Office, and I call on him to introduce his officials.
Chapter 14 — Valuation Output and Performance.
Mr. Aidan Murray
I am accompanied by Mr. Patrick Cooney, head of valuation services, Ms Mary Smyth, head of finance and personnel, and Mr. Seamus Connolly, managing valuer, Valuation Office.
I ask Mr. Dermot Keane, principal officer, Department of Finance to introduce his delegation.
Mr. Dermot Keane
I am accompanied by Ms Marie McLaughlin, principal officer.
I now ask Mr. Buckley to introduce the Vote and chapter. The full text of chapter 14 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie.
Mr. John Buckley
Almost €12 million was spent by the Valuation Office in 2008 and it recovered €2.5 million by way of fees. The valuation office is responsible for determining the valuation of property to be used for purposes of the levying of rates by local authorities. It is involved in two main streams of work. It revises valuations of industrial and commercial property, mostly on request from local authorities, on an ongoing basis. It is in the early stages of a comprehensive revaluation of rateable properties within local authority areas under a revaluation programme which will, ultimately, extend to the whole country.
I refer to the revaluation programme. It became necessary because there had been no national revaluation since 1865 and, over time, piecemeal revisions had eroded the link between rateable valuations and the value of property based on market rents. The Valuation Act 2001 was enacted to provide a framework within which these issues could be tackled and carried with it the expectation that equitable, transparent and uniform valuations within rating authorities would result within a reasonable timeframe. The arrangements to pursue this goal were examined in special report No. 60, completed in 2007, and chapter 14 of last year's annual report updates the position. A revaluation has been completed in one county, South Dublin County Council, and work is proceeding in two others, namely, Fingal, which is nearing completion, and Dún Laoghaire Rathdown.
The major concern in my report related to the arrangements for completing the revaluation programme to a reasonable timescale. When the annual report was finalised, the Accounting Officer estimated that subject to elimination of a number of constraining factors it could be brought in within ten years. These factors included moving away from 100% inspection of properties to be revalued and achieving industrial relations flexibility resulting in a more efficient staff deployment. Otherwise, the cost of the programme would increase and the timescale would extend over decades.
The Accounting Officer will be in a position to outline the progress in negotiating the removal of inflexibility and structural demarcations, including the distinction between valuers working on ongoing revision work and those working on the revaluation programme.
All Departments are attempting to capture their outputs and the associated cost of the production of those outputs and report them in annual output statements. This process is in its early stages and is likely to be refined over several years. Clearly, Departments must continue to seek to identify the most relevant indicators of output and based on these, ultimately construct performance measures related to cost and time.
The reported output of the Valuation Office suggests that even where output can be counted, it may be necessary to weight that output in a manner that takes account of the complexity of each task that culminates in a valuation certificate. It is only by doing this that it will open the way for the alignment of organisational, team and individual performance measures.
I thank Mr. Buckley. I call on Mr. Murray to make his opening statement.
Mr. Aidan Murray
I welcome this opportunity to provide an update on developments relating to the Valuation Office since I appeared before the committee last on 3 April 2008. The past two years have been very significant for the office and we can point to substantial progress across several headings, including areas of particular interest to the committee and the Comptroller and Auditor General. The foremost functions of the office remain the provision of a rateable valuation service to all local authorities, which underpins in excess of €1.3 billion in rates revenue, and the conduct of a national revaluation of all commercial and industrial property throughout the State, the first such exercise since the 1850s.
When I appeared before the committee last year, a particular concern was the likely duration and cost of the national revaluation programme. The programme was first rolled out at the end of 2005 and the rating area of South Dublin County Council was the first to be revalued. We have since undertaken the revaluation of Fingal, with the new valuation list due to be published this month, and we are currently conducting the revaluation of Dún Laoghaire Rathdown, to be completed next year. Furthermore, we are undertaking the necessary statutory consultation with a view to commencing the revaluation of Dublin city in the coming months.
Against the backdrop of the practical experience gained in conducting the revaluation of south Dublin, we conducted a thorough review of our modus operandi, with independent input in the person of the recently retired Commissioner of Valuation of Northern Ireland. The outcome to that review produced a series of recommendations which we have been implementing and which have informed our approach to progressing the national revaluation programme.
Of particular note are changes in work practices, the removal of demarcation lines and structural adjustments within the office which we secured through negotiation and with the support of our colleagues in the Department of Finance. These were areas of concern to which the Comptroller and Auditor General and the committee drew attention in the past. The resultant operational flexibilities will henceforth allow the office to deploy staff in line with business needs and to best effect.
With full implementation of all of the relevant recommendations which emerged from the aforementioned review, we now believe that we can deliver the entire national revaluation programme over a ten-year period and at an estimated cost of some €45 million. This contrasts favourably with earlier estimates that the process could take several decades to complete and would cost in excess of €100 million. The committee will be aware that the revaluation programme is, in effect, an investment in the integrity of local authority valuation lists throughout the country and that statute provides that the exercise will henceforth be repeated at intervals of no greater that ten years.
A further area to which the comptroller and the committee drew attention last year was the need for the office to develop and refine a performance measurement system which would address outputs at organisational, team and individual levels. This has been recognised as a complicated issue but we have commenced work on it, as per a commitment in our business plan for 2009 and it is embodied in our current statement of strategy. It will be progressed over the coming months.
The office continues to have a heavy workload across all headings and, no less than other State agencies, will face resource and other challenges in the time ahead. In certain areas, most notably the revaluation programme, we have been on a steep learning curve in recent years and have had to surmount a range of difficulties. We have demonstrated a capacity to learn and apply lessons from practical experience and make any changes which are necessary to enable us to discharge our statutory remit. This augurs well for the future of the office and the service we provide to all our clients.
I thank the delegation. How many people work in the Valuation Office?
Mr. Aidan Murray
We currently have a full staff complement of 154 and an authorised staff complement of 180.
How many of the 154 are valuers? The office also has administrative staff.
Mr. Aidan Murray
That is correct. There are 86 valuers.
Does the office have its full complement of valuers?
Mr. Aidan Murray
No. Our full staffing complement is 180. We currently have 154 members of staff, a figure which is likely to decrease to 150 by the end of the year. We will have a low staff complement, in terms of valuers and administrative staff. We also have technical staff which are people who would traditionally have provided mapping services. The majority of the staff are valuers, who are engaged in the revision programme and the revaluation programme.
Have all the staff been trained within the office? Have any come from the private sector?
Mr. Aidan Murray
Of late and during my time, we have recruited valuers from colleges who have acquired third level qualifications in various aspects of property. In the past, a broad spectrum of people were employed, many of whom were agricultural science graduates and acquired expertise in property valuation in the office. When people are recruited, a significant element of training in our methods is required.
In the past two or three years that has been a major problem for us because until last year we were unable to retain young staff in particular. During the Celtic tiger boom, we brought them in, managers would spend a large amount of time training them and they would then go to the private sector. Such people would have to be replaced by somebody else and who would have to start ab initio again. People would come in with a basic qualification but there would be a large element of internal training.
From the point of view of getting a better output now, the scene has changed. A number of things occurred to me. The office has undertaken a major job. When I was a law student Griffith’s Valuation was the bible. The office is trying to do a complete revaluation of the entire country, but only for commercial properties.
Mr. Aidan Murray
Only commercial and industrial properties. Residential and agricultural properties do not attract rates.
It is not on the scale of Griffith’s Valuation.
Mr. Aidan Murray
No.
It only concerns commercial property.
Mr. Aidan Murray
There are 170,000 properties.
The projection was a ten-year time frame.
Mr. Aidan Murray
The original projection, which is historical, was based on a consultancy report produced — an issue which was dealt with by the Comptroller and Auditor General and the committee last year — by Deloitte in the early part of this decade, before any practical experience had been gained of revaluation in this jurisdiction. It said it could be done in five years. The level of output required per valuer to do it in five years was off the scale. It could not be achieved.
Based on the experience in south County Dublin and the difficulties there in terms of retaining staff and refining working methodologies, we have now developed what we regard as an outline plan which is sustainable and would see the entire national revaluation programme done over a ten year period at a cost of some €45 million.
Does Mr. Murray think the office is on target?
Mr. Aidan Murray
I do. We are currently at the early stages. The south County Dublin experience was fraught with difficulty because we found it difficult to recruit staff. We were engaged in what could be described as virtually constant training. We were also trying to retain staff. We had one third of the number of young valuers we needed to do the job and we were doing the job for the first time since the 1850s. South Dublin was a major learning exercise, but I enter a caveat on that point in saying that the valuations which emerged there were no less robust legally.
Immediately after south Dublin we did a review of how the exercise had gone and where the pitfalls and delays were. We engaged the retired commissioner from Northern Ireland to help us. The review took between four and six weeks. It threw up a range of recommendations, one of which was highly significant. The report stated we needed to move away from the idea of inspecting 100% of properties and start dealing with properties on the basis of acquiring more market data and data from within our own resources. We do not need to inspect every single property, which creates a major time delay.
In examining Fingal and moving into Dún Laoghaire-Rathdown, our current level of inspection of properties is 26%, which is generating great time savings. In other words, in taking south Dublin and moving to where we are now, the process is accelerating and we believe we can accelerate it further.
Some questions arise. On the completed project in south Dublin, has there been any major adverse reaction? Do people think it is a fair job? Do the people running the businesses there think a fair and reasonable outcome has been achieved?
Mr. Aidan Murray
By and large we had a good experience in south County Dublin. Some people have seen an increase in their rates' liabilities as a result of the project. Others have seen substantial gains in their rates' liabilities. The overall loss in rates revenue to the local authority after the revaluation process and appeals consequent on that was some 3.2%. One does an initial revaluation so that people can appeal against it. Since south Dublin was completed — and bearing in mind it has been completed for two years — there has been no significant adverse reaction.
Was every premises in south Dublin included?
Mr. Aidan Murray
Yes.
So the office is now down to one in four in the two areas to be dealt with next.
Mr. Aidan Murray
In Dún Laoghaire-Rathdown we are inspecting 26% of premises. If we can get enough data on a property, it may not be necessary to send a valuer out to inspect it. We are concentrating more, as per the recommendations of this report, on acquiring data — considering where we can get it and reviewing the data we have within our own resources rather than going out and inspecting all over again.
From the point of view of the individual business person, there are appeals processes and so on. Does the Valuation Office wait until the whole job is finished or is it an ongoing process within, say, Fingal?
Mr. Aidan Murray
Yes; it is an ongoing process, which I will describe. To start with, we are required by law to engage in a consultation process if I, as commissioner, feel we need to instigate a revaluation. I am required by law to consult with the Department of the Environment, Heritage and Local Government and the relevant local authority. In reality, we consult more widely than this, including with chambers of commerce and various other people involved. We then pick what is called a valuation date, which is the date on which the valuations will be based — in other words, a date to which the rental levels will relate. I then sign a valuation order which sets in train the statutory process and that process then wends its way through to a point at which we issue what are called draft certificates. When these are issued, they effectively tell each occupier the valuation we intend to propose for his or her premises. Each occupier, when he or she receives the draft certificate, has the right under the Act to make representations. This does not involve hiring lawyers, going to tribunals or incurring large costs; it involves——
Do many occupiers engage in this process? What is the percentage?
Mr. Aidan Murray
Yes; I can give the Deputy those figures in a moment. In the case of south County Dublin, the number of representations we got was around 18% of the total. When a representation is made, it means the occupier talks to the valuer who has done the valuation——
Some changes can arise.
Mr. Aidan Murray
Yes. We encourage people to use that facility because, apart from anything else, if agreement is reached at representation stage it means that people, including our own staff, are not then dragged into the tribunal process.
If agreement is not reached, the occupier then has the right of recourse to make a first appeal to me as commissioner. This is now a statutory appeal. We have around six months to deal with the appeal after it is received. If at that stage the occupier is still not in agreement with the valuation, the——
At that stage, is the office open to discussing any new issues or points?
Mr. Aidan Murray
Yes. The person needs to adduce evidence as to why he or she believes the valuation is in some way iniquitous. After that there is a further right of appeal to the valuation tribunal. This, as members know, is an independent and quasi-judicial body. As a final appeal on a point of law, it is possible for an occupier to go to the superior courts to deal with the matter. The interval between the issue of draft certificates — which is the first indication an occupier will get of the new proposed valuation — and the issue of final certificates will allow for this representation stage. We are encouraging people to use it. It may be of interest to members that in the case of south County Dublin we received representations at a rate of 18%, while in Fingal that percentage was doubled. That is probably a reflection of the times we are living in; people are more likely to contest valuations. However, it is also in part——
Would that be because rents were falling and there was a drop in the value of property?
Mr. Aidan Murray
Yes; there would be elements of that. People may also feel that a cost, however justified, is still worth querying.
Although we had double the proportion of representations in Fingal compared to south County Dublin, it is impossible to say how many of those will translate into first appeals. Even as we speak, we are just finishing off the representation phase. The final certificates setting out the valuations are being issued only this week.
The valuations in south County Dublin were done during the height of the boom, while those in Fingal are being conducted in the trough. How does this relate to the fairness of the outcome? The office must take into account the current situation in dealing with valuations in Fingal. I am interested in the comparison between Fingal and south County Dublin. Will there be a disparity between the two areas?
Mr. Aidan Murray
I do not necessarily think there will be. The first thing we do in the process is to pick a valuation date. The valuation date in the case of Fingal and south County Dublin was 30 September 2005. That date was picked in consultation with the local authorities in both areas and no objection was raised to it when we started. Once a process has started, the Act does not allow for it to be aborted. The only circumstance allowed for in the Act is one in which the commissioner of valuation, if he feels he cannot publish the final list on the publication date indicated in the valuation order, approaches the Minister for Finance to ask for a deferral. However, the only circumstances in which one would do that would be if one could not physically get through the work.
In the cases of Fingal, south County Dublin and Dún Laoghaire-Rathdown, the whole process of revaluation is about dealing with the anomalies that riddle the current valuation lists, which have not been revised for many decades and, in some cases, much longer. It is about rebalancing between sectors, such as the retail and industrial sectors. At the end of the revaluation the local authority does not get a penny more in rates.
For illustrative purposes, in the case of south County Dublin, 39% of the relevant ratepayers saw an increased rates liability after revaluation, while 49% saw either a reduction or no change. In the case of Fingal, which is the more recent valuation — bearing in mind that the final certificates are issuing this week — there is an increased rates liability in the case of 48% of ratepayers and a reduction or no increase for 46%. While there has been evidence — this is understandable and to be expected — that certain sectors, such as the larger, prime retailers, have seen an increase in their rateable valuations, there are substantial numbers of people who gain from the process. In addition, at the end of it, the local authority has a list that is more robust and whose integrity is far more easily defended than some of the current lists.
Is it in order for me to continue in view of the division in the House?
Yes, but — I am sorry about this — while Deputy Kenneally and I are paired, Deputy O'Keeffe is probably not paired.
I am not paired. I ask the Chairman to take over while I do my duty in the House, as there are number of issues to which I want to return.
I have one question before the Deputy leaves. I am not talking about policy but about the Government's announcement regarding property tax. Have there been discussions between the Valuation Office and the Government on how this can be implemented? Is the office equipped to deal with realistic valuations of domestic properties? I appreciate that the programme it is undertaking is non-domestic, or commercial. How can a system of property tax be introduced, and what contingency plans are in place?
Mr. Aidan Murray
I will first give the committee the facts in this regard. We did engage in discussion with the Commission on Taxation, prior to publication of its report in September, on the options for introducing a property tax in the short term. In terms of our own capacity to deal with it, in an operational sense, our resources are tailored solely to our current remit, which is revision of industrial and commercial valuations, the revaluation programme and a number of other, smaller elements. We have provided to the commission — which is the only body to which we have been talking — advice, from the point of view of being the State property agency, on the different options that might be pursued. The last database we have of domestic property goes back to the 1980s so in terms of current data on the valuation of domestic residences——
That would have only been for housing stock then.
Mr. Aidan Murray
Exactly. It would be substantially out of line with what would be there now. We have talked to the Government about the possibility of banding but that is problematic in a market falling at the levels of the current market unless the bands are wide and we say to someone to pick a point they believe their house to be in and to make a return on that.
We have discussed this with the Government but have not considered it along with any other agency, it was part of the deliberative process the commission itself was going through prior to publication of its report in September. We are perfectly prepared to provide an advisory function and we can do that as we stand at the moment. If it went beyond that, and without using the hackneyed call that we need more staff to do more work, our resources are tailored to our current remit. Anything additional would raise the resource issue.
Basically the chief executive and commissioner of valuation are ill-equipped to deal with a request from Government.
Mr. Aidan Murray
It does not fall within our current remit and if a request came, we would have to debate with whoever made it about how our resources could be tailored to it. If it was an advisory function, a limited audit function or a supervisory function over private sector resources that might be engaged to play a role, that would be easier to accommodate than to have Valuation Office staff going out and conducting valuations of houses all over the country.
Has Mr. Murray an idea of the figures for housing units in existence when assessment was last carried out? What is the current national figure for housing units?
Mr. Patrick Cooney
The database we have holds approximately 1.8 million items. Of those, 170,000 are commercial and industrial properties and the balance is made up of residential and domestic property and farmland. I do not have the breakdown between domestic items and farmland. We can get some data for the committee later.
If the office is asked to carry out a national valuation of domestic properties, even with the resources being provided, would there be a timescale for the project?
Mr. Aidan Murray
We have not been approached for such an estimate and discussions with the Commission on Taxation related to what model could be employed if it was necessary to introduce a property tax quickly, probably within a space of a year to 18 months.
This is a policy issue but what one could do in that space of time with the databases available now would be rough and ready. It would, however, be refined over time, along with the returns received from occupiers, and would overlay an audit function to see if people were making bogus returns.
It would take ten years to do an assessment of non-domestic units. Would it take a comparable period for housing stock evaluation?
Mr. Aidan Murray
I would be loth to guess because we would need to look at different models. Within the private sector there are people who are underemployed in terms of property valuation and it might be possible to look at models using that resource under State guidance, which would be very different from what we have now. We would need to look at that resource, see what is available, the capacity it has and the working methodologies that could be employed there. Only then could we come up with a credible timeframe. Anything I say now would be a guess and I do not want to do that.
The office claims that it is confident the national revaluation that is taking place at the moment will be complete within the ten-year timeframe. I find it hard to believe that when only one valuation has been carried out so far and the office is currently in the middle of two others. Does the office have a plan for the next number of years that states which local authority areas will be tackled each year?
Mr. Aidan Murray
Yes. After we met last year in April, the committee was anxious, as was the Comptroller and Auditor General, that we use the experience we got and that we would review our approach up to that point. We did that.
The confidence we have that we can do this in a ten-year period at a cost of €45 million is based on a level of output per valuer of 450 cases per year at a cost of €239 per case. We are talking about doing 170,000 properties and we have sequenced it, starting in south County Dublin and ending up in Tipperary and Clare over that period of time. It is a detailed plan. There are other areas in the report that we have implemented and acted upon. Some are recommendations that are not within our own gift to implement. There are, for example, changes in the current Act that we believe should be considered that would enable us to further accelerate this.
The difficulties we face included the fact that we were only doing this for the first time in 150 years. We could not recruit or retain enough staff, we were constantly training people, we did not have an adequate cost base on which to make estimates, we had a consultants report done on a theoretical basis in 2001. We believe we can do this and the levels of output that would underpin the work would be sustainable.
To illustrate, when we were doing south County Dublin, the initial area we covered, the level of output per valuer was around 230 or 240 cases per annum. In Dún Laoghaire-Rathdown, the area we are currently covering, we have reached around 350 cases per annum. That is the level of increase in output and we believe it is perfectly sustainable to move to a level of 450 cases per annum per valuer. That is achievable and sustainable. If we do that, we can deliver over the ten-year period. It is structured in sequence year by year and county by county.
What is the total budget?
Mr. Aidan Murray
If we take the year 2008, our gross total was €13,000,743. That was our Estimate. Our net total, allowing for income we get in, was €12 million. The actual outturn for the office in gross terms was €11,970,000. We took in €2.5 million so our net total was €9.3 million.
Which comes from the Exchequer.
Mr. Aidan Murray
Which comes from the Exchequer, yes.
Where does the €2.5 million come from? What type of fee structure does the Valuation Office have in place?
Mr. Aidan Murray
We charge for a range of things. We charge fees for revision requests, which is the work we do for local authorities where cases are sent in to us. We do a range of work on revision requests and the basic fee is €250 per request. We charge for——
In terms of that €250 for revision requests, is that from somebody who believes the rateable valuation is too high and wants a revision or somebody who may have put an extension on to their premises?
Mr. Aidan Murray
It can be either. The classic one and the majority of cases would be where some physical characteristic to the building has changed and it is necessary to go and look at it again and perhaps revise it but there would be people also who might believe, and these would be private individuals and it would be in a minority of cases, there has been a change to the basis on which their valuation is grounded and they ask us to go out and carry out an examination. In some of those cases we arrive at the view that there has not been a physical change. They are called no material change cases, and they are charged for as well.
New buildings is the other area. In recent years we have seen quite a number of what we call new builds during the property boom. Some of those would be substantial and important from the point of view of the local authority. The traditional approach, before the introduction of what was called the bids legislation some years ago, was that a local authority would have to wait until the end of the year before it could enter the property onto its rates base for the following year but then this new legislation, which was brought in by the Department of the Environment, Heritage and Local Government, introduced the model of a levy that could be imposed once the building was valued, which meant that our valuers were under pressure from local authorities to go out at any point in the year, value the building and bring it on to the books. We charge for that as well.
We also have a range of fees that apply in other circumstances. Something that does not get much attention in broader circles is the fact that we have a great deal of valuation archival data in the office. We charge for those services. Unless we hugely inflate the fees we charge, and bearing in mind that most of these fees come from local authorities, we will never reach a position where we are self-financing.
Mr. Murray said the bulk of the office's fees come from local authorities. Does the office get anything from local authorities? I thought it was getting it from the business owner rather than the local authority.
Mr. Aidan Murray
We get it from a combination of both but local authorities would be the bulk of people. They send in lists to us. They identify properties from their own information sources throughout the country which need to be examined again and they send us lists of those properties. We deal with those under what is called our revision programme and the local authorities are then billed, but it is open to a private citizen to approach us as well.
If the local authority approaches the office and says it wants something revalued, it is the local authority the office charges.
Mr. Aidan Murray
Yes, and if a private citizen believes there is reason for getting us to re-examine his or her rateable valuation, they have a right to ask for that. We do it, and we charge them as well.
Does the office have to wait until it has a critical mass of work in a particular area before it will send out a valuer to it?
Mr. Aidan Murray
No. The model we employ is that each year we sign service level agreements with all of the local authorities throughout the country. We operate on the basis of four teams. I am talking about the revision side of the house rather than the national revaluation programme about which I was speaking to Deputy O'Keeffe. In the revision area we have four teams. One deals with the Dublin area and the other three teams have a geographic area assigned to each of them. The teams sign service level agreements with local authorities throughout the country and those service level agreements encompass the volume of work the office agrees with the local authority it will do for it in that year. The process of doing that work runs right through the year. We do not wait for huge numbers of cases to come in; the work is ongoing through the year. At the end of each year there will always be an overhang of work which comes in, say, in 2009 and which we will start in 2010. It is an ongoing process.
As the office splits the revision into four different teams they build up a certain expertise in certain areas. Are all of those still based in Dublin or are they based in the regions?
Mr. Aidan Murray
No, they are based in Dublin. We have only one office which is in Dublin and the teams travel from Dublin. They are not up and down every day. In terms of the management of the work they bulk together a number of cases in, say, counties Clare, Waterford and Cork and deal with those but we have only one office in Dublin.
How does the Valuation Office here compare with valuation regimes in other countries? Do any of the valuation offices have a commercial mandate or meet their full costs?
Mr. Aidan Murray
In other parts of the world where they have slightly different functions — Australia and New Zealand — I believe there are some differences in areas where offices play more of an audit role but in terms of our own office, in contrast with Northern Ireland and, I understand, the United Kingdom, they do not generally charge for their services. In terms of charging, our office would be seen as a slight exception to the rule. In terms of the type of approach we take to valuation, it would be broadly similar and in terms of revaluation, which is the programme mentioned earlier, we have jurisdictions that are further ahead than others including Northern Ireland, which is on its third or fourth revaluation of property in the North. We are a member of what is called a harmonisation group which is comprised of valuation offices here and in Britain. We have very close relations with our colleagues in Belfast. We have involved them in a range of exercises, one of which I detailed earlier where a retired commissioner came here and was actively involved with us. He plays in other functions for us as well. We generally keep an eye on what is going on but the models in farther flung parts of the world are somewhat different and not necessarily well suited to Irish conditions. The model where we could be self-financing would involve charging the full cost to local authorities, in other words, imposing on local authorities the full cost of the service we provide. It is debatable whether that would be appropriate.
Mr. Murray mentioned earlier the outputs the office got for south County Dublin and the way that has moved up in that the office hopes to get to 450 per valuer per annum.
Mr. Aidan Murray
That is right.
Is that a global figure or does Mr. Murray have some way of measuring the output of each individual valuer? What way are targets set? Are they based on a case mix and the level of the valuer? How is that done?
Mr. Aidan Murray
I will mention later that we will work towards greater integration within the different elements of the office but to take the revision area, the four teams have team targets based on the service level agreements, SLAs, with the local authorities. They have an overall target of work to get through during the year and there are team targets within that.
On the revaluation side, the target would be the area one is doing. If we take south County Dublin, for example, we are talking about in excess of 6,500 properties. If we take Dún Laoghaire-Rathdown, we are talking about approximately 5,500 properties. We dedicate a team to deal with each of those areas and that becomes the team target. Due to characteristics in the Act it is sometimes necessary for people who are dealing with, say, Fingal to deal with a residual aspect of south Dublin or Dún Laoghaire-Rathdown, but generally speaking the revision people have an overall target for the year based on the SLAs with local authorities. That is devolved down to team targets. We can measure the output per valuer. We have databases in the office that can do that in terms of what each valuer is turning out per annum. On the revaluation side it tends to be concentrated on the number of properties in the area we value. That becomes the target.
Mr. Murray said the office has a staff complement of 154, its full complement would be 180 and that he believes the number will fall to 150. Has there been a staff retention problem in the office and, if so, has that been resolved? I presume the office is subject to the current embargo on recruitment?
Mr. Aidan Murray
We are. The problem we had of staff retention or recruitment up to now has tended to be with younger staff, namely, to get young people to apply for a job, attend for interview, take up the job, engage with the work and stay with us. With the downturn in the property sector and the fact that many property companies are experiencing difficulties, that problem has largely resolved itself and staff are now staying with us. At one point our staff retention period was approximately 15 months. A person, having been orientated and trained, would have stayed with the office for up to 15 months and then would have left and we would have had to start the process again with a new person. Such staff are not leaving the office now. We have received many inquiries in recent months as to whether we are recruiting, even between recruiting drives, but we are not recruiting because of the moratorium on recruitment. However, we are suffering a loss of staff at the other end in terms of retirement. For example, by the end of 2009 we will have lost nine valuers through early retirement and one valuer through the incentivised retirement scheme. Therefore, we will have lost a total of ten experienced valuers in 2009. The pressure on our resources will probably come from that phenomenon rather than from losing young relatively junior staff.
There is probably a surplus of good valuers in the private sector who could be contracted at competitive prices. Is there a case for outsourcing a good deal of this work at quite competitive rates? Would that be a business-like approach to adopt in the light of the surplus labour in the marketplace?
Mr. Aidan Murray
It is an option we have but, as I said in my opening statement, we have been on a learning curve in recent years. We have put considerable effort into increasing productivity within the scope of our resources. Within our existing remit, I do not believe there is a need at this stage to outsource or to hire people from the private sector, although it is an option we can examine. The difficulty in the past was that we could not have matched the salaries some of these people in the private sector were being paid. We would have brought them in at the entry level whereas those people were being paid somewhat above that.
It might not be a problem now.
Mr. Aidan Murray
It might not. There is a nice fit between what we have in terms of our resources and what we are required to do.
There has been some movement in that respect. The issue of obtaining leases for foreshore licences for community groups was raised with me. That process was held up because the foreshore system is in a mess with responsibility for it being transferred from one Department to another. The delay in granting the licences was blamed on the time taken to obtain a valuation from the Valuation Office. The Valuation Office was not rushing to drop everything to do that. Having discussed the issue with the Minister for Agriculture, Fisheries and Food who was dealing with it at the time, he agreed that private valuations could be obtained. Those few jobs for the community groups were done. That is an example that might be followed in other areas.
Mr. Aidan Murray
It is. It is one of those strange proposals we put forward for a number of years. Our statutory remit effectively deals with revaluation work and with the revision work I detailed earlier. A proliferation of demands from a range of Departments, many of them related to foreshore leases as the Acting Chairman mentioned, were forwarded to us. We make the point that several years ago we did not have the resources to do this work. We could not take people off statutory work and deploy them to do non-statutory work. The Department of Finance some years ago allowed other Departments to have private sector valuations done. There is no bar to that being done now. At one time one had to have valuations done by the Valuation Office and to wait as long as it took to get the required valuation. It is now open to those Departments, including the Department of Agriculture, Fisheries and Food, to go to private sector companies, negotiate a good deal and get valuations done in respect of individual transactions or properties. We have indicated to this committee, to the Comptroller and Auditor General, who has acknowledged this, and to our clients that we cannot provide that service at present because of our concentration on statutory work, but that it is open to them to get that service elsewhere. During the past 12 months we have returned to the Department with responsibility for the marine, or what would now be the marine section of the Department of Agriculture, Fisheries and Food, approximately 230 cases that we had.
They are now being done in the private sector.
Mr. Aidan Murray
Yes. I expressed surprise that the facility the Department of Finance has provided to Government Departments and agencies to use private sector sources has not been availed of and that, in some cases, people have continued to send cases to the Valuation Office in the full knowledge that we cannot provide that service at the expense of a statutory service.
Is there a resistance among staff in the Valuation Office to outsourcing work, which they would regard as their core work and statutory duty?
Mr. Aidan Murray
There would not be a cultural resistance. No less than in any other body issues would be raised concerning industrial relations concerns and various other such issues, but I have not encountered any cultural resistance to that. In regard to the work we have been doing up to now in the revision area and in the revaluation area, it has not been genuinely necessary and in regard to market value work the facility already exists for clients to use private sector people, with which we have no difficulty.
Moving to the core of problem, some reference was made to demarcation issues and to there being some difficulty in having valuers involved in the normal revaluation work and the national scheme to which Mr. Murray referred. I cannot understand the reason for such a demarcation, as it is the same work.
Mr. Aidan Murray
It is in a sense, but the problem arose with the consultancy report, the Deloitte & Touche report of 2001, which was published in 2002. It proposed the setting up of a model which people accepted and applied. Essentially, it proposed that the revaluation work could be done by contract staff. In other words, staff could be hired on short-term contracts, perhaps on a five-year contract. There was a reaction to the additional work being required of the office at the time, which led to industrial relations action. Flowing from that action——
Why was there a reaction to that if the office was getting help from people outside the office? Surely that was easing the burden.
Mr Aidan Murray
It was, but there were issues around the management of those people, various additional areas of productivity that were required and a range of issues got tangled up at the time. To cut a long story short, an agreement was made with the unions to resolve all that difficulty and under that agreement a number of posts were created. Effectively, it set in stone the principle that contract staff could not and would not be used to do work in any other area of the office other than on the revaluation project. That meant that if there was an increased demand for revision work, contract staff could not be assigned to that work. There were also legal issues around the employment of contract staff to do permanent work, which is another issue altogether. The was the biggest element of the demarcation issue to which I referred earlier. When we did the south Dublin area revaluation we had to go to the union and advise it that we had only ten contract valuers — that was all we had been able to recruit and retain from a complement of 30 we were supposed to have in the revaluation unit — and that we were trying to get through this work. We pointed out that it would be a mark of the credibility of the revaluation programme that if it were to fall at the first hurdle and we could not do the first area, it would not augur well for the rest of it. We had to go to the union and with considerable effort, we got a once-off agreement that certain staff from the revision side or permanent side, as it were, could be redeployed to help on that project, but it was made clear that it was a once-off facility. We had other occasions on which we wanted to talk.
Why would Mr. Murray have been resisting that?
Mr. Aidan Murray
It was just adherence to traditions. I think also there may have been — in fairness to the staff currently in the organisation this has been broken down — a perception that perhaps the revaluation was some sort of a transient phenomenon and that the traditional bread and butter work of the Valuation Office was revision work. The revaluation came along and it was all going to contract staff coming in. It was all going to be very new and very problematic. There were new working methods to be devised, and some people may have felt they were better not being part of that and staying at what they were doing. In fairness to the staff in the office, the negotiations and that agreement with the union have completely wiped away that demarcation line. We can now use staff where we want, subject to resolving one or two legal difficulties we have concerning working practices. That means we now have some permanent staff working with our contracted staff on the revaluation project.
That makes absolute sense.
Mr. Aidan Murray
It does. While acknowledging difficulties in an earlier part of the decade, I wish to record that after difficult negotiations we did get changes in working practices. We got demarcation lines completely eliminated. As I said in my opening statement, we are now in a position where, subject to resolving one or two small legal difficulties, we will be able to use staff where and when we want within the office. If pressure comes on in revaluation, we can move people across from revision and vice versa. It gives the kind of flexibility that we have always wanted. At an earlier stage last year, it was one of the recommendations highlighted at the committee by the Comptroller and Auditor General as being absolutely critical. We now have it. That also underpins the confidence we have that we can do that revaluation in ten years.
I am glad to hear that because demarcation is of no advantage to anybody, including the staff.
I was going to ask a similar question to the one the Acting Chairman just posed concerning the whole area of inflexibility. I am a bit confused by Mr. Murray's reply. In the first part of it, he said he was allowed to transfer staff on a once-off basis. Later, however, he said he had total flexibility in moving staff from one area to another. It was a key part of the Rainey report that such inflexibility be broken down. Perhaps Mr. Murray could clarify that he now has that flexibility. As an addendum to that, did he need approval from the Department of Finance for that? Given that he has moved towards it, does that mean that costs will be reduced because of that flexibility?
Mr. Aidan Murray
First, I can confirm that we have. There were two phases towards getting flexibility. The first was to sit down with the union, in this case we are talking about IMPACT. To make it clear, the agreement we had as a once-off was almost a concession. We had to go and ask "Please, can we use people?" Agreement was reached with some difficulty, but it was made clear to us that this was a once-off and that we could not return a second time if we encountered further difficulties. That highlighted for us the absolute untenability of the situation — that every time we had a difficulty in running the organisation we had to go and almost ask for permission to use our own staff in the way that best suited the organisation. We negotiated with IMPACT and in fairness to it, after difficult negotiations, we got that agreement. So the industrial relations bar to doing that was removed.
The second phase was to deal with the issue of what were still contract staff doing permanent work side by side with permanent people. That raises issues which my Department of Finance colleagues are more expert than I in dealing with, to do with working time legislation etc. The Department of Finance has been extremely supportive. We went to the Department of Finance after getting union agreement. We did need its sanction, support and agreement to move further to eliminating the inflexibility that the Rainey report said we should eliminate. We got full support from the Department of Finance for that. It has worked with us in doing so and is also working with us in resolving one or two small legal difficulties at the moment.
I envisage that, with the industrial relations demarcation gone and the co-operation we have received from the Department of Finance, as well as having one or two small residual issues to deal with, we will have the complete flexibility that the Rainey report said we should have, which is essential to doing this job. We will not be getting it on a once-off basis, it will be there permanently.
So the Valuation Office is not quite there yet, but it is almost there.
Mr. Aidan Murray
We have one or two small issues to deal with, which I do not believe will be major difficulties. I anticipate that we could be in that position within weeks.
Is it nearly out of the way?
Mr. Aidan Murray
Nearly out of the way.
We will give Mr. Murray every encouragement in these difficult times when everybody is doing their best to work together.
Mr. Aidan Murray
Yes.
I wish to raise one other issue on the money side. The Valuation Office gets a grant from the Department of Finance and it also has a commercial mandate. Is Mr. Murray satisfied that the Valuation Office is knocking the best out of that commercial mandate? Is there scope for further commercial activity?
Mr. Aidan Murray
That is a moot point. If we regarded total cost recovery as an objective, the only way we could achieve that, given the nature of our operation, is by recouping all our costs from local authorities. I do not believe that is feasible or appropriate, however.
That is a fair point.
Mr. Aidan Murray
A second issue also arises. One of our central roles is to maintain the integrity of the valuation lists around the country. In other words, even where a property alters in circumstances and, by virtue of its nature, will not give rise to a rates payment to a local authority, we still want to be able to adjust the valuation list to acknowledge that there has been a change in that property. For example, if we were in a situation where we charged local authorities for every single thing we ever did for them, even where it did not give rise to rates income for them, we are pretty sure having discussed it internally that we would find, more so in the current climate, local authorities would be less inclined to put in those cases to us.
A fair point.
Mr. Aidan Murray
Our concentration will be on efficiencies and keeping costs down. We will continue to exert downward pressure on costs and upward pressure on productivity. If we ever went to the point of trying to recoup a larger section of our costs from local authorities we could, first, perhaps dissipate our own concentration on productivity and, second, end up with valuation lists being progressively corrupted around the country and becoming more out of date.
I am convinced. Does Mr. Murray have any opportunity for peer review or a comparative examination of the operations of similar offices in other countries, possibly of a similar size? Has he had any opportunity to examine that and, if so, how do we compare to New Zealand or countries of a similar size in the European Union?
Mr. Aidan Murray
We have not done any studies on it, or direct comparisons, but we have contacts through which we maintain contact, both through professional organisations of which my colleagues are members and through the harmonisation group I mentioned earlier, with similar bodies in our own part of the world. We do not maintain ongoing close contacts with colleagues in New Zealand, south-east Asia or Canada, but we have a working knowledge of what they are doing. There are many different models of organisation around the world. The Northern Ireland valuation service, for example, has regional offices. Even for a place as small as Northern Ireland, they have seven offices including the head office in Belfast. We have one office. In terms of how we organise our affairs——
Are there any cost savings to be achieved by regional offices, or are we too small?
Mr. Aidan Murray
I tend not to think so. Certainly, in respect of working from Dublin, we have concentrated databases, staff and managers in Dublin. It does not really affect the output and we have been increasing outputs. While we have not done a formal study, I believe that were we to start setting up operations nationwide, overall costs would increase, perhaps with no great gain in productivity.
I believe members have covered the ground. I ask the Comptroller and Auditor General for his final comments.
Mr. John Buckley
Obviously, the Accounting Officer has outlined the steps he has taken to speed up the revaluation programme, achieve greater productivity and move towards performance reporting. This move towards performance reporting is important since it is only by having fair measures of output that one can have a proper internal and external dialogue about performance and the efficiency of which he spoke. Clearly, the changes since the publication in 2007 of the special report on the Valuation Office are to be welcomed and progress will be kept under review in the course of our ongoing audits.
From time to time, the Committee of Public Accounts encounters horror stories on which members then comment strongly. However, it also is proper for members to comment when they find a good news story. The Valuation Office is making progress, it has seen problems and has dealt with the issues raised by the Comptroller and Auditor General. It is fair to say "well done". On that basis, is it agreed to note Vote 15 on the Valuation Office? Agreed. Is it agreed to dispose of chapter 14 on the output and performance report? Agreed. I thank the witnesses for their attendance. As the witnesses from the Department of Communications, Energy and Natural Resources are due to appear at noon, the committee will suspend its sitting until then.
The witnesses withdrew.