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Dáil Éireann debate -
Wednesday, 25 Nov 1931

Vol. 40 No. 16

Railways (Valuation for Rating) Bill, 1931—Second Stage.

I move that the Bill be now read a second time. The Bill contains a number of rather technical provisions, but the purpose and the main principle of it are fairly simple. The purpose is to avoid a danger, which is very serious, of railway valuations on revision being reduced to nil if the law remains as at present. It is a very long time since some of the railways were revalued. I think it is 50 years since the section which constituted the Midland Great Western Railway was revalued. Although some lines have been revalued in more recent times, no difficulty arose with the present system until a great decline in the prosperity of railway undertakings commenced in comparatively recent times. In 1925 the railways applied for revision of their valuation, and we were immediately faced with very considerable difficulty. It became apparent at that time that the present formula could not remain. The Valuation Office made a rather rough revaluation of the railways, and they allowed certain percentage reductions. The Minister for Local Government did not consent to any rating authority contesting the ratings or appealing against any new valuation, because at that time it was apparent that there was not any satisfactory material for a thorough revaluation on the present basis. It was also apparent that there were large sections of lines on which the valuation would probably be wiped out altogether. The railways at the time, in consideration of the attitude taken up, agreed to cooperate with us in elaborating a new basis for valuation. It was very difficult to get ahead. Meantime, as a matter of fact, a similar problem confronted the authorities in Great Britain, and finally last year an Act was passed which represented that cooperation and, in a large measure, agreement between the railway companies and the various other interested parties.

This Bill follows to a large extent the Act passed in Great Britain, except that we have introduced the principle of minimum valuation which was not incorporated in the British Act. That minimum valuation is necessary because if it were not in the Bill you might have it that although the railway system as a whole was not by any means reduced to nil there could be sections of lines in respect of which the valuation would be nil. The valuation is determined on the basis defined in Section XI of the Valuation Act, 1852: "an estimate of the net annual value thereof; that is to say, the rent for which, one year with another, the same might in its actual state be reasonably expected to let from year to year, the probable average annual cost of repairs, insurance, and other expenses (if any) necessary to maintain the hereditament in its actual state, and all rates, taxes and public charges, if any, (except Tithe Rent charge) being paid by the tenant." That is, the basis of all valuation is the rent at which the hereditament might be let. The Act, of course, applied to railway undertakings as to all other hereditaments. An estimate had to be made on the basis of a landlord owning and running the line and the railway buildings and letting them to a hypothetical tenant. The basis adopted was to take the net annual receipts and to deduct from the net annual receipts an allowance in respect of renewals and a further allowance in respect of the tenant's capital which went towards the creation of those receipts. For a very long time—fifty or sixty years—that practice has been established and very generous allowances have been given in respect of tenant's capital. Of course, the allowance on the tenant's capital extends to rolling stock of all descriptions, workmen's tools, to the chairs in the offices, to everything except the actual fixtures and fixed plant, which was allowed for in another way. In respect of tenant's capital the allowance in no case was less than 10 per cent., and it was very often as much as 17½ per cent.; the average was something like 15 per cent.

The railways have reached the position at present that if a revision were carried out in the ordinary way, if the net receipts for the year were taken, and if a fair deduction was made from them in respect of renewals of permanent way and all fixed plant, and if a further deduction was made from the net annual receipts in respect of tenants' capital at the rate of 15 per cent., which is the average, the valuation in some districts would be not only nil, but there would be a position where, if everything were carried out logically, there ought to be a minus valuation. It is quite clear that if revisions were carried out generally now there would be in respect of some systems in some districts a nil valuation. If the total valuation came to be distributed over the railway lines there would be in respect of many sections a nil valuation. It is perfectly clear, therefore, that a change is necessary.

I might say that it is regarded as certain that it would not be possible in the courts to get a change made in the percentage allowances for tenants' capital because the matter is so well and so long settled that the courts would not make a change. This Bill proposes to make quite a number of changes. For instance, it provides for a quinquennial valuation so that we cannot have the position that existed in regard to the Midland Great Western section, where for over 50 years there was no general revision. In the past a general revision could only take place if it were asked for by the railway company or asked for by the rating authorities through whose areas the line passed. Take the case of the Great Northern line. The Dublin County Council could not have got a general re-valuation of the Great Northern line. It could only have contested the division of the valuation. It might have contended that it should have got more than the County Meath or other counties got, but it could not have obtained a general revision of valuation of the undertaking. The railway companies naturally did not ask for a general revision except at a time when they thought they were likely to get a reduction. We provide that in future every five years the railway undertaking as a whole shall be re-valued and that will prevent the position where it is being under-valued seriously or over-valued seriously.

We provide that the Commissioner of Valuation and any courts to whom an appeal may in future be made "shall not be bound to give effect to any custom or practice affecting the valuation of railway hereditaments which obtained prior to the passing of this Act in regard to the deduction or allowance to be made in respect of the capital of a tenant, but shall have regard to all relevant circumstances." That is, we are removing the obligation on the Commissioner of Valuation and the courts to have regard to the practice of fixing an allowance for tenant's capital at an average, as it has been, of 15 per cent. We also provide—and it is not in the British Act— that there shall be a minimum valuation, so that even if the condition of the railway undertakings were to become worse than it is, we could not have the position where there would be nil valuations generally, even on the new basis. The minimum valuation will be, so far as the running line is concerned, the agricultural land value. On station buildings and other non-running line hereditaments the minimum valuation will be one-third of the 1914 valuation; so that in no circumstances, no matter what happens to railway profits, can any county council receive with respect to the running line through that county less than the agricultural land valuation, and no district in which there are stations and similar buildings situate can have rates based on any valuation less than one-third of the 1914 valuation. That provision is put in because as long as the railway line is operating it must be assumed, whether there are profits or not, that the railway company is in beneficial occupation of the various hereditaments, and consequently should make a contribution to the rates. It seems to us that that meets the situation fairly. If there are small profits, or if there are no profits, it allows the railway undertaking a substantial reduction of valuation, and allows the total value of its property to be relatively low. On the other hand, it assures the local authorities that they will always have what, in effect, will be a substantial contribution to the rates from the various railway companies.

Some Deputies may ask why, in respect of buildings, we are taking one-third of the 1914 valuation rather than the whole of the 1914 valuation. It is true that a factory owner or a shopkeeper will have to pay on his whole valuation whether he makes any profits or not. The position of the railway company is different. If a shopkeeper has two shops, or a shop and a store, or if a man has two factories situate in different places, if profits were small or non-existent, or if business were bad he might close one of them, and in many cases might escape a proportion of the rates. He might dispose of the premises in various ways if there were no profits, and he could not actually close them. The railway company is carrying out a public service, and is not really free, to a considerable extent to close without serious inconvenience to the public. It is felt that this provision of minimum valuation, taking everything into account, is an entirely reasonable proposal. It really has this effect, that it is imposing on the railways a liability which at present does not exist. If a railway company is now making no profits on the existing basis, and re-valuation goes through, that railway company can obtain a nil valuation. We are taking away the possibility of that nil valuation.

I do not think I need refer to the considerable number of points of detail in the Bill. There is only one other thing I will say, that the railway companies have only been dissuaded from proceeding with an application for re-valuation in the present year, because they were informed that this Bill would be introduced. I think this Bill will probably give them some reduction in their total valuation in each case. It is not absolutely certain that it will do that, but, I think it is most probable that it will give some reduction. I would not say that the reduction will be very striking. They were given a certain reduction in 1925, and I am not sure that the further reduction will be very appreciable. However, we have to have regard to the principle, and the principle is that of basing the new valuation on the net receipts, calculated as prescribed in the Bill. The Commissioner of Valuation and the courts shall be no longer bound to give enormous allowances in respect of tenant's capital, which has been the practice heretofore.

As the Minister has stated, this is a very technical Bill. It is one of these Bills that Deputies in opposition have to take largely on trust. We have got to assume that it will have the effect that the Minister says it will have. I take it from the Minister's speech, and from what I could gather by reading the Bill, that the intended effect of it is to permit of some reduction of the valuation of railways for rating purposes, but that it will not permit of their valuation for rating being reduced to nil. We were given to understand by the Minister for Industry and Commerce that the whole railway position is under review by the Government and that proposals for legislation in that respect are likely to be introduced. If that is so, should not this Bill form part of these proposals or be withheld until these proposals have been submitted to and discussed by the Dáil? Someone said, and rightly said, that we are getting the transport policy of the Government delivered to us backwards. Any ordinary person thinking of a revision of the transport policy would suggest that the main outlines of the proposal would be the first thing that should be submitted, and that the detailed proposals should follow. Instead of that we are getting the Traffic Bill firstly, and this Bill secondly, while the main proposals have not been submitted or any indication of their nature suggested.

I cannot see that this Bill is urgent. If it is not urgent it should be withheld until the main transport proposals of the Government are submitted to the Dáil and discussed, so that we will know exactly along what lines the Government propose to proceed. The Government's mind is closed in that direction. It is possible that there will be considerable changes in respect of transport policy in the future. A number of us believe that such changes are urgently needed, in which case the position in respect of valuation for rating of railways may be so altered that the Bill would not be necessary. I would like the Minister to give us some information as to why this Bill is introduced at this stage, before the Transport Bill has been introduced to the Oireachtas.

This is a very important Bill. The question of railway ratings and valuations has been occupying the attention of the local authorities for three or four years. Those of us who have been associated with local authorities know that for the past five or six years there has been a reduction of the amount of rates payable by the railway companies with the result that the local authorities were seriously handicapped. The losses incurred by the local authorities in respect of railway rates had to be borne by the other ratepayers. It was very difficult for some of us to understand this Bill before the Minister had made his Second Reading speech. The first part of the Bill, providing that valuations in respect of railway property cannot be reduced below a certain point, will be welcome to the local authorities. Like Deputy Lemass, one wonders why a Bill of this kind is introduced now, having regard to the promise that a Transport Bill will be introduced in the near future. This is a Bill that will require careful consideration in Committee. The local authorities have suffered already in respect of the reduction of railway valuations and we do not desire that they should suffer more under this Bill. As regards railway stations, one wonders why dwellings attached to railway stations should be entitled to a reduction of valuation.

That matter is not affected by this Bill at all.

It is somewhat surprising that the Minister when outlining the proposals of this Bill, did not give the House more details in regard to the Transport Bill which is to be introduced later. For a considerable time, railway companies have been complaining of the amount of rates they have to pay. It is well known that railway companies are, to a certain extent, handicapped in this respect. A railway company has to pay rates to the county council of every county through which their line passes. The greater part of the money which the railway companies pay in this way is devoted, in most cases, to the upkeep of the roads. That is tantamount to the subsidising by the railway companies of their greatest competitors—the bus companies and the companies controlling heavy lorry traffic. This Bill is comparable with the curate's egg. It is good in parts, both in respect to the county councils and the railways. It is provided that even if the railway companies are run at a loss they will have to pay a certain amount of rates to the county councils. Those rates will go in great part to the upkeep of the roads. In the constituency I represent, the Donegal Railway Company, although it made a comparatively small profit, had to pay during the past year about £1,000 to the Donegal County Council. Portion of that money ultimately went to the upkeep of the roads.

It is provided in this Bill that there will have to be a revaluation every five years. What is the Minister's idea as regards that? If the Minister finds that the railway companies are in a better position than now at the end of the first five years, will he introduce amending legislation? I was glad to hear that the valuation of railway station buildings will be one-third of the 1914 figure, but I was surprised to hear the Minister tell Deputy Corish that stationmasters' houses on railways will not come under that provision of the Bill. I think the Minister should regard these stationmasters' houses as part of the station buildings, because in remote parts of the country it is essential, where a railway company has a station, to provide a house for the stationmaster. For the purpose of rating, the stationmaster's house should be regarded as part of the station building, and I hope that in Committee the Minister will agree to that suggestion.

I understood the Minister to say that the minimum valuation would be one-third of the 1914 land valuation. I am not clear whether that applies to buildings in urban areas—whether the houses, stores and station premises in urban districts will come under that provision as regards the land valuation, and whether the valuation and rates of these districts will be materially altered by this proposal.

The Minister made quite an understandable case for the Bill, provided things were normal in the railway world. I agree with Deputy Lemass in hoping that the Minister will postpone the further stages of this Bill until we see the Transport Bill. What is to be the position under this Bill if the Transport Bill gives the railway companies power to close down branch lines or sections of their lines? Deputy Lemass hit the nail on the head when he said that the Government, in these matters, were moving in a backward direction. If the Minister is to state the transport policy to the House before the adjournment or before the next general election, I think that should be done first and that this Bill should be postponed until we see the measure which will disclose the Government's transport policy.

I am rather sorry that the Minister did not deal in greater detail with this Bill. The Bill was ordered to be printed on 10th July, 1931, but it was only placed in the hands of Deputies during the past week or ten days. It is exceedingly hard to get a grip of its provisions. In Part 2, Rule 2, reference is made to railway districts. Towards the end of Part 2, in Rule 7, there is a reference to the rating of the Great Northern Railway Company, which says "In relation to the district which is part of the undertaking of the Great Northern Railway Company." I cannot find in the Bill any definition of "railway district." So far as the Great Southern Railways are concerned, they seem to be fairly well covered by Tables 1 and 2, because all the areas covered by the Great Southern Railways, or lines associated with them, are definitely allocated to districts. I have had to read the Bill rather hurriedly, and I have not been able to find any section or clause defining a "railway district." I do not see, therefore, how Rule 7 can be construed in relation to the Great Northern Railway undertaking. In regard to Table 1, in which the valuation is to be allocated over the several railway districts, I should like to know whether there has been any negotiation with the local authorities concerned as to the manner in which the various parts of the railway undertaking will be allocated to those districts.

Quite obviously their interests will be significantly affected according to the way in which the allocation is made, whether the allocation is as a result of agreement with the railway company only, or whether the local authorities have been consulted. I think it is important that we should have some information on that point. In connection with the proposal in the Bill to fix the minimum valuation on running lines at the agricultural value of the land over which the lines run, and to grant to the railway companies a concession of one-third on the 1914 valuation in relation to non-running hereditaments, I would like to know whether, before that minimum value was determined, the Minister had any understanding with the railway companies as to the new allowances that will be made under Section 5, sub-section (2).

Upon the Minister's own showing, the allowances which have hitherto been made have been altogether excessive. That naturally will have to be taken into consideration now in regard to any concession which we make to the railway companies. If the position is that over a considerable number of years they have enjoyed unwarranted allowances not only in regard to the rates payable to local authorities but also in regard to a number of other things, I think most people will say that certainly over a considerable period of years pre-war the finances of the railway companies were not administered as carefully or as economically as they should have been. In view of a number of things which we all know, such as the unnecessary building of railway stations and the manner in which lines were laid out in a considerable number of places, if the position now is that the railway companies have got into rather low water I think we ought to be very careful before, first of all, we grant them a concession vis-a-vis their other competitors in transport, the canals and the omnibuses, and also vis-a-vis the local authorities to whom they properly pay rates.

On the case which the Minister has made I am not certain that sub-section (2) of Section 5 is one that ought to appeal to the House. I think we ought to be much more definite in prescribing the lines on which the valuation commissioner will proceed when making a re-valuation of the railways.

The present sub-section does mean that he is not going to be bound by the precedent with regard to excessive allowances. It does not bind him in any way, but it still leaves him, I think, far too much discretion in regard to the allowances which he may make, and for that reason I think the sub-section would need to be more precise than it is.

Before the Minister replies I would like to hear him make a case for urgency in favour of this Bill before the Transport Bill is introduced.

The reason for urgency is simply this, that if this or some other Bill of the kind is not passed to take their present rights from the railway companies, then the law will take its course and the valuations in many cases will be reduced to nil. The Bill is absolutely necessary. Up to this the railway companies have been held back from making application for revision because discussions with regard to this Bill were in progress. We informed them that we would introduce the Bill as soon as practicable.

Has not the Minister for Industry and Commerce promised to introduce a Transport Bill before the adjournment of the House for Christmas?

That is quite different from this problem of railway valuation for rating purposes. We kept the railway companies from exercising their ordinary rights for a couple of years because we informed them that a Bill would be introduced as soon as possible. We got general agreement amongst the railway companies with regard to the principle of the Bill. The railway companies in June last made application to the rating authorities for a revision. If this Bill is not passed, or some Bill to take their present rights from them, they naturally will exercise them. The revision will be carried out by the commissioner of valuation. If they are not satisfied, then there will be the usual appeals. The result of that may be that the valuations will be unreasonably reduced.

With regard to the point raised by Deputy Cassidy, the provisions of this Bill will not in any way apply to stationmasters' houses, hotels, or anything that is not strictly necessary for the carrying on of the undertaking. It may be a great convenience to the railway companies, or to their employees in many cases to have houses, but they are not strictly necessary for the carrying on of the undertaking. This Bill will apply only to the things that are absolutely necessary: the running lines, the station buildings, signal cabins, and things like that. Deputy Hogan asked me whether it is the value of agricultural land that will be the minimum value in the case of a running line in towns. It is not. There will be a valuation that will approximate to a ground rent valuation in the case of a running line in an urban district.

Then there is going to be a differentiation as between urban and rural districts?

Yes. In the rural districts the value of agricultural land will be the minimum value, and, as I have stated, in the case of urban districts and towns the valuation will approximate to the ground rent valuation. Deputy MacEntee asked where the Great Northern district was brought in in the Bill. It is brought in in Section 7, on page 10, where the percentage is fixed at 27.3. In the case of the Great Southern Railways there are various percentages, which are set out in Table 1. These percentages are based roughly on the existing position which represents the position when things were fairly normal. There must be great differences in the valuations which will be allotted on buildings on some lines as compared with others.

For instance, on the line running from Harcourt Street to Bray and from Westland Row to Bray there is a great number of stations and of station buildings, having regard to the mileage of the line. Consequently a much higher percentage must be allocated to buildings or to non-running line hereditaments on a section like that as compared with what would be allotted in the case of a line where there are very few and inexpensive stations. This represents the position as it has been up to date. It is not proposed to change the existing distribution of valuation as between a running line and non-running line hereditaments.

Question put and agreed to.

Could not the Minister agree to postpone the Committee Stage of the Bill until the House has an opportunity of considering the provisions of the promised Transport Bill?

It is absolutely necessary that this Bill should be passed. We cannot deprive people of their rights. We have bullied and persuaded them long enough into taking no action. We cannot continue that any longer. This Bill must go through because they must have their rights.

I want to see what is going to be the valuation basis of a railway line that is closed down.

I can see the case for urgency now since the Minister spoke a second time.

Committee Stage ordered for Wednesday, 2nd December.