Dáil Éireann debate -
Wednesday, 23 Jun 1971

Vol. 254 No. 13

Local Government (Rateability of Rents) (Abolition) Bill, 1971: Second Stage.

Minister for Local Government (Mr. Molloy)

Targaim: Go léafar an Bille don Dara Uair.

Bille gearr teicniciúil é seo. Sé aidhm an Bhille ná na h-aimhrialtachtaí agus na h-éigeartaí a tharlaíonn i gcás rátaí ar oidhreachtáin a úsáidtear le h-aghaidh gnóthaí poiblí, eolaíochta nó carthanachta a chur ar ceal.

The main purpose of the Bill is to terminate the rating of certain rents, under the system known as the rating of half rents, with effect from the 1st April, 1971. Under the Poor Relief (Ireland) Act, 1849, a person receiving rent from property, the occupier of which was exempt from normal rating because of its being used for public, scientific or charitable purposes, was to be rated on a valuation equal to half of the rent. At that time rates were, in effect, shared by the owner and occupier of rented property and the provision in the 1849 Act ensured that the owner would still be liable for his share of the rates where the occupier secured exemption by reason of his occupying the property for public, scientific or charitable purposes.

In modern times, when rates are ordinarily a charge on the occupation of property, the levying of rates under the half-rent system on the owner of property on the basis of a fraction of the rent he receives is anomalous. Furthermore, the system may give rise to hardship in individual cases as it may result in an owner paying more in rates than he receives in rent. The purpose of the legislation, therefore, is to discontinue the system of half-rent rating altogether from the current financial year. The exemption from rates of the occupiers of property is not affected in any way.

The State, as occupier of property subject to half-rents, is affected by the proposal. The State pays a bounty-in-lieu of rates to the local authority in respect of premises it occupies. Where the owner of State property is subject to rates on the "half-rent", the State bounty-in-lieu of rates is reduced by the amount which the owner pays in rates. The State bounty-in-lieu of rates must now be increased to offset the amount the owner will no longer pay. It is estimated that in the current year the extra cost to the Exchequer will come to approximately £30,000. This sum will, of course, go to the local authorities. Some authorities themselves will have to face a slight additional charge also in respect of rates on half-rents which will not be offset by the State. Despite the fact that the proposal will involve these relatively small extra charges on public funds, the proposal is a sound one in that it removes an obvious anomaly in the rating system, one that can involve injustice and can be dealt with without affecting the overall rating system, which must remain. The abolition of the half-rent system was recommended by the interdepartmental committee on local finance and taxation in their second interim report. The rating system as a whole will be dealt with in the forthcoming White Paper on local finance.

Section 1 of the Bill, which removes the original liability of persons to be rated on rents received by them from property which is otherwise exempt from rating, taken together with section 3, which provides for the repeal of the various legislative provisions relating to the rating of rents set out in the Schedule, terminates the system of half-rent rating.

The fraction of the rent on which rates are leviable was reduced below the original one-half by permanent legislation in relation to affected property in areas other than county health districts. In the case of county health districts the reduction—from one-half to one-quarter of the rent— was continued in temporary legislation which expired on the 31st March, 1970. The reduction was continued administratively in 1970-71; section 2 of the Bill provides for the extension of the relevant statutory provisions in respect of that year.

I commend the Bill to the House.

Mr. Hogan

This is a rather technical Bill and I do not profess to know all the angles, particularly the legislative angles, and the ancient legislation relating to these half-rents. I know that, when this was being considered about ten years ago, the then Minister for Local Government, Deputy Blaney, expressed the hope that some finality would be arrived at in respect of this rather archaic system of half-rents. I should like to ask the Minister why his proposals now appear to be rather tentative. I am quoting from what he said: "The purpose of the legislation therefore is to discontinue the system of half-rent rating altogether from the current financial year." After ten years they should be able to make up their minds definitely instead of suggesting that the system be abolished for a period of ten years. What the Minister says is true, that the report of the interdepartmental committee on local finance and taxation in their second report entitled Exemptions From and Remissions of Rates states as follows at page 23, paragraph 58:

The system of half-rent rating gives rise to anomalies and inequities. In some cases rates are assessed on small head rents under leases while in other cases the basis of assessment is the current commercial rent. The abolition of the system has been recommended from time to time by representative bodies on the grounds that it gives rise to hardship, especially in cases where a lessee's interest is owned by a private individual or body corporate which is not entitled to exemption from rates and the lessee's interest is subsequently sold to a charity or public body. The rent received by the landlord is thus reduced by an amount equal to the rates on the appropriate fraction of the half-rent by the operation of events outside the landlord's control.

The House should accept the proposals suggested by the Minister. The amount involved is quite small. Ten years ago it was only £16,000. He now gives a sum of £30,000 as the extra cost to the Exchequer. He says this sum will go to local authorities. They will not get much one way or another out of this but so far as the system seems to be based on rather archaic legislation the Bill is to be welcomed. When replying, I should like the Minister to explain why he is so hesitant and why he has introduced this change for only a year.

Mr. Molloy

We are abolishing half-rents altogether.

Mr. Hogan

That seems rational. In the past the peculiar half-rent system has meant, in effect, that the rates were higher than the half-rent. This created an anomalous situation. Various adjustments were made from time to time such as lowering the valuation on which this half-rent was placed. Even here there were anomalies because there were different ratios laid down. The county councils were 50 per cent, Cork Corporation 33 per cent, Dún Laoghaire and Dublin 22 per cent. In general one can welcome the Bill. I see nothing in it to which one can really object. There may be points that have escaped me but on Second Reading I see no objection to it.

Mr. Treacy

I do not know to what extent this measure affects a very large number of people. Perhaps the Minister will say how important and urgent a measure it is and how many people will be affected by it. It strikes me, as a representative of the ordinary people, that the proposal is rather innocuous, especially when one considers the overall burden of the rating system and the need for reform of a radical kind. The Minister mentions that the rating system as a whole will be dealt with in the forthcoming White Paper on local finance but it would be better to have the overall legislation dealing with the rating system in general than to deal with it in this rather piecemeal fashion. Mention of rates or the rating system is sufficient to send the ordinary citizen's blood pressure soaring. Clearly it is imposing a crushing burden which has reached the stage when very many local authorities are prepared to go the way of Dublin Corporation and abolish themselves rather than impose what they believe to be an impossible financial burden on their people.

An Ceann Comhairle

We cannot discuss the rating system as a whole. As the Minister pointed out, the House will get an opportunity of doing so. This is a limited measure.

Mr. Treacy

I appreciate that and that is why I am rather critical of this measure, in view of the immense burden rates are on the people and the need for reform. The measure purports to remove what the Minister calls an obvious anomaly in our rating system. There are so many anomalies in the system that I could spend a long time enumerating them and perhaps be ruled out of order. The whole approach of the rating system is cock-eyed and archaic. One never knows what yardstick is applied in determining valuation. It is shrouded in mystery but to refer to one small anomaly as is done in this Bill and ignore altogether the larger issue is to treat the people with something like contempt.

Personally, I am not aware of the urgency or importance of this measure. A figure of £30,000 has been mentioned for the cost to the Exchequer in the current year. That is rather a drop in the ocean in relation to rates revenue. I should be more impressed by hearing the Minister say precisely when we shall have a White Paper on local finance. This has become urgent and compelling, especially having regard to the proposed reconstruction of local authorities. Therefore, I am far more interested in hearing when the Minister will face up to his responsibilities, tackle the whole rates problem effectively and issue his White Paper so that we may get down to a debate here on this very important issue and so that we may find a substitute for the present system which is proving such a great hardship for so many people.

There are so many things that one could say but they would probably be out of order on this small measure. I would be grateful if the Minister would refer to the larger issue of the change in our present rating system and tell us when we can hope legislation will be introduced which will give our people a fairer, more just and more equitable system of rating which will permit local authorities to face up to their responsibilities with heart and courage and maintain essential services instead of proceeding, as they are now, in a state of pessimism prepared to go the same road as Dublin Corporation.

An Ceann Comhairle

We cannot anticipate the debate on the White Paper, the Deputy might refer to the Bill.

Mr. Treacy

I am not prepared to transgress the rules of the House by going into the rateable situation in general but I am prepared to assert that if something is not done quickly to solve the rating system the whole financial structure of our local authorities will collapse.

An Ceann Comhairle

The Deputy may not proceed along those lines, he is anticipating the debate on the White Paper.

Mr. Treacy

We shall have a full opportunity to debate the rating system as a whole and I look forward to that wider and more important debate rather than the pretence contained in this Bill which affects a relatively small number of people and does not bear very much on the mass of our people affected by the scourge of rates.

Mr. T.J. Fitzpatrick

(Cavan): When discussing any Bill dealing with rates or exemption from rates one is prompted to remind the Minister that it is a great pity the Government have not got down to dealing with the rating system in general, particularly at a time when the Government are asking public representatives all over the country to deal with reform in local government. The Minister has been told several times since his White Paper on the Reorganisation of Local Government was published that it is simply not possible to deal with it until we have his proposals for the financing of local services. I join with Deputy Treacy in saying that it is a great pity we do not have the White Paper before us. We should like to hear from the Minister when he proposes to circulate that White Paper.

There is just one point in connection with this measure about which I candidly admit I am not clear and I should like the Minister to deal with it. I understand if a person rents or leases office accommodation or storage accommodation to the Department of Posts and Telegraphs, the Board of Works or some other Department, for public purposes, at £100 a year that property is then rated on the half-rent which is £50. The owner pays the rates to the local authorities but is forthwith refunded the amount of rates paid by the Board of Works acting as agent for the public office concerned. I want to know first, if the Minister agrees that this is the case and second, if the Minister does agree that this is the case, is it proposed to abolish those half-rates on half-rent in this Bill? If that is the case it would seem that while this Bill means nothing by way of savings to the ordinary owner of property it will transfer a very considerable burden from the Exchequer to the local authority and it will at least relieve the various Departments from making the payments I have mentioned.

Mr. Molloy

That will not happen.

Mr. T.J. Fitzpatrick

(Cavan): Will these rates continue to be paid?

Mr. Molloy

Paid by the State in bounty.

Mr. T.J. Fitzpatrick

(Cavan): I have never understood this bounty-in-lieu of rates. I find it very hard to believe if the Minister concedes what I am saying is right about the rates terminating on these half-rents that £30,000 would cover the whole country. The rate in the £ is now in the region of £5 and £6 and with rents being what they are it would be much more than £30,000. I should like the Minister to clear this up before the Committee Stage. I hope the understands my point. I am saying if a person leases an office to the engineers in the post office for £100 a year that is rated on £50 a year. The owner pays the rates to the local authority and then recovers them from the Department of Posts and Telegraphs, the Board of Works or whoever pays the rent. Is that being abolished in this Bill? If it is the Bill is neither as simple nor as harmless as it looks.

Dr. O'Connell

This seemingly innocuous Bill has me a little puzzled. It seems we are tackling the problem the wrong way round. We are talking about buildings used for public, scientific or charitable purposes, but we should be introducing a Bill compelling such bodies, which are enjoying freedom from rates, to pay full rates and thereby alleviate the burden on other members of the community such as people living in flats who have recently had their rates increased.

The Corn Exchange Building is being used for office purposes. It was originally granted freedom from rates under the Valuation (Ireland) Act, 1852 and it still enjoys that freedom from rates. The Minister is now saying to the owner he does not have to pay rates because the occupiers do not pay rates. This applies to the Royal College of Physicians and some other buildings in Dublin. People are enjoying freedom from rates while others are being over-burdened with rates. I should much prefer the Minister to say that we are not going to allow special concessions, we are going to make everyone pay. A Bill which would bring the rating system up-to-date and the valuation of some of the premises in Dublin up-to-date could then be introduced.

In bringing in a Bill like this we have got our priorities wrong. I wonder if this will solve the problem in a place like the Corn Exchange Building which is being used as an office block and in respect of which permission has been granted for the erection of a multistorey office block which, to my knowledge, will still enjoy freedom from rates. I should like the Minister to tell me what can be done to alter the present law whereby these buildings enjoy freedom from rates. All we are doing here is saying that their owners should not be compelled to pay rates on the half-rent. We have it the wrong way around. This is very annoying when one sees poor people who are paying maximum rates in corporation flats and who are not living normal lives. Apart from their rents being pushed up time and time again, they now have an increase in their rates and the Minister is not concerned about that. If these are subsidised buildings, should they not enjoy freedom from rates in the same way as buildings used for scientific or charitable purposes? I should like the Minister to spell out the particular buildings which are used for charitable purposes. I do not think we should gloss over it without going into detail. Perhaps he would give us details of the buildings that enjoy these concessions.

Mr. Carter

I do not think this Bill has anything to do with valuations in general or the rating system in general. I think Deputy O'Connell was completely out of joint when he referred to this. There will be a time for this. Perhaps the right time would be on the Estimate for Local Government.

This Bill has been introduced to do a specific thing—to relieve the position of an owner who would be unfortunate enough to have his farm or his premises occupied by, for example, a semi-State company in respect of which, I think, there is no bounty repayable to the local authority on the rating equal to half the rent. The only regret I have is that the Minister or his advisers were not able to make the provisions of this Bill retrospective for a period of at least five years. I shall give an example. Suppose a person had a bad farm of land in Cavan, Leitrim or North Longford and that this farm was selected by a semi-State company to carry out experiments in scientific soil testing or land cultivation. Suppose that before that the valuation of this holding was £50 or £75 or maybe less. The owner might be getting £300 or £500 a year rent. Under our present rating system the unfortunate owner would be obliged to pay the rates on half the rent and he would find himself, as some owners have done, paying much more in rates than he could ever hope to receive by way of rent. As I understand it in the case of semi-State companies there is not any refund as there is in the case of Government Departments.

This is a short Bill to relieve certain anomalies in this system. The system is archaic and should not have been carried into this century at all having regard to the scope of our rating system at present. I welcome the Bill for what it does. It does it merely from 1st April, 1971. My only regret is that the Minister did not see fit to make retrospective an order to compensate some of those unfortunate owners who were caught out under this system for the hardship, for the anguish and for the amount they are out of pocket at this stage.

Minister for Local Government (Mr. Molloy)

I suppose when any measure comes before the House in which rates are mentioned there is a temptation for Deputies, especially on the Opposition side, to have a "go" at the whole rating structure. Being of a generous nature, I forgive some of the Deputies who started on that road because I should not like to detract in any way from the main purpose of this Bill which is really a very simple measure to remedy an archaic and anomalous situation. It is only with us because of legislation introduced in olden times and the opportunity arises now to abolish it altogether. The legislation under which half-renting operates in county health districts, in particular the legislation under which the half-renting was reduced to quarter, terminated on 31st March, 1970. We have now availed of the opportunity to abolish it altogether.

I do not know whether some of the Deputies really understand what is involved in this. Deputy Carter made, I think, the best effort to explain it to the House. I had a case where a constituent was left property. I shall give this brief explanation because it is the easiest way to understand what is involved. She was left very substantial property in the city of Galway. Like everybody who is left something in a will she thought this was her lucky day but subsequently discovered that there was a 900-year lease on the property to the State. It was being used as a Garda barracks. Because it was used for public purposes the half-renting which, in effect, is quarterrenting, applied. This means that the premises are valued on quarter of the rent received. Of course, once the rate in the town went over £4 in the £ the owner found herself in the position where she had to pay more in rates to the local authority than she was in receipt of from the State to whom she was leasing the premises. This particular constituent——

Mr. T.J. Fitzpatrick

(Cavan): Surely it was refunded by the State if it was a Garda barracks?

Mr. Molloy

No, it was not refunded. The only provision was that it was reduced from the half to the quarter. When it went over £4 the quarter concession was no use because the person was then paying more than the amount she was getting in rent from the lessor. So the position is very anomalous. I think it is right that we should bring in this short Bill to clear up the situation.

Dr. O'Connell

And satisfy the Minister's constituent. It would be great if we could bring in a Bill for every dissatisfied constituent.

Mr. Molloy

It was not done for my constituent. I am only giving that as my personal experience. This was recommended by the interdepartmental committee. There have been representations from several organisations to the Department in recent years to have this half renting abolished altogether. I may mention the Incorporated Law Society who have been on to the Department on a number of occasions. We are pleased that we now have the opportunity of introducing this legislation to remove this anachronistic legislation which is well out-of-date and causing some hardship and concern, to very few people actually. As I have explained, the number of people involved is very small and the amount of additional bounty which the State will have to pay in lieu of these rates comes to £30,000 only.

Mr. Treacy

Can the Minister give the figure of the number of people likely to be involved?

Mr. Molloy

Very few. I have not got the exact number but there are not very many persons involved because it is not an uncommon practice nowadays, when the State is making an arrangement with the landlord, to arrange to pay the full rates as part of the lease. These are old leases in the main. This clause operated in long leases which were made some time ago. The net effect of the Bill will, of course, be nil in cases where the State has made an arrangement in leasing the building to pay the rates for the owner.

Mr. T.J. Fitzpartick

(Cavan): Will they continue to pay the rates?

Mr. Molloy

The State will continue to pay in lieu of the rates where that type of an arrangement has been made and there will be no additional charge on local authorities arising out of this Bill in those cases.

Mr. T.J. Fitzpatrick

(Cavan): If half the rate is abolished will not the rate payable by the State be much less?

Mr. Molloy

It will not because the half renting system only applies to owners of property whose property is occupied by the State and who have not made an arrangement with the State in the original lease that the State would pay the rates in full. There are old leases where this arrangement was not made. In the case which I came up against individually, the Office of Public Works saw no reason why they should increase their rent when they had a legitimate lease. They were acting in the best interests of the taxpayers. The Dáil is now rightly correcting this situation.

Mr. T.J. Fitzpatrick

(Cavan): I do not want to interrupt the Minister but my problem was in regard to modern leases.

Mr. Molloy

In the case of modern leases this Bill has no effect at all.

Dr. O'Connell

What about buildings used for charitable purposes the owners of which pay half rates only?

Mr. Molloy

They would be very few. A number are used for charitable purposes. The Commissioner of Valuations is the arbitrator. He decides whether the building is being used for a purpose which would exempt it from rates.

Dr. O'Connell

Does the Minister know that the number in Dublin would provide £1 million extra in a year?

Mr. Molloy

There are a number of buildings like the National Library and the Art Gallery which are exempt from rates and which are owned by the State.

Dr. O'Connell

The Corn Exchange Building.

Mr. Molloy

We are not going into individual exemptions. We are merely dealing with cases where the half-rent applies at the moment and if there are cases like that, which the Deputy is now saying were exempted originally because they were being used for charitable purposes and now that use has changed, the only person who can decide that is the Commissioner of Valuations. He is the arbitrator and if there is disagreement with his decision the matter can be tested in the courts. It is not a matter for the Minister for Local Government.

Dr. O'Connell

Where they pay half rates and where they can arrange for themselves to be the owners as well as the occupiers, what happens?

Mr. Molloy

I do not know why the Deputy is asking me that question because this half-renting only applies where the owner of the premises is not the occupier and where the use is a public use, or for charitable purposes, or for scientific purposes.

Dr. O'Connell

It would not apply to anyone who becomes the owner?

Mr. Molloy

No.

Dr. O'Connell

It is established owners?

Mr. Molloy

That is right, generally speaking. That also more or less answers the point made by Deputy Fitzpatrick. Deputy Treacy asked me how many people did it effect. I have not got that number. As I have explained already, it would be very few as can be seen from the amount of money involved.

Mr. Treacy

In terms of three figures or four figures, hundreds or thousands?

Mr. Molloy

It is £30,000 worth of rating which would not amount to very many people spread all over the country.

Dr. O'Connell

That is only for the State?

Mr. Molloy

It would mean going through all the books of all the local authorities. We have the total figure. I do not know the number of individuals. The State will pay this to the local authorities.

Mr. Treacy

The number is infinitesimal?

Mr. Molloy

The number is very small but individually it is a hardship and a burden on these people.

Mr. Cluskey

It is better than the rent the State is paying for some places.

Mr. Molloy

I have explained to Deputy Hogan that this legislation is to abolish this system completely.

Mr. Hogan

I ministerpreted it.

Mr. Molloy

It was quite understandable. I think the House understands fully what is now proposed. I do not intend to elaborate on it any further. This is quite a simple measure.

Question put and agreed to.

An Ceann Comhairle

Next stage?

Mr. Molloy

Now?

Mr. Hogan

In a week or a fortnight.

Mr. Molloy

Why not take it now?

Mr. Hogan

Something may arise.

Mr. Molloy

What can be in it? We are abolishing something that exists. There can be nothing unusual in it. This involves the complete abolition of the existing half-rent system. There is nothing complicated about that. Does the Deputy not want to take it now?

Mr. Hogan

We can deal with it in ten minutes in a week or a fortnight.

Mr. Molloy

I was hoping the House would give me the Bill now.

Committee Stage ordered for Wednesday 30th June, 1971.