Finance (No. 2) Bill 2013: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

I propose to discuss the living city initiative in the Finance Bill, which was initially introduced in concept and in a limited form earlier this year. The initiative was billed as a pilot project for urban regeneration in Limerick and Waterford. It is a targeted pilot tax incentive to encourage people to return to the centre of cities to live in older, historical buildings and to encourage the regeneration of the retail heartland of central business districts. Under the residential part of the initiative, residents can claim tax relief for the costs of refurbishing a house at a rate of 10% per annum for ten years against their income if it is their private residence. This is a significant relief. Retailers will be entitled to relief on works undertaken to upgrade or refit their shops under the accelerated capital allowances scheme over a period of seven years, at a rate of 15% for the first six years and 10% for the final year.

When I spoke on this initiative in February, during the debate on the previous Finance Bill, I pointed out that Waterford, my constituency, would not benefit greatly from the initiative as drafted, and that tweaking would be necessary before the commencement order was signed. The date range for buildings coming within the scope of the legislation was too narrow and the application of a strict definition of what constitutes a Georgian building would have resulted in Waterford city centre gaining little from the initiative. I appreciate that the Minister and his officials heeded the points I made and the necessary changes were recommended and implemented on foot of a cost-benefit analysis of the project. These changes have the potential to assist the process of rejuvenating Waterford city centre.

I am working with Waterford City Council, which is compiling a comprehensive inventory of pre-1915 residences in the city. Now that the measure has been broadened, it is important that the city gains maximum benefit from it. In that regard, I have some further questions and suggestions which could be considered as the initiative is rolled out to other urban areas, including Cork, Dublin and Kilkenny. The ex ante evaluation conducted by Indecon makes for interesting reading, particularly in respect of the different attitudes towards the initiative in different cities. Professional and business people in Waterford are, in some cases, much more sceptical about this tax incentive scheme than their counterparts in Dublin.

The report refers to the merit of small-scale construction refurbishments, in addition to the wider renewal and conservation objectives. It is worth recalling what has been taking place in the area of State-funded conservation and the importance of this initiative as a consequence. The national conservation grant, which funded up to 50% of the cost of repairs and conservation measures for buildings on the record of protected structures, was abolished in 2011. In 2010, €3.74 million was provided under this scheme, which was replaced in 2011 by the Structures at Risk fund, with a total national allocation of only €650,000. These facts accentuate the importance of the living city initiative in conservation terms. The report suggests that Waterford and Limerick would benefit from significant tourist numbers and spending as a result of the scheme. The increase in tourist visitors estimated following research among architects and quantity surveyors suggests a potential increase in tourist numbers of the order of 11.4% in the two cities.

I will now address the nub of the issue, namely, the impact on urban renewal and conservation and the hope that the initiative will result in a reversal in the trend of depopulation of city centres. In the case of Waterford's old city centre, 2,242 buildings, or 25.8% of the total number, are unoccupied. Of this figure, 983 are pre-1919 constructions located in what is regarded as the old city centre. The report estimates that of these 983 buildings, approximately 180 premises will eventually be part of the take-up of the scheme. While this is a conservative and relatively small figure in the context of 2,242 empty buildings, it is still significant. If 180 residences successfully avail of this initiative over the next five years, it will provide a significant boost for tradesmen such as carpenters and plumbers and those operating specialised conservation businesses. Moreover, given that Cork and Kilkenny are to be included in the initiative, it offers significant prospects to tradesmen in the wider region. For example, a tradesman in my home town of Dungarvan will be within one hour from Cork and Kilkenny city centres and 35 or 40 minutes from Waterford city centre. The benefits of the scheme will therefore transfer to tradesmen across the region.

As the report states, refurbishment of old buildings is labour-intensive. Estimates suggest that labour costs will account for 56% of capital expenditure under the initiative. This, the study suggests, would amount to approximately 718 man-years of employment, or 144 jobs for each of the next five years in Waterford and Limerick alone. When one reads through the criteria in place for the scheme one quickly realises, however, that there are a number of barriers to take-up of the initiative, including difficulties in obtaining funds to finance the cost of refurbishment. The authors of the report stress that unless the adjustments they recommend are adopted, the level of take-up will be minimal and the full potential of the initiative will not be achieved. When one deciphers the survey results on likely take-up it becomes clear that the highest level of indifference registered was in Waterford city, where only 28.2% of those surveyed stated there would be a high level of interest in the initiative in the city. In contrast, 61.9% of respondents in Dublin expressed the view that there would be a high level of interest in the capital. I note that Deputy Eoghan Murphy is present.

The question, if I were Deputy Eoghan Murphy, I would be asking in his constituency is, whether places such as Ringsend and Irishtown would be included because the survey indicates that there is a very high level of interest in Dublin as opposed to some other parts of the country.

More than twice as many householders in Dublin were very enthusiastic about the initiative than were in Waterford and one of the reasons might be that there is a two-tier economy operating in Ireland - Dublin and outside of Dublin. It probably has a great deal to do as well with the fact that householders do not believe that they will get credit from the banks to carry out these extensions or renovations, which brings me to where the Department should consider some further changes or initiatives around the scheme.

In many cases, individuals who have very low incomes and who pay little or no tax, such as social welfare recipients, will be instantly excluded from this scheme. They can apply for funding under the home renovation scheme recently announced in the budget but they will be effectively shut out of the living city initiative. If somebody, for example, in Waterford, had a house worth €200,000, he or she would need to spend €20,000 to avail of the grant, if he or she managed to get a loan from the banks. However, in many cases, such a person's income would be so low that he or she would not come near to paying €2,000 in tax a year to avail of the tax relief incentives. Unfortunately, that particular individual profile is what makes up a large part of urban city centre populations. There is a gap here. In the scheme, the cost of refurbishment needs to be at least 10% of the pre-works value of the residence. To accommodate householders on lower incomes, that 10% threshold needs to be lowered to at least 5% or 7.5%.

The Department should also contact the banks and make arrangements to educate them as to the ins and outs of this scheme. Once the banks realise that this is State-backed and guaranteed, they will be far more willing to release funding, even to those who have large debts. What we have seen so far from the home renovation scheme announced in the budget is the banks are advertising to get their hands on that scheme and to start loaning money to householders to fund renovations because they realise it is State-backed and guaranteed.

As much flexibility as possible needs to be given as well to the individual local authorities to define where their respective city centres start and finish to ensure this has as much impact as possible. I work with Waterford City Council. We will be working with the Department officials to include as many parts of Waterford city centre and to define that as broadly as we possibly can over the next few months before the application is made and EU state-aid approval is sought.

I also have a question with regard to how local service providers will be defined under the scheme. The Indecon report suggested that any definition should be broadened as far as possible to heighten the impact of the scheme.

I thank the Minister and his officials for listening and making changes to the scheme. The living city initiative will prove to be a substantial economic stimulus for the urban areas involved and I look forward to working with the Minister, as the application is made and EU state aid for the scheme is sought.

I welcome the Bill and most of the measures contained therein. I was someone who advocated before the budget a greater correction than €2.5 billion and I still hold that view. It is not about wanting austerity. When one asks what is austerity in the current climate, it is a balanced budget. It is responsible budgeting, and that is what we are trying to move towards.

Commentators speak of the need for stimulus in the economy but last year we borrowed €12 million as a stimulus for the economy to fund current spending. That is not sustainable and we have recognised that. In the fiscal correction that we have been making each year, it has not been austerity budgets. It has been reducing the stimulus that we have been putting into the economy to run the current account and it is important to recognise such is the economic reality of the position.

I stated I would have gone beyond €2.5 million, but that argument has been lost and we have the package in front of us. It is important to recognise that it is about not only cutting the deficit each year, but also reforming and restructuring how we spend the money that we have and getting better value for it. That is an important point on which to reflect because any decisions, in terms of trying to better manage the finances and put the economy on a more sustainable footing for the years to come, that were not taken this year will have to be taken in the future and will not go away.

I will not go into the specifics of the measures contained in the Bill only to note some of those I welcome. On the living city initiative, to which Deputy Deasy referred, the Deputy is correct when he talks about Dublin and its importance and the areas that need to be looked at. When we look at measures that are being taken to move certain areas out of the black economy into the real economy, the 9% VAT rate retention, protecting class sizes for schools and the different job-creation measures in the Bill, and even the increase in DIRT which, while not liked, will hopefully increase spending in the domestic economy because of the significant amount of money households have on deposit, these all are welcome. When one looks at the purpose of these measures, it is to increase activity in the economy. The best way to raise revenue for an economy is to increase activity, not to increase taxes. It is to get the public active in the economy producing, contributing and spending money as well, and then raise revenue off the back of that. Therefore, I welcome these measures. I do not welcome measures such as the changes in the medical insurance tax relief or the change to the pension levy but, when I look at the overall package in the budget, I support that because it is there to increase activity in the economy which is the way to go.

For the remaining minutes available, I will speak on the process and transparency around it. I welcome the earlier budget date of 15 October because in looking at the commercial aspect of the economy for a number of years, commentators have wanted greater clarity on the plans for the coming year. People do not like surprises. They want certainty in their lives when they plan for their businesses. They want it in their households. We want it in the State. In that regard, bringing budget day forward to 15 October is good because it gives greater certainty before we enter into the busy season at the end of the year.

I also welcome the new transparency from the Department of Public Expenditure and Reform, in terms of the data it is publishing, and the new budgetary timetable; budgeting over a number of years or at least giving the headlines is important too as it gives some sort of certainty as to where we are going, but we need to go further.

In 2011, our first year of Government, a senior Minister came before the Committee of Public Accounts and stated that the idea of someone coming into the Chamber to read out the secrets decided by Cabinet is crazy. We have moved the date forward but we must go further than that. Members of Dáil Éireann did not know what would be in the budget until budget day, effectively, until the decisions had already been taken. There were the announcements in the Dáil on the day and then a series of one-hour replies from the Opposition on a detailed document which it had only just seen. It was set pieces for the media. In my opinion, it was pantomime. One has to ask, what is the purpose of budget day and why have it as a day in itself.

What we should have is a series of long and boring debates over weeks and months on the details before the decisions are made. That is the process that we need to have. The programme for Government that we agreed promises to open up the budget to greater scrutiny and we can go further in terms of setting up an independent Oireachtas committee to look at budgetary issues, to help Members of the Parliament prepare submissions and cost their own proposals, to help them get a better understanding of the budgets and to keep an eye on the numbers throughout the year. In the United States, there is the congressional budget oversight office which helps members of Congress to do just that, and we could do that here as well. In giving greater resources to Parliament, we would have better parliamentarians and a stronger Parliament. It relates to that idea of not having secrets merely announced on budget day in the Parliament but going through the details of different proposals over time, looking at the different options available, Deputies bringing their own options to the table and putting together a package of measures. Ultimately, of course, the decision would be for the Government but, having made the decision, we would have seen all of the options available to us. It would not be a question of having to row back on decisions or to change our minds because, by the time we had made the decision, there would be full clarity around the decision being made.

My time is up and I want to give time to Deputy Feighan, but I would add, in terms of transparency, we need to move forward with tax transparency and go even further. We need to be proactive and publish, on the Department of Finance's website, how we are spending the people's taxes, in euro and cent. We should put a tax calculator on the website with a ready reckoner, let them get the breakdown of their taxes and then show them what we are spending on education, in primary, secondary and third level, on social protection in pensions, jobseeker's allowance, etc., so that taxpayers will understand how we are spending their money and also the difficult decisions that we have to make to help bring them along in the process of fiscal correction over the number of years.

I ask Deputy Feighan to move the adjournment. He will be in possession when the debate resumes.

Debate adjourned.