Local Government (Rates and Miscellaneous Provisions) Bill 2014: Second Stage [Private Members]

Deputy John McGuinness

I move: "That the Bill be now read a Second Time."

We now live in a country in which the Government is at war with its citizens. It continues to reflect on the various problems people face. We talk about them here in the House but there is very little action. Out of austerity has come the need to review all the old certainties of income that the Government would have had. We need to question ourselves as to where that income comes from, particularly when we are talking about businesses and entrepreneurs. In the past, the economy, with its entrepreneurial spirit, created 800,000 jobs, leading on to 1 million if the various sectors are taken into consideration. Apart from the job creation itself, this gives life to local communities and ensures the sustainability of jobs in various towns and villages. There is enjoyment in rural and urban areas that we are progressing together.

However, there is now a serious imbalance in what is going on. On one hand, various rates and taxes are being levied against those in business, while on the other there is the rhetoric that we are supportive of business. In fact, small businesses, particularly family businesses, get very little support from Government. Fine Gael in government does not recognise the enormous layers of bureaucracy placed on the shoulders of those families and individuals who are entrepreneurs and who are keeping local villages and towns alive.

In opposition, Fine Gael raised the issues of upward-only rent reviews and the burden of rates. Yet in government there is a reluctance to do anything. The Minister of State should not tell me that it is impossible to deal with upward-only rent reviews through legislation. It is of course possible. The Quinn legislation should be built upon. It should be enhanced and enforced and we should give breathing space to those caught in that cycle of upward-only rents.

In a similar way, the Government needs to examine the rates structure. It needs to examine why 28% of a local authority's income comes from rates. I believe €1.4 billion in rates is collected and spent every year. We need to ask how well that money is being spent. What value do local communities get for that money? Is there real value for money or is this just another way of collecting taxes? I suggest that it is another way of collecting taxes from the very same tax base that is paying significant amounts in terms of enterprise and employment, which is not as it should be. The future in this country depends on entrepreneurs and those in local communities creating sustainable jobs.

The Minister of State will know that the single biggest issue raised in our clinics is as follows. Having adjusted every other cost within their businesses, the one single cost business owners cannot reduce is the local authority rate. There are many anomalies in the current rates system, for which there 15 different statutes. There is an ad hoc arrangement throughout the country as to how local authorities deal with rates. There is a 75% rate of collection for local authority rates, which indicates the growing number of businesspeople who cannot simply afford the rates being imposed on their properties. It is shocking to think that the Government refused to acknowledge or understand that in starting a business, when one is watching one's costs, the only single cost one cannot touch is a Government cost, that of rates. The Government has shown no sympathy or understanding to those who are starting a business or already in a business when it comes to rates.

I am suggesting a different approach - a value-for-money approach. I challenge the Government to prove to me that the €1.4 billion collected in rates, representing 28% of local authorities' income, is being used effectively and efficiently. I ask the Minister of State to give me the rationale behind imposing a rate on a business without any consideration of the ability of that business to pay. There is no rationale. The Government simply forces the issue and insists on payment. It gets the officers to call to the premises to bring pressure to bear on those who are already under pressure because of taxes and everything else. It makes it known in the local community that the business can pay. What is going on is appalling. The Government has no real intention of reforming the system.

The owners of local shops and pubs that have closed down will say that the imposition of rates and the continuing increase in those rates, even though they have been held at one level in recent years, is having a detrimental effect on their businesses. If we are really serious about business, this is one simple action we could take to show the entrepreneurs and businesspeople that we are serious about understanding their problems.

For some reason, the reluctance on the part of the Government in this matter persists.

Let us consider the position of those who own crèches - I am not even going to mention publicans, those who run small shops, etc. - and who provide care for children in order to allow both parents to go to work. They will inform the Minister of State that they cannot afford to pay rates. The services these facilities offer mean that, in effect, they are almost educational establishments. If they are educational establishments, they should not be obliged to pay rates. Why is it not possible for the Government to single out certain sectors and ensure those involved in them will either not be liable for rates or will have them reduced? Why can those in government not understand the closure of banks and post offices and other entities which provide Government services in local communities not only has an impact on those communities but also reduces the footfall and makes it impossible for businesses to perform? If the Minister of State walks up and down high streets throughout the country, he will see shops closed. If he considers the rates bills paid by businesses, he will discover that there is a major issue in respect of the subsequent occupier clause, which clause must be removed. If he examines the position of sports clubs which are obliged to pay rates on their entire properties, he will understand this issue must be dealt with. However, the Government is not prepared to put in place the legislation necessary to resolve the matter.

Emergency legislation has been introduced in the House on many issues. In the context of those entrepreneurs who are doing very well and whose businesses are performing in the export market, however, we are not taking action. If one speaks to representatives of Chambers of Commerce Ireland, the Small Firms Association and many of the other relevant bodies and groups, one will discover that their priority is to have a reconsideration of the rates structure. Then there are the businesses which are anxious to develop, expand and create employment. After such businesses pay various local charges, including those for planning applications and so on, all of which are taxes, they are then faced with the prospect of their properties being revalued. When such revaluations are carried out, the owners of the businesses in question end up paying significantly higher rates just because they are entrepreneurs who wanted to take a risk and create jobs and who wanted to obtain loans in order to ensure their operations might become profitable. The one matter over which they have no control and which impedes both their decision making and their ability to progress is that of local authority rates.

The Minister of State may be of the opinion that this is a small burden for businesses to carry. In that context, he should ask pub owners who no longer have the incomes they used to have how they are faring in paying their rates. Is it not incumbent on the Government to examine the books and level of turnover of such businesses and state - taking into account the position on the economy in general - that it realises they simply do not have the money to pay? The Government will not introduce the legislation which would enable this to happen. I return to the argument about crèches and the fact that the subsequent occupier clause has remained in place for years. Both arguments are essentially the same.

There is then the position on the Valuation Office, representatives of which have informed the Committee of Public Accounts that it simply does not possess the resources necessary to revalue properties throughout the country in a speedy and efficient manner. As a result, only pockets of properties have been revalued. There are no winners in the revaluation process because the same amount overall must still be paid in rates. Those who lose out are the ones who previously paid reasonable amounts but who have been obliged to pay increased rates. There may be businesses which enjoy a slight reduction, but the overall take will remain the same. That should not be the case. This matter must be about value for money, efficiency and an acknowledgement that the people to whom I refer are making a contribution to the overall economy, but the Government does not recognise that contribution. The Taoiseach continually says this is the best small country in the world in which to do business.

Deputy Paudie Coffey

Forbes magazine also says it.

Deputy John McGuinness

The Government appears to be ignoring all of the facts. I continue to work in the private sector and I am in a position to inform the Minister of State that the Government, in the context of the promise with regard to upward-only rent reviews, from which it walked away and its position on commercial rates, is hanging a noose around the necks of Irish businesspeople. It will regret doing so because future generations will not be willing to become entrepreneurs. All it need do is take action on some of the narrative it has sought to shape. It should start with the rates system and reduce the amounts demanded of businesses by the various local authorities. In the context of the Bill, I am suggesting there be flexibility in the payment of rates, as the existing system is impossible and difficult to operate. The governing legislation is too old and based on a notion for a different and long-gone era. I suggest in the Bill that the various laws in question be examined by means of an efficient and fast-track process that would provide for a suitable outcome. I have referred to the subsequent occupier clause and the position on properties owned by sports clubs, etc. There is also another Bill which was introduced in the House and on which the Government could build in developing a new structure. I accept the position on the Valuation Office, but such a new structure should incorporate a self-assessment aspect. The Government is so fond of self-assessment, it should apply it in this area. If self-assessment was introduced, valuations of properties could be carried out locally and occupiers and entrepreneurs could apply the going rate. If misleading information was provided - as is the case in other areas - those who supply it would be subject to penalties. This is the easiest and most cost-effective way to proceed.

The Government does not appear to be overly fond of reform. However, I urge it to embrace the reform the Bill would facilitate. It must do so immediately because, as Members on all sides are keenly aware, businesspeople cannot cope with either the level of taxes they are obliged to pay or the rates system. Those who export products and travel abroad on trade missions and win the orders necessary to keep their businesses open will inform the Minister of State that the one single matter which annoys them is commercial rates. The Government must take action in this regard immediately.

Minister of State at the Department of the Environment, Community and Local Government (Deputy Paudie Coffey)

I thank Deputy John McGuinness for giving me the opportunity to discuss the issue of commercial rates. I am responding to the Bill on behalf of my colleague, the Minister for the Environment, Community and Local Government, Deputy Alan Kelly.

The Bill deals with a wide variety of aspects of commercial rates and while the principle of consolidating rating legislation in one Act is not without merit, the Government is opposed to the Bill on a number of grounds.

Deputy Mattie McGrath

Shame.

Deputy Paudie Coffey

I remind all Deputies that rates income constitutes a very important contribution to the cost of services provided by local authorities such as road maintenance, public lighting, development control, parks and open spaces and libraries.

Deputy Michael Fitzmaurice

People do not get these services.

Deputy Paudie Coffey

In fact, commercial rates income represented over 33% of income or €1.5 billion to the sector in 2012. All rates collected within a local authority area are spent exclusively on delivering the public services required locally to create the environment in which businesses can prosper. Locally elected members adopt the annual rate on valuation in order to provide the required level of services that they consider necessary and appropriate in an area.

Commercial rates legislation spans multiple statutes, some of which date back as far as 1838. It is a complex area, in respect of which a significant body of case law has been established.

Local authorities and ratepayers are, in the main, familiar with and generally accepting of the operation and practice of the rating system.

Deputy Mattie McGrath

Who wrote that? We do not believe it.

Deputy Michael Fitzmaurice

The Minister of State does not believe what he is reading.

Deputy Paudie Coffey

In this context, any review of rating law, which is essentially a local taxation system, would have to include a detailed review of all extant legislation as well as comprehensive consultation with the key stakeholders, those being local authorities, ratepayers and the Commissioner of Valuation, as well as a number of other statutory bodies, including the Courts Service and the Revenue Commissioners. To introduce reforming legislation without having undertaken this essential consultation process carries a significant risk of individual aspects being overlooked or of unintended consequences arising.

While many of the provisions in the Deputy's Bill restate existing policy and procedures - for example, the striking of the rate, the calculation of the annual rate on valuation and the basis of liability - it proposes notable changes to the current rates processes. Some of these raise significant legal and constitutional issues, essentially rendering the Bill unworkable. Furthermore, several aspects of the Bill are contrary to stated Government policy, particularly the treatment of vacant commercial properties. The Bill's proposals in this regard are regressive, in that they remove the local discretion and reserved power provided to elected members in the Local Government Reform Act 2014.

I shall highlight several of these matters for the Deputy. Sections 9(4) and 9(5) require the local authority to notify a landlord where his or her tenant has unpaid rates at the close of the financial year. Where the landlord has been notified and rates remain unpaid for a second year, subsection (5) provides that the landlord becomes jointly liable with the tenant for the outstanding rates relating to each year after the first where rates remain outstanding. The approach to providing joint liability in this case is unworkable. Commercial rates are fundamentally a business cost levied on the occupiers of commercial properties. These occupiers are benefiting from the services provided by a local authority, services that are funded from commercial rates charges, which create and support local economies and allow businesses to trade. It is acknowledged that the proposal may be born out of a desire to assist the local authority in the collection of rates by providing an additional mechanism to recover unpaid amounts, but the practical and legal issues of amending the basis of liability would need to be considered in detail.

The Bill restates the existing arrangements whereby occupiers are liable for rates except where a property is vacant on the date the rate is made. Where the property is vacant, it is the person who enjoys the immediate right to occupy it who shall be liable. However, the Bill repeals the existing legislative arrangements that provide that an owner may be eligible for a refund of the rate paid where the property is vacant for specified reasons. The Deputy's Bill essentially creates an exemption from rates for these occupiers or owners, which not only narrows the rates base in the first instance, but also moves away from the current policy approach - that is, to recognise that owners of vacant properties are still benefiting from the services that local authorities provide, the cost of which is funded in part by commercial rates and which make the general environment more favourable for businesses to trade.

The Bill also removes the newer approach that was given effect in the 2014 Act, namely, providing elected members with the power to respond to local commercial property markets by decreasing the proportions of refund available to eligible property owners in specific local electoral areas. The benefit of a reduced refund is to provide an incentive for the efficient use of property, but the potential to tackle the problem of vacant properties that this provides is lost through the Bill's proposals in this regard.

Deputy McGuinness's Bill proposes to exempt occupiers of rateable properties who are commencing commercial activity for the first time from one quarter of their rates liability during their first year of operation. While the Deputy's ambition to assist start-up enterprises is to be commended, what he is proposing in the Bill is unworkable. Not only could the Deputy's approach place eligible new businesses at an unfair advantage over existing ones, but state aid rules must also be considered. As has been pointed out by Forfás, there is a related risk that this type of policy approach could unfairly benefit serial entrepreneurs or existing businesses that may seek to benefit from the scheme unfairly by establishing new companies, resulting in no increase in employment or enterprise development overall. Furthermore, the effect of narrowing the rates base is to increase the rates costs for other ratepayers or to reduce the level of services that local authorities provide to businesses generally. It should be noted that various business support schemes operated by individual local authorities outside the ratings system have already been successful in targeting support in a managed way at specific categories of business.

The Bill appears to be providing the Valuation Tribunal with a swathe of new responsibilities without making sufficient legal provision for such new functions. The Valuation Tribunal is an independent body set up to deal with appeals to it against decisions of the Commissioner of Valuation on the rateable valuation of commercial properties. The Bill does not adequately deal with the matter of providing the tribunal with such new authority or provide any specific detail on how or on what basis an appeal can be made.

The Government has serious concerns about the Bill's proposed interference with the court process of debt recovery. Sections 18 to 23 appear to intend to repeal existing local authority recovery powers and replace them with an explicit power to recover debt in the District Court. It also restricts the matters that the court can consider when determining a case and on what issues it can make judgment. The matter of court authority and the civil process for the recovery of debt is a complex area and detailed consultation with the relevant statutory authorities would be required before any such change to the process could be considered. Restricting the power of the court in this manner could be seen as an attempt to interfere with its operation and should be approached with great caution, given the tripartite separation of powers.

The Bill proposes that an amendment be made to the Valuation Act 2001 to extend the exemption from rates provided to occupiers of premises that are considered to be community halls, sports clubs or other local amenities. The effect of the amendment would be to provide that only the element or portion of the building that was licensed for the sale of alcohol would be rateable. Following a Government decision on the matter, the Minister for Public Expenditure and Reform has introduced an amendment to the Valuation Act 2001 in the Valuation (Amendment) (No. 2) Bill 2012, which will include an exemption for buildings or parts of buildings that are used for community sport but are not used in the sale or consumption of alcohol or in the generation of income apart from club membership fees.

The Government is committed to keeping the overall approach to commercial rates under review, having regard to the objective of minimising business costs, enhancing competitiveness and other Government actions to support small to medium-sized enterprises, SMEs, as well as the retail sector specifically. This commitment is reflected in the various actions for which the Minister for the Environment, Community and Local Government is responsible under the Action Plan for Jobs.

Local authorities have successfully reduced or maintained annual rates on valuation in recent years, directly reducing costs for businesses. While the analysis of the impact of rates on business costs is limited, what analysis is available concludes that commercial rates represent a small portion of overall business overheads compared with energy, rents, payroll and other inputs. The figures vary from sector to sector, but research from Forfás, IBEC and local authorities indicates that commercial rates, on average, account for less than 5% of business costs. Similarly, local authority data from 2012 indicate that a third of businesses pay less than €1,000 per year, with 80% of ratepayers paying less than €5,000 per annum.

It is accepted that the current rates burden, while not excessive overall, may require redistribution in some cases and relies on outdated values. The revaluation process being undertaken by the Valuation Office is rebalancing the rates liability to ensure that the rates burden is more equitable and in line with relative changes in valuations across different classes of property. The Government holds the view that the focus should be on expediting the revaluation programme and ensuring that all properties that should be paying commercial rates are being appropriately valued and, therefore, charged rates by local authorities. Where up-to-date values are not available, distortions are occurring that place some commercial enterprises at a competitive advantage compared with similar enterprises. These gaps in valuations have a potential impact on commercial rates costs for other ratepayers within a local authority area.

Yesterday, my colleague, the Minister of State, Deputy Harris, was in the Seanad dealing with the Valuation (Amendment) (No. 2) Bill on behalf of the Minister for Public Expenditure and Reform. That Bill contains a series of measures to expedite the national revaluation programme. I trust that Deputies will be supportive of it when the time comes for it to be debated in this Chamber.

Deputy Michael Fitzmaurice

I commend Deputy McGuinness on his Bill. I have not been in the Dáil for long, but whoever wrote the Minister of State's speech never created a job. Nor could anyone read and believe what the speech contained.

I am talking about people who take chances and entrepreneurs who try to create employment, many of whom have had to go into banks on a Friday evening because they were struggling to pay wages. They have received letters from these banks with red writing at the bottom of them. They are trying to create a country of small and medium-sized enterprises. We have come into the Dáil Chamber today because a Deputy is trying to propose something constructive, but his Bill has been turned down and faults have been found in it. I would like to know why, as politicians, we cannot try to work together here.

The reality is that rates are the single biggest issue in all parts of Ireland, especially the towns that are in decline. All of us who have been members of councils know that the hands of councils are tied. If they agree to decrease rates, they will not have enough funds. I will give an example. Some €14.7 million was collected through the household charge in one county. In that case, 80% of the money was kept, while 20% had to be sent back. Some €2.7 million was whipped away from that county. While I know that the money has to go to some other county, the money that always came from the local government fund from day one is completely gone. If we want to keep burying our heads in the sand by denying this is happening in every part of Ireland, we can do so, but we will have more children jumping onto aeroplanes to fly to Australia and Canada. A good friend of mine has moved his business to Canada, but the guy is actually fabricating steel in Ireland. He is trying to provide work. He will tell us that the Canadian authorities are pro-business and will do whatever they can. In Ireland we put obstacle after obstacle in front of people who want to be entrepreneurs. I will give a perfect example. It relates to a person who was prepared to put his hand in his pocket to buy a hotel in the small town of Ballinlough, County Roscommon. The annual rates on that building which had not been open for seven years were €40,000. The man in question put a proposal to the county council, but it was turned down. I am not blaming the council; I am blaming the Government for not introducing an initiative that would start the revival of small towns in rural Ireland. The man in question was prepared to pay €40,000 over three years, but the best the council could do was €39,000 per annum. As result, the deal is off and the place is closed. The ten, 12 or 15 jobs, from which the Government could have received taxes, are gone.

We should not talk about reviving rural Ireland unless we are prepared to take risks and introduce new initiatives to revive businesses throughout the country. The owners of pubs, crèches and shops are on their knees. I would like to put a suggestion to the Minister of State, Deputy Paudie Coffey, and hopes he writes it down. It relates to someone with a new initiative in a town who is at least 10 km from somebody else who is doing the same thing. Why do we not do something that would involve payments of 25% in the first year, 50% in the second, 75% in the third and 100% in the fourth? Why do we not try to be imaginative? If we were to provide incentives such as the one I have proposed, somebody might look around and say, "there is nobody engaged in that business in this town." We can create young entrepreneurs by giving them incentives to do things that are not being done in different towns. We should not continue to deny the facts by perpetuating the myth that services are being provided in return for the charges being paid, including water rates. It struck me yesterday when I heard people talking about the council reviewing the non-domestic rates for water in the coming months that if we wanted to keep kicking business, that was fine, but what would happen? The doors would close and there would be more mothers and fathers crying at airports because their sons and daughters had gone.

I ask the Minister of State to listen to the Opposition and people in business, including Deputy John McGuinness. The Government should listen to those who have proved that they know how to run businesses, rather than ministerial speech-writers who have not created one job in their lives. As we are talking about small businesses, it is worth mentioning that fabrication companies around the country are facing bills of €25,000 to be accredited. We know what they went through when the bubble burst. They kept on one in two employees, but because of legislation introduced by the great European Union on CE marking - I refer to EN 1090 - they are facing bills of €25,000 to be accredited. How can any small business withstand that pressure? If we do not decide to put trainers or something in place for the likes of them, we will be saying "bye bye" to more children and skills. I have given a document to the Minister of State, Deputy English, on the skills required around the country and certain tweaks needed to create 5,000 or 6,000 jobs. Having spoken to people involved in businesses throughout the country, I guarantee that if we continue to bury our heads in the sand - for example, by being against businesses, rather than being proactive - the stark reality is that more and more people will leave the country.

Deputy Mattie McGrath

I am delighted and privileged to be able to speak about this Bill. I compliment Deputy John McGuinness from the bottom of my heart on the research and work he has put into it. When one reads the Bill and listens to the Deputy speak, it is clear that he knows business and understands what makes it tick. I am sure he will not be afraid to admit that successive Governments, including the last one, of which I was a member for a long time, failed business, the economy and the people. Some months ago I wished the Minister of State, Deputy Coffey, all the best in his new position. I know that he is a hard-working, decent and honest politician. I am sure he is aware that what Deputies McGuinness and Fitzmaurice have said is 100% correct. Unfortunately, he has to read the speeches and scripts sent by the Government.

Deputy Michael Fitzmaurice

We need to change that.

Deputy Mattie McGrath

Yes. Earlier this year I debated the issues involved at the Bulmers plant in Clonmel with the Minister of State's colleague, the former Minister of State with responsibility for small business, Deputy Perry. I am not blaming either of them for the reply I received which was just not credible. It was written by civil servants and some research may have gone into it, but we did not get any answer in the circumstances. What are we doing here if we cannot catch the system by the scruff of the neck, shake it and make it fit for purpose? Young people are leaving, which is a source of great anguish. This is very much related to the domestic violence Bill that we debated this morning. The pressure being experienced by the owners of small and medium-sized enterprises and sole traders, not to mention their wives and families, has nothing to do with alcohol or gambling. It stems from the sheer hard work that has to be done by risk-takers whose businesses are going reasonably well. As Deputy Michael Fitzmaurice said, they go to the banks only to receive knock after knock and kick after kick under the system. Unfortunately, many of them have ended up in the graveyards of Ireland because of this pressure.

Deputy Michael Fitzmaurice

Yes.

Deputy Mattie McGrath

It is the worst pressure of all. Every letter one receives from Revenue, regardless of what it is for, includes a threat of imprisonment at the bottom.

Deputy Michael Fitzmaurice

Correct.

Deputy Mattie McGrath

A businessman who came to my clinic last week is owed €9,500 in VAT, but he cannot get it. He has been waiting and waiting, although he has been talking and ringing and doing everything else. This sole trader used to employ two people, but he had to let them go because his cashflow dried up. One might think this is not a great deal of money, but it is to him. When he owed Revenue €90 two years ago, he ended up having to pay €360 in penalties and fees. Where is the fairness in such a system? It is stark raving mad and bullying of the highest order. The same applies to the local property charge on houses. Many people who have moved abroad to work or engage in business did not receive the notice telling them that the second house charge was being applied to them in respect of a house in Ireland that they had vacated against their will. Many moneylenders would not charge the punitive rates the system is able to charge. It is morally wrong; it is totally wrong every other way.

I would like to speak about Revenue and the issue of rates.

I have been in business for a number of years and I got a rates bill for the first time ever only two weeks ago. I did not mind that as I am in business. Part of my business is agriculture-related and the people came and valued me. However, we cannot get them to value businesses such as the hotel about which Deputy Fitzmaurice spoke. One has to first apply to have one's business valued by the same people who valued it in the first place. Where is the independence in that? One must then pay a fee of €200, if not more - it was €250 at one time - and wait and one might get the shock of one's life because they might up the value of one's business when they call to see it. Many of the people involved, good people in their own right and I am not blaming them, do not understand the system. They are looking at antiquated systems and values. One or two people with small businesses in my area have told me that if they have to pay a rates bill on top of all the other bills, it will be a bill too far and they will not be able to pay. The banks and the Revenue Commissioners are not giving them any leeway and there are also the health and safety requirements, which is part of modern Ireland. Health and safety regulations were badly needed in this country but they have gone over the top. It has become an industry. Some of the people involved were self-employed and they moved on as they saw they could have a better living and became health and safety inspectors and more power to them. People are telling business people what is wrong with their business when they do not know the business and do not understand the system. They are just shovelling papers and while I do not want to disparage them it has gone too far.

These small business people may have a small pub or a small shop or be a sole trader with a plant hire or other business. The Minister of State, Deputy Coffey, knows these small business people who are in every village and town better than I do. If they come up with a new idea or initiative, open a business and pay everything - the banks, rates and rent - but dare put up a sign advertising their business for a short time on a public road, they will be fined €150 for every such sign, at least that is what happens in my county. Once an inspector goes out and takes a photograph of it, the fine for putting up such a sign is €150. Candidates who display posters in elections are exempt from the imposition of such fines. Surely businesses that want to create jobs, provide a business service and give life to communities should be entitled to put up a sign to advertise their businesses provided the signs are not a traffic hazard. What is happening is madness. I know of a business that was operating from a business park in my town of Cahir. The man had to close the doors. He could not afford the advertising in the newspapers and other media as it was too high a cost and he was not benefiting from it. He put up about ten roadside signs. He sold a new kitchen the first Friday evening a person saw the sign. That person was living in a housing estate across the road from the business person but did not know about his business until they saw the sign. The business grew and he employed people but he got bill after bill from the county council running to thousands of euro and he had to close his business. In fairness to the council official, whom I have often telephoned, he does his best to implement the law, but the law is an ass, excuse the pun, because one cannot advertise one's business on a roadside sign. One cannot be creative in that way. We must respect road safety at all times, which is very important.

The Minister of State read out a number of initiatives. I salute Senator Feargal Quinn and others on this and we fought for years to get the Construction Contracts Bill to save businesses. I remember the morning Pierse Contracting was closed and there were 650 small sole traders in a Dublin hotel. They had families to feed and would have got nothing from social welfare or from the community welfare officer because they were self-employed. They might have had three or four people employed and when they were let go, thankfully, they would have got some social welfare payment. However, the businessman who took the risk, had sleepless nights and whose wife and partner and family went hungry at times to pay wages would not get a shilling. The system is out of touch. All the measures the Minister of State mentioned are so-called initiatives dreamed up by civil and public servants who do not understand this area. I have been saying for years that the Construction Contracts Bill is still not implemented even though we voted it through here almost two years ago. I do not know whether the Construction Industry Federation is holding it up, and I suspect it is, but it is a downright disgrace. It took so long to work through it and get all Stages of it passed and signed off at which time we thought we were signing with that achievement. However, when the legislation to establish Uisce Éireann was voted through, without debate, last December it was signed into law on 25 December, a most unusual day for anyone to be ag obair other than the emergency services. Why the panic? When they want to do it, they can do it. The Construction Contracts Bill is still lingering where it was left. I have asked why that is the case. The other legislation was signed into law on 25 December, Lá Nollag, a rest day other than for the emergency services. What was the panic with that legislation? Why was there such indecent haste?

I want to salute an official in South Tipperary County Council, Anthony Fitzgerald, who deals with supports for small businesses. Anytime I telephone him, and I contact him about very sad cases, he deals with them in an understanding way because he came from a business background and is able to talk and mediate. Bank of Ireland has a initiative on supporting business this week and I hope to call in to support it this evening. However, the banks, in general, are closed to businesses, they do not care about ordinary small businesses and consider that they are in the way, as it were. We cannot have a chequebook now but, thankfully, I still have one in my pocket, like many other people. Some businesses have been established for 100 years and they are familiar with e-business. Every time they go into their bank it costs them money, not to mind they having to stand at a counter to make an appointment. It was offered to me in a bank one day to go up in the lift and I asked how much it would cost me, so I walked up the stairs. That is the way it has gone. The attitude has changed. The boom came and the banks went crazy and now that the recession has come they have not adapted. They just want to get their balance sheets right and their attitude is to hell with the businesses. I do not know where we are going to go with this.

I wish the head of Revenue who is retiring and has been appointed to the policing authority - I had issues with her when she was in that role and I have had many issues with Revenue - well, but why do people have to be appointed in that way? That is why the people are marching on the streets. It is not all about the water charges. It is about all of this.

Acting Chairman (Deputy Joanna Tuffy)

The Deputy is straying from the Bill.

Deputy Mattie McGrath

I am a little but it is all very relevant and connected to small business people. They are at their wits end. They are trying to keep the doors open. People knock on their doors and ask them to sponsor them at Christmas and to support the Society of St. Vincent de Paul and they do. They support anything that happens in the local community, as the Minister of State, Deputy Coffey, knows. They support activities and give young people at college work at the weekends. The National Employment Rights Authority, NERA, which is another agency that should have been disposed of, is telling them they should be paying so much an hour when business people would have employed more young people.

I support this Bill 100%. I am very disappointed that the Minister of State, Deputy Coffey, and the Government are not accepting it or at least not amending it and trying to do something with this meaningful piece of work. However, that is the system here, that is what has let the country down and that why the people are out on the street.

Acting Chairman (Deputy Joanna Tuffy)

The next speaker listed is Deputy McConalogue. Does Deputy Fleming wish to speak now?

Deputy Sean Fleming

Yes. I welcome the opportunity to speak on this rates Bill in substitution for my colleague. I am sharing my time with Deputy McConalogue who will speak subsequently and there will be no disruption to the next speaker.

I thank my colleague, Deputy McGuinness, from Kilkenny who is very familiar with the issues affecting small businesses and fully understands all the issues affecting their viability. He has given long, detailed and careful consideration to this Private Members' Bill entitled the Local Government (Rates and Miscellaneous Provisions) Bill 2014, that he has published, for which I thank him. There are outstanding and excellent ideas in this Bill and the Government would be well advised to take on board what he is saying.

I had intended to speak about the contents of the Bill specifically in the first instance but I was so shocked by the Minister of State's opening statement that I must address that first. His reply demonstrates that his Department is living in a parallel universe separate from the rest of the Government, of which he is supposed to be a part. He said the Government is opposing the Bill on a number of grounds. He stated in the second paragraph of his reply that Deputies will appreciate that:

the rates income constitutes a very important contribution to the cost of services provided by local authorities such as road maintenance, public lighting, development control, parks and open spaces and libraries. In fact, commercial rates income represented ... 33% of the €1.5 billion to the sector in 2012.

What happened this week to that valuable rates resource? As part of the Government's package to rescue Irish Water and save face, it announced here two days ago that the largest utility in Ireland will be exempt from commercial rates. Has the Minister of State got that point? The Government is exempting the largest super-quango in Ireland from commercial rates that everybody, including Irish Water, the regulator and the Minister, knew Irish Water was obliged to pay.

The bill for the rates is €66 million but the Minister has written off at the stroke of a pen the commercial rates bill Irish Water was to pay local authorities. The sum of €66 million out of the €1.5 billion to which I just referred, represents 4% of the income local authorities were expecting to receive from commercial rates next year. One could ask what the Government has done. It has said the bill will be written off for Irish Water but the Irish taxpayer will pick up the bill. The Irish taxpayer has now been handed the bill, a direct subsidy for Irish Water, and is now going to pay the additional €66 million to local authorities through the increased local government fund, in lieu of the rates that are being written off for Irish Water. That will not stand up to the EUROSTAT test. It is a direct operational subsidy. That is typical of what is going on with the Government. It is looking after the super-quangos, the big people and the State monopolies but it has no regard for ordinary people, small businesses and those who are trying to keep employment in the country. Once again, the actions this week in terms of rates for Irish Water run counter to the attitude being shown today.

I wish to refer to the contribution of the Minister of State, Deputy Paudie Coffey. I genuinely feel sorry for him having to read out the guff someone wrote for him because whoever wrote it did not tune in to what was happening in Parliament in the past 48 hours. He said the approach to providing joint liability in this case is unworkable. However, let us look at what the Government did this week. The Government said the occupier will pay the bill for water but it went on to say that in the case of a rented property a charge would be put on the property owner if the occupier does not pay. That is the ultimate in joint liability in terms of the occupier and the landlord. The Government has no problem having joint liability for water bills but it says it is unworkable in another context. Does the Minister of State have any idea of what the Government has been doing in the past 48 hours? Whoever wrote the script could not have made such a statement if he or she was tuned in to what the Government said.

The Minister of State then said Deputy McGuinness’s proposal to exempt occupiers of rateable property who commence in commercial activity for the first time from 25% of rates in their first year of operation was unworkable. One could ask whether he has any idea of what happens in the real world. The people who wrote the script clearly do not. In the town of Portlaoise, in an effort to regenerate the main street, Laois County Council introduced a scheme whereby occupiers of buildings that commence commercial activity where a building has been vacant for more than one year will get a reduction of not 25% but 75%. The local authority will take 25% because it is 25% more than it is getting at the moment. It said that in year two, a 50% reduction will be provided and a 25% reduction will be available in year three. That is an outstanding initiative by Laois County Council. The scheme should be repeated in every small town in County Laois – Portarlington, Mountmellick, Stradbally, Mountrath, Abbeyleix, Rathdowney and Graiguecullen. It should be repeated in every town in the country. The scheme is workable and local authorities are doing it. They are giving a discount. Shame on a Department that would have a Minister come to the House and say a 25% reduction is unworkable.

The Department is out of touch with what is happening in the country and with the local authorities under its own remit. One could ask how such a thing could be outlined in a script. It is outrageous. I apologise for having to point out the discrepancy but I have never seen such a thing. Perhaps it is a reflection on the Friday sittings; that one can give out any old guff in a script on a Friday afternoon that bears no relation to what happened in the House on Tuesday, Wednesday or Thursday. Everything to which I referred in the script in terms of dealing with rates and local authorities is in absolute direct contradiction to everything the Government has done. It has exempted Irish Water from rates but it will not give a little help to a small business. It was said that it could not contemplate an initiative to reduce rates for a new business but it is being done by Laois County Council. Does the Department not know what is happening in the real world?

The Minister of State said it is not possible to have joint liability for rates but that is happening in the case of Irish Water. The occupier is liable but a charge will also be put on the property owner. That is the ultimate in joint liability. Does the Minister of State have any idea of what is happening? When he responds to the debate he should have the dignity to apologise for what he read out and withdraw his script. What Deputy McGuinness said is the only bit of commonsense we heard in the House.

I accept I have only two minutes remaining but I had to deal with the nonsense in the Government’s script before I got as far as the Bill. I am aware the Minister of State, Deputy Simon Harris, made some changes to the Valuation (Amendment) Bill in the Seanad yesterday, which will come back to the Dáil. We will support the good aspects of the Bill, but we will not accept anything that does not help small businesses.

I wish to refer further to matters that should be addressed under the rates valuation system. Reference was made to sporting organisations but again there is a sting in the tail in the final paragraph. The reference is to where a building or part of a building is used for a commercial sport, but which is not used for the sale or consumption of alcohol or in the generation of income, apart from club membership fees. Everyone agreed that if there is a pub in a sporting facility it should pay rates, but that rates should not be paid on the rest of the property. However, there is a rider to the effect that if the rest of the property generates any income other than membership fees it will not be exempt. That is not good enough and we will vote against it when the Bill comes to the Dáil because, for example, if a hall is rented out to a local badminton club or for another purpose it would be considered to be generating income other than membership fees and therefore rates would be charged.

The Minister of State, Deputy Harris, agreed to make an exemption for the payment of rates by community child care facilities. There are 87 child care facilities in County Laois, the majority of which are privately run and provide the same service as the community child care facilities and they must be listed in the schedule to the Bill as exempt from rates in line with the community child care facilities because otherwise they will not operate on an equal playing field. The issue must be addressed.

A self-assessment situation must be developed similar to that for income tax with proper penalties. There has been talk of revamping the Valuation Office. It will take it two decades to get around the country. We must have action now, not in 20 years’ time.

Deputy Brian Stanley

I welcome the opportunity to speak on the Bill. I share many of the concerns of the previous speaker on the manner in which the Government is dealing with the issue.

One of the big promises made prior to the previous election and that is contained in the programme for Government relates to upward-only rents. The Government has not dealt with the issue. Who has been lobbying the Government not to deal with it? Why does the Government have feet of clay on the issue? Upward-only rents and rates are the big issues in provincial towns. People are stuck with the upward-only rent system. If a constitutional amendment is required, surely it is possible to have one to change the clause on property rights in the Constitution, in conjunction with the raft of referenda the Government is due to introduce.

There is a problem with the rates system. The system is outdated. As Deputy Fleming indicated, a good scheme on rates has been introduced in Portlaoise. The county council has made changes, not just on Main Street but also on Church Street and other minor streets in the town in order to try to regenerate businesses in the town centre. Councillors have put in place a very good scheme that dealt with many of the issues the Minister of State said could not be addressed. It managed to find a new way to deal with the issue and not to give new businesses an advantage over existing businesses providing the same service. It proves that something can be done. Town centres in Mountmellick, Portarlington, Mountrath, Rathdowney and Abbeyleix are not the same as they were 30 to 40 years ago. Significant numbers of businesses have closed.

There were six shops in Shannon Street in Mountrath. There are none now. That has been caused in part by the rents and rates systems. I accept that there are other factors, but those are major factors that must be addressed.

The valuation is based on footfall, the location of the premises in the town and other factors, but the Minister must take into consideration that the commercial activity and the footfall has changed completely in the past ten years, never mind the past 30 years, and the Government has to deal with this issue.

I welcome the opportunity to speak on the Bill. Irish Water was referred to earlier. What the Minister has done here is breathtaking. It is a complete write-off. The issue of double liability was referred to. This is not double liability; what has happened here is single liability. It is liability for Joe Mug, taxpayer, and Joe Mug, householder. That is who is caught to pay it again. Once again, the Minister has made a mess of it.

While I am not too happy with some elements of the Bill, I welcome its introduction by Deputy McGuinness. It is important that we try to deal with the issue and help those businesses employing one, two or three people. We must help those business, even if their businesses provide only one job. People talked about ten jobs and 20 jobs, but we know the importance of protecting even one job.

Setting local rates is a contentious issue locally and politically. Each local authority must be allowed the right to set its own rate, but there must be a single mechanism for dealing with that. A number of items of legislation are already in place and it is clear there is a need to combine and modernise those, as set out by Deputy McGuinness.

The Minister must examine the issue of seasonal small businesses that operate out of a premises for a number of months of the year and then stop. That is a huge issue in coastal towns but also in midland towns, depending on the type of business, because a premises may be empty for a number of months of the year but it is bringing in rates for the period it is open. That must be addressed.

We have to examine the issue of start-up businesses. I referred earlier to the scheme in Portlaoise town centre and the streets off that. We must address that, because it is better to get 25% or 50% of the rates than no rates. It is far more important. Local authorities have the power under the 2004 Act to do that, but the Government might consider rolling it out across the country and encouraging it. It is very important that new businesses be given breathing space for one year to let them get up and running.

Legacy rates are a contentious issue. Deputy McGuinness has set out some provision for that in the Bill, but it needs further examination. If the Bill moves to Committee Stage we could deal with that. It is a complex issue. There is no straightforward way of dealing with it, because a number of circumstances have to be catered for, but we should move the Bill to Committee Stage to try to deal with it.

There is also the issue of businesses that fold, or go into liquidation, whose debts are left with the local authority. Currently, local authorities are very far down the pecking order in terms of who is the priority creditor. The banks always get in first. That is the way it works with developers as well, and the local authorities are left carrying the can with regard to development levies, rates and so on. That issue is important. I note an attempt is made to deal with it in section 23. That is something the Government must take on board, because local authorities are carrying huge legacy debts in regard to rates, development levies and other liabilities. I would like to see that being dealt with.

Overall, while there are elements of the Bill we might have a problem with, there are many elements that are positive. It is a serious attempt by Deputy McGuinness to try to deal with many of these issues. To continue as we are, with an outdated rates system dealing with town centres, is not an option. The Minister will see that in his constituency and when he is driving across the country. There are examples of it in town centres in many counties. The nature of town centres has changed completely and the civil servants need to recognise that. The Valuation Office must recognise it also, but we have to recognise it here. We must change the system, simplify it and make it more fair.

We have to find some mechanism for dealing with the profitability of a business, because the sweet shop with the same square footage as the bank next door cannot be liable for the same rates. The current situation puts many small businesses in a very difficult situation because they have small turnovers and very small profit margins but huge rates bills to pay. We have to find a mechanism to address that. If we look internationally we will see there are better ways of doing it. I would like to see that issue dealt with. We have to try to help those businesses survive and grow.

We will support the progress of the Bill to the next Stage. I hope the Government will allow that to happen, because we have heard enough talk about it over the years. It needs to update legislation on rates. That has not happened. I acknowledge that there is provision in the 2004 Act, inserted by the then Minister, Noel Dempsey, which I welcome. That provided some breathing space for the schemes such as the one in Portlaoise to operate. However, we need to go much further than that, and this Bill provides the opportunity to do so.

Deputy Charlie McConalogue

I support the Bill brought forward by Deputy McGuinness and commend him on putting in the effort to draft it and bring it before the House. I commend him also on the work he has done throughout his career here in Leinster House in terms of being a strong voice for enterprise and encouraging Government policy which supports business, and medium to small businesses in particular. His business background is a great asset to him, which he brings to the Dáil and to national policy by introducing this Bill.

The Bill does four things in particular, which Deputy McGuinness outlined in his opening contribution, in introducing a single mechanism for the making of an annual rate on valuation. It also introduces a fair and equitable refund scheme in cases in which properties are vacant, and deals with the question of landlords' liability for rates that have not been discharged by tenants. Also, the Bill provides for a coherent mechanism for reviewing all aspects of the rating process and the collection of rates. Overall, the Bill is very important legislation and brings to the debate a response to some of the very real problems we have with our rating system.

I accept that the system of rates goes back many years. Much of the legislation can be traced back to the late 1800s. Many Governments have continued with the system in place, but that is no excuse for the fact that the system is no longer fit for purpose. It is long past the time when it needs to be changed and a total review done of how we charge businesses. We must ensure we do so in a way that does not stifle them and try not to create a situation in which many businesses that could otherwise have got up off the ground, so to speak, might look twice when an opportunity was presented.

The lack of progress on implementing real change in the rating system is in stark contrast to the way water charges were eventually changed, albeit only after massive public protest on the streets. We do not see the same urgency from the Government in looking at the rating system that is in place and bringing about real change in how rates are levied on businesses. That is an unfortunate reflection of the fact that the Government will tax or charge one if it thinks one will pay. We have seen that in the way the Government has raised revenue from the public through regressive measures, including flat charges in a number of areas. We also see it in the flat charges that continue to exist in a rates system that the Government has not addressed.

There is a need for real reform. The hunger for reform exists across the public and in various sectors of society. The Government promised to act on it, but has sat on the issue of rates and we have not seen the type of reform that businesses need. That means a hedge fund in an office next door to a sweet shop is levied with the same rates as its neighbour. There is no consideration given to the ability of a company to pay.

Like every other Member, I have received representations from businesses across my constituency that have found the rating system is making life impossible for them. I will give the Minister of State some examples. A small hairdressing business in a new building constructed in the mid-2000s with a premises of no more than 300 sq. ft. is levied with a rate of €6,000 per annum. That is over €100 per week levied on a small business. It is a very significant charge considering one can rent properties of that size in many locations around the country for approximately €100 per week. Another example involves a restaurant business seeking to purchase a property in which to continue its business. The rates valuation of the property was €8,000 per year, whereas the property could be purchased for a little over €80,000. If one was going to obtain a rent of €8,000 on a property with a purchase price of €80,000, any financial advisor would tell one that was an exceptional yield and a sound financial investment. It is the exact opposite with the sums being put before businesses looking to set up. They have to pay up to 10% of the value of a property per annum in rates to the local authority. Another example is that of a petrol station starting up which is facing rates of €30,000 while trying to get off the ground. That is only a small selection of examples. The common thread is that the local authority does not have the discretion to come to arrangements under the scheme. There should be an up-front scheme for new businesses that are trying to get established, with charges levied that reflect the ability of companies to pay. I have no doubt this issue is a significant contributor to the fact that many of our town and village centres have been dying on their feet for the last number of years. Businesses are closing and shop fronts are shuttered. If one has travelled through any reasonably sized town over the last number of years, the only enterprises one will have seen increasing in number are charity shops. The average small town now has four or five charity shops, which is a reflection not only of the economic environment, but also of the fact that charities are among the few businesses that are exempt from rates. Therefore, it is possible for them to keep their overheads low, make a profit and return an income for the relevant charity. Businesses cannot do that. If a business wants to set up, it is faced immediately with significant charges. One of the first questions business owners ask when they assess a property is "What is the rate on this premises?". Not only will they have to pay rent, they will also have to pay a rate charge which is more than the rent. It is an entirely illogical position and one we should in no way continue to stand over. It is anti-business. As long as we stand over it, we will continue to see businesses which might otherwise have got off the ground look twice and ask why they should put themselves under that pressure. It is too much of a punt and a risk. They will see that they will be paying out all the time, with no light or income at the end of the tunnel.

We need to address the structure and system that are in place. I urge the Minister to do so in a serious way which examines the way in which rates are levied and introduces a mechanism to take into account the ability of companies to pay. Income should have a direct correlation with the amount being sought. I commend Deputy John McGuinness's Bill to the House and urge the Minister to address the matter. It is long past time for a radical overhaul of the rates system in this country. I ask the Government to address the situation promptly.

Deputy Patrick O'Donovan

I welcome the opportunity to speak. Any occasion on which we have a chance to speak about local government funding is particularly welcome. I compliment the Deputy on his introduction of the Bill. While the Minister for the Environment, Community and Local Government, Deputy Alan Kelly, has provided reasons for the Government's refusal to accept it, I note that doing nothing on rates is not an option. Leaving the current system in place is not an option. Deputy McGuinness's Bill may very well have the flaws that the Minister, Deputy Kelly, has identified, but doing nothing is not acceptable any more. Nothing was done by the last Government and nothing has been done by this one up to now. I do not find that acceptable because, as someone who was a member of a local authority for eight years, I know that local government funding is overly reliant on a smaller and shrinking group of people who do not know how their rates are calculated. They have no input into how their rates are calculated either. It is the last relic of the Victorian taxation system and it needs to go. The system of rates does not need to be reformed; it needs to be abolished in its entirety and the system in place for the collection of the local property tax must be extended to commercial premises. That would achieve a number of things, which I will outline in the course of my contribution.

We have a very effective system whereby the Revenue Commissioners accept a valuation from an individual for a private dwelling house. The individual will accept the property tax based on the multiplier the local authority attaches to it. If the local authority wants to reduce it, it can. The other funding sources for local authorities are private businesses and the commercial sector, which have no input into the process. My own county, Limerick, has gone through a revaluation process recently. In a revaluation process, the entire valuation for the county must remain the same, come hell or high water. It demonstrates how archaic the system is that it is designed not to change. While some valuations will go up and others will go down, the entire rate base will remain the same. If one took that approach to its natural conclusion and said the tax base would have to remain the same regardless of changes in the economy, income tax would have gone up to 85% or 90% over the last number of years. It would be done on the basis that there was no need to borrow.

One keeps piling on tax because one must generate the same revenue as in previous years. This is what occurs in local authorities. What is the outcome of this approach? Local authorities find that a large number of businesses cannot pay and are forced to close down. The flipside of rates is the local property tax. If a householder can show through an auctioneer or valuer that the value of his or her house has appreciated or depreciated, he can make a return to the Revenue Commissioners for assessment.

The only future role I envisage for the Valuation Office is one of an auditing body. It could randomly select valuations to ensure they are accurate using criteria such as location, turnover, type of business and so forth.

While the Bill introduced by Deputy McGuinness may very well have flaws, the idea of doing nothing no longer washes. We need to adopt the model of the Commission on Taxation and establish a commission on local government funding, which would have a fixed, short-term focus of producing a set of radical proposals. Deputy McConalogue is correct that they should be radical. They should not include the word "rates" because rates are paid by only a small number of people.

Deputy Stanley, who spoke strongly in favour of reform of the rates system, believes only business people should support local authorities. His opposition to the local property tax and domestic water charges is not sustainable because everyone uses local authority services.

It is legitimate for the owner of a petrol station located in rural west County Limerick to ask what services the local authority is providing his business. He may not have access to street lighting or footpaths and may not even have local authority provided running water. It is legitimate in such circumstances to ask what services the business receives in lieu of rates, given that they may be as high as those paid by a business in the centre of a city which benefits from footpaths, lighting, parks, libraries and other services. The current system is inherently unfair.

While I am aware that changes were made this week to the Valuation Bill before the Seanad, the legislation is designed to do only one thing, namely, to make the collection of rates easier. It is farcical that it does not include any measures to ease the burden of rates or make them more transparent. While it provides that businesses will be able to have valuations completed quicker, it will not result in any reduction in rates.

A revaluation process was completed recently in Limerick. It will take 20 years to revalue the entire country if the Valuation Office completes the task at the current rate. The valuation system, as a means of funding local authorities, is inefficient, archaic and long past its sell-by date.

While I do not know the rationale for the Government's decision not to allow the Bill to proceed to Committee Stage, as a backbench Government Deputy, I will support that decision. Notwithstanding this, the Government must not ignore the issue. Deputy McGuinness and other Deputies have made a number of good points, as have others, including Chambers Ireland, the Small Firms Association and the Vintners Federation of Ireland. This issue will not go away irrespective of which party is in government. The system needs to change fast.

Last week, I tabled a parliamentary question to the Minister for the Environment, Community and Local Government requesting that he provide details, in tabular form, of the amount of cash local authorities had on deposit. I do not know the reason the most recent figures available are from 2012. The Minister's reply indicated that, as at 31 December 2012, Cork County Council had €119,930,578 on deposit, Dún Laoghaire-Rathdown County Council had €155,366,717 on deposit and Sligo County Council, which has had financial difficulties recently, had €3,231,015 on deposit. While I accept that local authorities must have money in the bank for contingencies and so on, it is legitimate to ask why they have such large sums on deposit, what interest is accumulating on these moneys and what is being done for businesses in counties where cash is being stashed in this manner. For what purpose are these deposits given that commercial rates are being increased and local property tax collected?

The days of doing nothing are over. Frustration is mounting among self-employed business people who are disappointed that nothing is being done about rates. I am aware of the Minister of State's background in County Waterford. I appeal to the Government, especially my Fine Gael Party colleagues, to ensure this issue is addressed. We must not leave it to another Government to take basic steps to address problems with rates. The local property tax has been introduced and is being collected. It is seen to be fair and those who pay it have an input in the process. They know exactly how it is calculated, who is recovering it and where the money is spent. In contrast, the collection of rates involves plucking an arbitrary figure from the sky. Local councillors then attach a multiplier to this figure in December of each year and this determines the rate, which must then be paid in two moieties. People do not know on what it will be spent. It could well be spent in a different part of the city or county. Businesses must also pay commercial water rates, for which responsibility has still not transferred to Irish Water. They will ask what they are getting for their rates as they do not cover refuse collection and many streets are characterised by widespread dereliction. At the same time, local authorities are holding money on deposit.

It is no longer acceptable to argue that we should continue to potter along and do nothing for small businesses and ratepayers. While the Bill will clearly be defeated in a vote, if anything is to come from this debate, I implore the Government to do, in respect of local authority rates, what it has done in respect of Irish Water in the past six weeks. This will require the establishment of a commission, made up of politicians and representatives of businesses and local authorities, to produce a system for funding local authorities that is transparent, fair, equitable and based on ability to pay and the type of business provided. Queen Victoria was knocking around when the current system was introduced. While the language may have changed, little else in this archaic and antiquated system has changed. It has not served us well and must go. In recent days, we heard people speak about their legacy, rather than the legacy of the Government. The Minister of State could leave a legacy of being the Minister in the Department who decided the valuation system had to go.

Minister of State at the Department of the Environment, Community and Local Government (Deputy Paudie Coffey)

I thank all Deputies who contributed to the debate, especially Deputy McGuinness for giving us an opportunity to discuss the issue. I also recognise the considerable work and research he did on the legislation.

I have outlined the reasons the Government opposes the Bill. The principal reason is that many of the proposals raise significant legal and constitutional issues which essentially render it unworkable.

In the short time available, I will try to address some of the points raised. Some Deputies questioned my contribution to the debate. For the information of the House, I am a businessman and I have employed people in my small business in a small rural town. My family has been an employer in a small rural town since the 1970s and employs people to this day. I am pleased to report that a business operated by my brother has increased employment recently as a result of the economic upturn. I hear at first hand the challenges businesses face on a daily basis as they seek to meet overheads, pay bills and staff and keep the door open and business going. This challenge is ongoing, having been especially severe during the economic crisis of the past five years.

As Deputies McConalogue and O'Donovan stated, the rating system has been in place since the mid-1800s. Numerous attempts have been made around the edges to try to reform it. To date, Governments have failed to implement the deep reform of the system for which many Deputies have called. There are many reasons for this failure. A number of Deputies referred to the Valuation Bill currently before the House. The previous Valuation Bill was introduced in 2001. I note comments made at that time by Deputy Sean Fleming who made a strident contribution on this legislation this morning. He described the 2001 Bill as a new concept and argued that the country would see the full benefit of it when it became fully operational, one, two or three years after its enactment.

In fact, we did not see the full benefit because that legislation sat on the shelf for a number of years and only three or four local authorities were revalued from 2001 to 2011. The current Valuation Bill is trying to expedite that process. Previous Governments have failed with regard to this issue but that does not mean that we do not continue to evaluate and revise how local authority funding operates in this country. The Deputy has alluded to the fact that this Government has taken hard decisions to try to widen the tax base that funds local authorities. We have introduced the local property tax to bring a level of accountability for the funding that is raised and spent in local authority areas. We have also strengthened local government through the Local Government Reform Act. Under the Act, audit committees with real powers in local authorities can examine how rates and the local property tax are being spent within their respective counties.

I am not referring to Deputy McGuinness but some Opposition Deputies, some of whom are from Sinn Féin or are Independents like Deputy Mattie McGrath, who is a good friend and colleague of mine from the south east, oppose the local property tax and genuine efforts by this Government to broaden the tax base and at the same time, look for commercial rates to be reduced. We cannot have it every way. I genuinely feel it would be beneficial if we could widen the tax base and then possibly arrange through the Joint Committee on Environment, Culture and the Gaeltacht for a deep analysis of how we fund our local authorities and how commercial rates, the local property tax and indeed the rates that will be collected through Irish Water are being spent in the individual local authorities. I know Deputy O'Donovan called for a commission. Until we get that analysis, I certainly believe that we cannot reform the system we have which literally sustains local services in local authorities.

I understand the frustration of Deputy McGuinness because I have been in business and my family is in business. I want to support businesses in whatever way I can. I suspect that this is a debate to which we will return because as the economy improves, and I think it is improving, we need to see that continue. When it does, I hope that retailers and small and medium-sized enterprises about which we are speaking will see their fortunes improve but that does not mean we take our eye off the ball. We need full accountability and transparency in respect of how local authorities are funded. Our councillors, our local authority system and this Parliament have an important role to play in that. I suspect that we will revisit this issue but I welcome the debate today. I see the genuine intent behind the Bill. We are opposing it for the reasons outlined but that is the position of Government.

Deputy John McGuinness

I want to address the Jekyll and Hyde approach I have seen here this morning. Let me start by saying to the Minister of State - Deputy Paudie Coffey from Waterford - that he was great once he put down the script. It came from the heart, he knew what he was speaking about and he moved away from the bull in his original opening statement and for that I commend him. I have not heard Deputy O'Donovan speak in the House although I know he is a regular contributor. I admire him for what he said today because he is a backbencher from Fine Gael and is expected to toe the line. However, he has given this morning his personal view and acknowledged the reality of what is happening outside the gates of this House and I admire him for that. He is a young person in politics and I hope he keeps up that contribution because it is only by changing from within his party that he will bring about the changes that are necessary in the legislation that comes from that side of the House. I thank him for his contribution. He is the only Government Member who has spoken today. I thank my colleagues in opposition - Deputies Michael Fitzmaurice, Mattie McGrath, Sean Fleming, Brian Stanley, Charlie McConalogue - as well as Deputy O'Donovan and the Minister of State.

I want to go back to the Minister of State's speech because he did not write it. That speech was handed to him as he came in the door because whoever wrote it has no idea of what is going on outside. If the Minister of State showed the transcript of the last piece he spoke in this House to his brother, he would say "that's grand Paudie." However, if the Minister of State showed him that rubbish, he would tell him where to put it. That is the problem here. The Minister of State, his brother and Deputy O'Donovan know the big issues that are happening outside this House. The Minister of State knows that what he has just repeated and parroted from the Civil Service is absolute nonsense. If the Minister of State, or Deputy Coffey - whichever one we are speaking to now - believes in it, he should take out an advertisement in his local paper. If he does not want to pay for the full publication of this rubbish which is his opening statement, he should just pay for the following comments where he states that he is very familiar with and generally accepting of the operation and practice of the rating system. Does he think this would go down well in Waterford? I do not think so. He might then go and say that under the approach I have adopted in parts of the Bill, the approach to providing joint liability is unworkable. I do not think that would go down very well. If he goes on to say that 5% of their overall costs is the cost of rates to most businesses, I do not think businesses would agree with that. If he talks in the advertisement about taxing sporting clubs through the rates, I do not think they would be too happy with him. In his speech, he says that the rates burden is not excessive in the overall sense. Would he stand beside his local publican or shopkeeper and tell them that their rates are not that excessive? I do not think he would get much of a vote down there.

I will allow the Minister of State one minute at the end of my time to stand up in this House and say that politically he is accepting this Bill on the basis that it can be amended on Committee Stage or that individuals like Deputy O'Donovan can bring forward amendments and so on. I do not believe that my Bill has all the answers or is correct in every aspect. They are just my views. I was honestly hoping that the Minister of State would come in here today and accept the Bill because it can be amended later on.

We now live in a country that is at war with citizens. I started by saying that. The first duty of Government is to keep its people safe. I keep saying this in here but what has the Government done? I will tell the House what it has done. It has created a system whereby any local business can now have visits from the likes of the Revenue Commissioners and the Department of Health. If a person runs a delicatessen down the road, they can have visits from six other different Departments. One could go on and say that they could have visits from HIQA and NERA. One then finds the Revenue Commissioners threatening individual citizens with the collection of all sorts of taxes. The Government has given those who administer this country the ability to put their hands into the pockets of ordinary people and steal from them. The Government has almost criminalised everybody in the country who is in business or who owes money to the extent that they must prove they are innocent. Everyone is looked upon as being guilty. If one looks at the entrepreneurs and the people who are trying to keep businesses open and sustain jobs, one can see that the Government is treating them like criminals and making it impossible for them to run their businesses from an administration perspective.

In respect of the rates system, the Minister of State says that the some of the measures in my Bill are unworkable. I do not like the language in the stuff dished out by the Minister of State when he came in here first, which said that my Bill would interfere with the running of the courts. I would not say they were Deputy Coffey's words. Yes, they were the Minister of State's words and the words of civil servants.

That is utter nonsense. The Bill would make the system more streamlined and efficient. It addresses issues recently raised by county managers. Yet the Minister of State described it as "interfering". Such language runs through everything we do. Earlier, I pointed out that the Valuation Office told us it would never get around the country to revalue properties. It cannot do it. The Minister of State is creating an inequitable situation in the marketplace whereby one set of crèches will pay while another set will not.

The Minister of State is in dispute with local authorities and sporting clubs. Sporting clubs are the only organisations, respected in their communities, that are delivering family-oriented services that introduce discipline and give young people something to do other than things that are not good for society. Nevertheless, the Government is going to start taxing them through the rates system. There is no sense in it.

To return to the word “unworkable”, I presume the two Deputies present have constituency offices. They do not pay rates on their constituency offices. While it was fine to exempt us from paying rates on our constituency offices, the Government can do nothing to assist the SME sector, which creates 800,000 jobs. While the Government may not be able to do much through the rates system, because it does not want to affect the €1.4 billion it generates, it expects the local business people to ignore everything and pay up. The same business people pay €3 per cubic metre for water in and water out. In their day, rates were to include water in and water out, refuse collection and everything else. Although people pay them, they now also pay for their bins and water. When the young entrepreneur or the owner of an established family high street outlet goes home, he or she will also pay for water there. It is convenient for the Government to exempt Irish Water from rates.

I offer the Minister of State, Deputy Coffey, the opportunity to acknowledge his brother and all the other people in business, and the knowledge that he personally knows to be true, by standing up and saying, "Deputy McGuinness, your Bill will go through to Committee Stage, and we will have a fuller discussion on it." Come on, Paudie. Up you get. We have time.

Dáil Éireann debate - Friday, 21 Nov 2014

Local Government (Rates and Miscellaneous Provisions) Bill 2014: Second Stage [Private Members]

Dáil Éireann debate -
Friday, 21 Nov 2014