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Seanad Éireann debate -
Wednesday, 7 Jul 1971

Vol. 70 No. 11

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

Question proposed: "That the Bill be now read a second time."

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

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

In modern times, rates are ordinarily a charge on the occupation of property. The levying of rates under the half-rent system on the owner of property, on the basis of a fraction of the rent he receives, is therefore anomalous. In addition, the system may give rise to hardship in individual cases since it may result in an owner paying more in rates than he receives in rent. In their second interim report, the inter-departmental committee on local finance and taxation recommended the abolition of the half-rent system. The enactment of this Bill will mean the discontinuation of the system from the current financial years.

The State, as occupier of property subject to half-rents, is affected by the proposal. The State pays a bounty-in-lieu of rates to the local authority in respect of the premises it occupies. Where the owner of State property is subject to rates on the "half-rent", the State bounty-in-lieu of rates is reduced by the amount which the owner pays in rates. The State bounty-in-lieu of rates must now be increased to offset the amount the owner will no longer pay. It is estimated that in the current year the extra cost to the Exchequer will come to approximately £30,000.

This sum will of course go to the local authorities. Some authorities themselves will have to face a slight additional charge also, in respect of rates on half-rents which will not be offset by the State. Despite the fact that the proposal will involve these relatively small extra charges on public funds, the proposal is a sound one in that it removes an obvious anomaly in the rating system, one that can involve injustice in individual cases and can be dealt with without affecting the overall rating system, which must remain. The forthcoming White Paper on Local Finance will deal with the rating system as a whole.

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

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

The only purpose of this short Bill is to abolish the rather outmoded system known as the half-rent system. The Act under which this system has been in operation for a considerable time past has been archaic and a complete anomaly in the general set-up of the rating system as we know it. To make things a little bit more complicated, although the system was known as the half-rent system, it was later changed to become in effect the quarter-rent system. Then, to become really helpful, there were reductions made again so that we had the situation where the fraction ratio charged varied throughout the country. We had in county council areas rates being paid on 50 per cent, which was half-rent, in the areas of Cork Corporation and Limerick Corporation, 33 per cent, Dublin and Dún Laoghaire Corporations, 22 per cent, Waterford Corporation, 60 per cent, borough and urban district councils, 50 per cent, and town commissioners nil for the purpose of town charges.

By the time I had worked all this out I was just about as confused as I imagine many other Senators in the House also were. Indeed, when I read the debate which had taken place on this Bill in the other House I got the distinct impression that perhaps the Members of the Upper House were not the only ones to be somewhat confused about the half-rent system. However, what everyone seems to be in general agreement on is that it is clearly an anomaly in present-day circumstances and ought to be removed. Apparently, the original intention was that usually where the tenant was either a charitable institution or a public or scientific body, the rates payable by the owner would be paid in theory initially under the 1849 Act on half the rent received.

Clearly, once the rate in the pound went beyond £2 in the £1 the owner of the property was at a serious financial loss. Even in cases where, as in Dublin city and Dún Laoghaire Corporation areas the rates were payable at only 22 per cent of the rent received, with the absolutely fantastic charges which the rate in the pound is now demanding the property owner was still paying more by way of rates than he was receiving by way of rent. It was only right that there should be some legislative measure to remedy this situation.

The point in this Bill which surprises me most of all is that it has taken so long to emanate. It is quite clear that for a considerable number of years this system must have been apparent to everybody as one which no longer operated successfully and was merely an embarrassment. The first concrete proposal to abolish it came in 1960 but the then Minister for Local Government was not inclined to move on it at that time. Some sort of extension system was allowed to bring the system through to the year 1970. Then the inter-departmental committee on local finance and taxation in their second report, published in 1967, set out the situation of the half-renting system and made the case for its abolition. It seems strange that it has taken from 1967 until now to produce what, as the Minister has said, is a very short and innocuous Bill.

We now have the Bill and I think it would be fair to say that it is to be welcomed from all sides of the House. One of the rather annoying sections to it is section 3, which allows this retrospective clause under which the Government can from time to time, when it so suits them, although the previous legislation should have expired in 1970, by means of a circular from the Department of Local Government continue the system in operation for a further year. Yet, in a tardy way, the Government produces their Bill and backdate it to a month long past. When local authorities and other bodies ask for retrospective legislation from the Department of Local Government they are always met with a very firm and definite "no" and an assurance that retrospective legislation is bad legislation and should not be countenanced under any circumstances. But when the Department of Local Government have difficulty in producing a five or six section Bill and produces it some six or nine months after the operative date from which they would like to see it operating, they merely insert what they are beginning to call a "saver clause". I am not sure whether it should not be called "a face saver".

The retrospective element of it is not essentially bad. It is not at all bad in this case. But it would be well if the draftsmen and those concerned in framing local government legislation were to remember their saver clause when they get requests in other fields of local government for retrospective legislation to remedy outstanding and obvious ills in the local government code.

The other aspect which upsets me about this Bill is this. Again, if I may emphasise it, it is a very short Bill which will not detain the House very long. Yet being so short and designed merely to correct an anomaly which has been in existence for over 100 years, it is introduced to the Dáil and Seanad in the months of June and July, 1971. Since late in 1970 the Minister for Local Government has been promising that a White Paper on reform of the whole system of local finance and local taxation and the rating system would be published in the immediate future. As Members of the House will know, in the interim a White Paper on local government services generally was published and circulated rather in a vacuum, because no one felt he could comment on it due to the lack of a White Paper on the reform of the financial structure of local government. However, with the White Paper still being promised, we have now presented to us a minor Bill to amend in a small way the rating code.

What upsets me is that, if the Minister and his Department see fit to introduce this Bill at this stage and bring it to both Houses of the Oireachtas, it does not augur well for anyone who had hoped there might have been sweeping changes and definite proposals on the reform of the whole rating code in the forthcoming White Paper. If that had been the case quite obviously this Bill would have been left over until such time as the main Bill and legislative measures to change the entire rating system were drawn up. I am a little fearful and disappointed that the arrival of this Bill here today is a very definite indication from the Government that they have no intention of making sweeping changes in the rating system.

Another indication which would seem to confirm that opinion is the Minister's remarks when speaking on this Bill in the Dáil on Wednesday, 23rd June 1971. In the Dáil Official Report, Volume 254, No. 13, column 2155, he says:

It removes an obvious anomaly in the rating system, one that can involve injustice and can be dealt with without affecting the overall rating system, which must remain.

Here we have the Minister for Local Government assuring us that the overall rating system must remain and, coupled with that, we now have a five section Bill designed to change a small anomaly in the whole of the rating code. Yet we have a promise of a White Paper with, one had hoped, very definite proposals on changes and improvements in the rating structure and the method of raising finance for the operation of local authorities generally. The most significant thing to be taken from this Bill is that the White Paper will be a non-event when it eventually arrives.

The Minister referred I think here today—and certainly during the course of the debate in the Dáil—to the fact that while the abolition of the half-rent system will cost the Exchequer approximately £30,000 more this year, it will in certain cases mean that local authorities will have to bear the loss of a certain income which they receive at present. Perhaps, when he is replying, the Minister will clarify how he envisages that local authorities will suffer because of the passing of this piece of legislation.

The Bill is to be welcomed because it eliminates a rather annoying factor in the rating code. At the same time it is a Bill to be regretted because it seems to be a clear indication that this is probably the nearest we will get to sweeping reform of the rating system from the present Government.

Like Senator Boland, I think this Bill is necessary. It is obviously necessary in order to put into statutory form what is already in practice. I, like Senator Boland, should like to reiterate that it is a curious thing that no proper legislation has been brought in since 1849 to rectify the existing anomalies. In 1849, I am quite sure, the people who were paying rates under the half-rent system—unlike Senator Boland, I will not go into the breakdown of the half-rent system— were obviously making money at that time, but rates have gone up so much since that time that there is a loss to the ratepayers nowadays in these circumstances.

Certain inferences are to be drawn from this. The obvious inference is that the necessity to bring this Bill in here implies a delay on the production of the White Paper on local financing and the rating system. For that reason I wonder if, instead of wasting the time of both Houses of the Oireachtas in dealing with a similar Bill in the future, the Minister has made any provision whereby he, by regulation or otherwise, could extend the operation of the Bill. We will not have the White Paper before us this term and if it comes before us next term we will need some time to read and absorb its contents. Only then will legislation be brought in to deal with the whole rating system and local finance. As the White Paper has not yet been brought before us I cannot foresee any new legislation on the rating system being introduced before 31st March, 1972. Would it be wiser for the Minister to extend this Bill for two years instead of bringing it before us again to extend it for another year, or would he like to arrogate to himself the power by regulation so to extend it?

The next Seanad term will be a short one and most of our work will be done between January and March, 1972. Taking everything into consideration, I cannot see such legislation being enacted before 31st March, 1972. Does the Minister foresee legislation to implement the proposed White Paper being enacted before that date? If he does not, he is wasting our time now in asking for only one year under this Bill.

The Bill is a very short one and Senator Boland has already covered most of the points to be raised on it. One could involve oneself in dealing with certain buildings that are not rated at all, such as the commercial buildings and others. However, I will not go into that point in any detail. I should like to support Senator Boland on the various points he made. I want the Minister, in his reply, to give us some indication as to when the White Paper on local finance will be introduced and when he expects it to be enacted and implemented.

I, too, would like to welcome this Bill. It will certainly bring relief to some people and we all agree that half a loaf is, perhaps, better than no bread. As had been said, we have been waiting in anticipation of greater rate reorganisation. The real crunch has come this year with the steep increases in rates all over the country. In addition, we find that the grants, which local authorities expected would be on the same generous scale as in previous years, have been cut.

Of course, this will increase the burden on the rates next year. It is all very well to say that we are giving relief under this measure to a certain small number of people, and certainly I do not begrudge it to them. It should have been done long ago because people are reasonably equitably taxed and we cannot expect private individuals to be subsidising private buildings, the Board of Works or local authorities and so on.

It is a great pity that the young, energetic and active Minister for Local Government did not really get his teeth into this whole rating problem. He could have before the House in the present term not only the White Paper but proposals to bring the present vexatious system up to date. We should have had prompter action on the part of the Department of Local Government because it is a long time since Dublin Corporation and Bray Urban District Council opted out, as it were, rather than impose steep burdens on the people. The Department should surely look at its list of priorities in introducing legislation.

I do not know how many people this Bill will help. However, seeing that the total amount of money is relatively small, when one compares it with the revenue from our rates, I think that very few individuals must surely be involved. Therefore I urge on the Minister for Local Government to have his house in order before the end of this year, because it will be very difficult for local authorities to strike a rate next January and February and every council will be facing a deficit, particularly those in the rural areas who want to maintain over the entire year full employment of the roads staffs.

The Senator must not go outside the narrow confines of this Bill into a general discussion about local government.

You will agree that we are waiting a long time for a chance to discuss our rating system?

Acting Chairman

At the moment I am waiting for the Senator to discuss the Bill.

I thought it might be an opportunity of reminding the Minister of his duties and obligations in this regard, rather than take up the time on the Finance Bill, later on in the month when we shall not have the pleasure of having the Minister for Local Government present, and when any comments we might wish to make on this subject would be reaching him only secondhand. I hope that before the year is out, the Minister will come back to us with comprehensive legislation on rate reform. The road he is on is a good one, but he has certainly been a cautious starter. The entire country is awaiting relief and it is now quite common for farmers with rather modest holding to pay £400 and £500 in rates. Surely these people are paying more in proportion than they would if paying full taxation. I know that in a small five-section Bill such as this, it is very difficult to broaden the scope, but the Chairman has been very kind and I should like to welcome the Bill for what it does. However, I regret that the Minister did not wait a few months longer in order to do a really good job and come to the rescue of so many people, especially here in Dublin, where there are people on fixed incomes trying to compete with the ever-increasing and climbing rates in the city.

First of all, I should like to thank the House for the welcome they have given this Bill, and for avoiding, to a fair extent, the temptation to go off in a different direction because, when dealing with rates, public representatives are very conscious of the need for some improvements in the rating structure. The Government have recognised this and have had the whole matter under consideration for some time. The only comment I can make at this stage on the proposed White Paper is that it is being prepared and is at an advanced stage. It is my ambition to publish it as soon as it is possible for me to do so.

It is at an advanced stage. It must be nearly senile by now.

The Senator will appreciate that this is quite a big question and I am certainly not anxious to rush something just to satisfy the Senator. A number of questions were asked and the impression seemed to be given that there was not much point in coming in with this small Bill, when there is a need for some major statement on the rating system as a whole. One got the impression that the Senators were not too pushed whether this was brought in or not. I should like to explain to the House that the purpose in coming forward with the Bill now is that there are known hardship under the system that operates at present.

In my short introductory speech, I said that there are persons whose property is occupied by the State, and who are obliged to pay rates on half-rents, and who are receiving from the State less in rent for that property than they are liable to pay in rates. That is an anomalous situation and is certainly something which I should be very anxious to remove and this Bill does remove it. Although there are not very many persons involved, it is a hardship which we cannot tolerate any longer, and the opportunity arises now because some of the legislation dealing with half-rent rating terminated in 1970. At this stage it would require new legislation to extend that for a further period. We are now availing of this opportunity to abolish it altogether, rather than extend it.

I am afraid that Senator Belton misinterpreted section 2, which is merely extending for a further year, the rating relief provided for under the Local Government Act, 1946, and the Local Government (Temporary Reduction of Valuation) Act, 1961. This legislation, in effect, reduced the fraction on which rates are leviable to a quarter of the rent. This legislation terminated after a ten-year period, which ended on 31st March, 1970. Therefore, we are only validating in respect of county health districts, under section 2, the reduction in the liability of persons who are subject to half-rent rating in respect of 1970/71, after the statutory authority for that reduction had expired. We had circularised the local authorities to inform them that we intended coming forward with legislation and we are now validating the extension which operated last year in county health districts, so in fact we are not extending it any further.

The Bill is primarily to remove this anomaly which causes hardship in certain individual cases. It is the second such measure introduced to alleviate hardship arising out of the payment of rates. The first was the Local Government (Rates) Act, 1970, which provided for the payment of rates in instalments spread over the greater part of the year, and for the adoption by local authorities of schemes for the waiving of all or part of the rate liability of persons on whom the payment of rates would impose hardship. Between those two measures all cases involving personal hardship are covered. I think it is well worthwhile to come forward, even at this stage, and terminate this rating of half-rents.

I do not think any other point was brought up which needs to be covered except the cost of the abolition of half-rent rating of local authorities. Local authorities will suffer a net loss in the case of property occupied for charitable or scientific purposes. The number of local authorities which will suffer a net loss in revenue on foot of such property is quite limited. The principle one is the Dublin County Borough Corporation—where the additional burden on the rates, as a consequence of the termination of the half-rent rating, is estimated to be less than 1 new penny in the £ in the current financial year. It is not of major consequence.

It is notable that, while numerous inquiries were made by local authorities arising out of the official notification of the proposal to abolish half-rent rating, in no case was there any indication given that the proposal would give rise to any appreciable loss in local authority revenue. No complaints were registered against the proposals set out in this Bill. I thank the House for the manner in which they have received the Bill and I should be obliged if they would agree to give me all the Stages.

Question put and agreed to.