Valuation (Amendment) (No. 2) Bill 2012: Second Stage

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

I am pleased to have the opportunity of introducing the Second Stage reading by Seanad Éireann of the Valuation (Amendment)(No. 2) Bill 2012. As Senators will be aware, the proposed amendments are designed to accelerate the national programme of revaluation of all commercial and industrial properties across the State, to minimise exemptions from rateability and to deal with difficulties identified in the working of the Valuation Act 2001.

A key motivation for introducing the amending legislation is to expedite the revaluation of commercial and industrial properties on a national basis. Such a comprehensive programme has not been undertaken in all rating authorities since the middle of the 19th century. However, a major start was made in recent years when all commercial and industrial properties were revalued in the county council areas of South Dublin, Fingal and Dún Laoghaire and work is also well advanced in the Dublin City Council area. The momentum of the programme was disrupted by the volatility and instability in the property market in recent years, as a result of which the Dublin city revaluation, which is a major element in the overall programme, was deferred for about 18 months. I am pleased to say that work has now advanced significantly to the stage that the first results are expected shortly.

While it is intended to roll out the programme to further local authorities later this year, there is still concern that the revaluation programme is moving at a slower pace than would have been expected. In 2001, the expectation was that the complete revaluation of all commercial property would take ten years to complete. This assumption has proved over time to be wide of the mark and hugely optimistic. The current estimate for the completion of the revaluation programme under the current arrangements is 2018. This Bill seeks to introduce a number of measures to speed up the process and includes a statutory basis for the introduction of self-assessment of valuations by ratepayers, allowing elements of the work to be outsourced, streamlining the appeals process while extending the period of consultation between the ratepayer and the commissioner, providing that only properties on the valuation list will be revalued in a local authority area.

Revaluation is all about rebalancing the overall rates burden in each local authority area and I am conscious that there is pressure for the work to proceed at a brisker pace. A substantial amount of work has been carried out to determine how the work can be accelerated. To this end, enabling provisions are included in the Bill in respect of self-assessment by ratepayers and contracting external service providers to augment the in-house capacity of the Valuation Office.

To complement these initiatives, there is provision to enable the Commissioner of Valuation to use general market data, or aggregated data, including statistical and computer-aided techniques, to estimate the net annual values of groups, classes or categories of properties, where appropriate.

The Bill updates the valuation code to accord with modern conditions. In this regard, I am keen to make the system more transparent to ratepayers and rating authorities alike. The Bill corrects several identified deficiencies in the current legislative framework based on the practical experience of those in the Valuation Office and other stakeholders working with the current legislation over the last decade or so.

The Bill aims to streamline aspects of the current appeals process. This will help to accelerate the pace at which the national revaluation programme is proceeding while ensuring in-depth engagement between the ratepayer and the Valuation Office in fixing the annual value of a property. The Bill will retain the right of appeal to the tribunal where ratepayers are dissatisfied with a valuation and to the High Court on a point of law. While the main proposed amendments, as set out in the Bill, are designed to accelerate the revaluation process, in order to minimise exemptions from rateability and to deal with existing difficulties identified in the operation of the 2001 Act to date there are other technical changes which will lead to the more efficient and optimum use of scarce resources in the Valuation Office.

This Bill has been in gestation for some years. The need for amending legislation was prompted by a study of the valuation code following ten years of working with the provisions of the Valuation Act 2001 and because of anomalies in the system that emerged as a consequence of various judgments and determinations of the Valuation Tribunal and the courts since its enactment.

The existing valuation legislation is primarily contained in the Valuation Act 2001, which provides for the valuation of all fixed property, including land and buildings. Valued is also incorporeal property, defined as property with no physical existence, such as tolls, easements, fishery rights and other rights over property. The Valuation Office has responsibility for implementing and maintaining the valuation system. Rates are no longer collected on domestic property, as a result of the provisions of the 1978 Local Government (Financial Provisions) Act, or on agricultural land, as a consequence of a 1984 Supreme Court decision, although both of these categories of property are still included in the valuation lists. Therefore, the commercial and industrial sectors now effectively constitute the rateable valuation base.

The basis of assessment for valuation purposes is the net annual value, NAV, of a property. The NAV of a property is equivalent to the annual rent, exclusive of all payments in respect of rates, taxes, repairs and insurance, which a property could reasonably be expected to command. The rateable occupier, the person who has to pay the rates, is the person in the immediate use and enjoyment of the property, who is the tenant or the owner in certain cases. Rating authorities and ratepayers have the option of having a property listed for revision. As no national valuation has been carried out in the last century and a half, this revision process has effectively been the only way in which the valuation lists have been changed in the intervening years.

The national revaluation programme, which was provided for in the Valuation Act 2001 and which commenced in the greater Dublin area in 2005, is the first general valuation since the middle of the 19th century, and it is a significant undertaking. The Valuation Act 2001 provides that the valuation be carried out on a rolling basis. This means that each rating authority area will be separately valued as part of a planned sequential valuation of the whole country. The sequence is decided by the Commissioner of Valuation, who is independent in carrying out his function. Each rating authority area will have its own base date, by reference to which valuations will be determined.

Revaluation is a very important element in achieving uniformity of valuations within a given local authority area. It is important that such uniformity be established on a rating authority basis, whereby all valuations in a rating area will be uniform relative to one another, as distinct from having national uniformity whereby all valuations in the State would be required to be uniform. Between valuations, uniformity will be maintained on a rating authority basis and any anomalies or changes will be addressed on a rolling basis by the carrying out of a revaluation at least every ten years. Such rating authority uniformity will be much easier to establish and maintain than national uniformity, thus making it easier to ensure ratepayers will be treated equitably.

Although considerable progress has been made in recent years, there is still much that needs to be done. The present position is that, following the completion of three local authority areas in Dublin, some 18,000 properties have been revalued. While this represents only 11% of all rateable properties, it constitutes about 22% of the valuation base for levying rates. However, the current revaluation projects which are well advanced in regard to Dublin City Council and also under way in respect of Waterford and Limerick will result in a significant advancement of the circumstances, resulting in the revaluation of an additional 38,000 properties. At that stage, approximately 33% of all rateable properties will have been revalued, representing approximately 54% of the valuation base in monetary terms.

It was estimated that the overall valuation would take ten years to complete. However, because of the magnitude of the task, this timetable is unlikely to be met without employing the measures provided for in this Bill, such as self-assessment by ratepayers, the contracting of external valuation services to augment the Valuation Office's resources and the employment of computer-based methodologies. Using all these approaches, the Commissioner of Valuation will have greater flexibility to advance the revaluation programme, now that a sound foundation has been established by the largely completed revaluation of all the local authority areas in the county and city of Dublin.

It is proposed in the Bill to name specifically the State bodies that are exempted from rates. The proposal is that the definition of "office" in the Schedule to the Public Service Management Act 1997, as amended from time to time, will apply. Originally, the term "office of State" was intended to apply to a limited number of offices that are closely related to central Government and Departments of State, and was never intended to include the hundreds of public-type bodies which often operate at a considerable distance from the State. Previously, when Departments were exempt from rates, the State paid a bounty in lieu of rates to all local authorities in respect of Government property in their jurisdiction and in the mid-1980s this was merged into the equalisation fund, which later became general-purpose grants from the local authority fund. In recent years, a number of bodies, including the HSE and FÁS, took successful legal actions to be exempted from rates. This has moved the definition of "office of State" far beyond that envisaged when the 2001 Bill was enacted. It involved considerable legal expense for the Valuation Office and has impacted on the revenue collected by local authorities. During the Second Stage speech on the 2001 Act, the Government clearly stated that health boards, FÁS and the VECs would pay rates, except where exemptions applied under other provisions of the Valuation Act. Ultimately, such shortfall must be addressed through an increase in the ARV in the local authority area, resulting in an increased rates bill to other ratepayers on the valuation list. Accordingly, the intention of my proposal is to limit the exemptions to offices of State as originally intended in the 2001 Act and to prevent other non-State bodies becoming exempt.

Under the current legislation, the ratepayer has the right to make representations at revision and revaluation stage to the commissioner in regard to the proposed valuation. This was a new feature of the valuation process introduced under the 2001 Act. It is, in effect, a first-instance appeal for which no fee is payable. In addition, the traditional right of appeal to the commissioner against the decision of the revision officer was retained, as was the right of further appeal to the Valuation Tribunal. This process affords the ratepayer three opportunities to contest a valuation assessment. There is also a right of appeal to the High Court on a point of law.

In the modern context, streamlining this process is essential. It will allow the commissioner to deploy resources most efficiently in revising and revaluing properties on an ongoing basis. My officials have examined comparable appeal systems in other jurisdictions and have found that generally there are no more than two opportunities to appeal or raise an objection to a valuation assessment, while our current system effectively provides four opportunities to appeal, including the right to make representations.

The comprehensive treatment of submissions made at the representation phase, introduced by the 2001 Act, and the right to raise issues of rateability or quantum at tribunal stage has convinced me that the right of appeal to the Commissioner of Valuation could be safely disposed of without infringing the rights of occupiers of property. The Bill proposes to remove this stage. Following implementation of the proposed change, there will be an extended opportunity, from 28 days to 40 days, to make representations to the Valuation Office, followed by a right to appeal the decision to the independent Valuation Tribunal. As with all such appeals, a point of law can subsequently be appealed to the courts.

I am proposing to make enabling provisions that would allow the commissioner to assign valuation work to valuers who are not officers of the Valuation Office. Currently, the commissioner can only assign valuation work to a member of his or her staff. This amendment will allow the commissioner to engage with the private sector directly through a tendering process. This would augment the internal capacity of the Valuation Office, increase the resources devoted to the revaluation programme and accelerate the delivery of the revaluation project. The commissioner intends to carry out a pilot project on the use of external valuations. This is an innovative advance. On a pilot basis, a group of people outside the Valuation Office who have expertise in this field will work with the office to arrive at a more time-effective means of assessment.

I am also proposing to make enabling provisions in the Bill to give the commissioner capacity to introduce a self-assessment option for the valuation of commercial property. Initially, this would be done in one local authority area on a pilot basis. The Bill provides for the insertion of a new Part dealing with self-assessment. Provision is made for the commissioner to make regulations providing for the carrying out of the valuation of property by self-assessment by the ratepayer and for such option to be exercised in accordance with regulations set out in this section.

The Bill empowers the commissioner or his or her officer to make inquiries or seek information or records in order to be satisfied as to the accuracy of a valuation submitted by an occupier of a property under the self-assessment method of valuation. The officer may then enter this valuation or substitute a valuation of his or her own to the valuation list. The valuation determined will be effective for rates purposes from the effective date determined under section 7, and interest becomes payable from that date at the court rates of interest. If an occupier fails to submit a self-assessed valuation under this section, the officer will be entitled to determine the valuation of the relevant property and enter it on the valuation list. The Bill provides that failure to submit a valuation will be an offence. It will also be an offence to submit a false valuation to the commissioner knowingly or recklessly.

While I have covered the main changes, there are other proposals, many of a technical nature, for which provision is also being made. These include addressing anomalies within the current legislative system, which provides for the global valuation of public utility undertakings, enhancing the position of the Commissioner of Valuation in the area of issuing instructions to his or her officers for the purpose of maintaining equity and uniformity in the valuation list, and defining the regional fisheries board - now Inland Fisheries Ireland - as a rating authority so as to allow for its revaluation, which is not possible under the 2001 Act. It is also proposed to amend the provisions to allow the commissioner, having regard to all of the circumstances, to amend a valuation following receipt of representations where there was an earlier decision not to change the valuation because there was no material change of circumstances in respect of a property. Additional proposals include confining revaluation to updating an existing valuation list rather than valuing every relevant property situated in the rating authority area, enabling the correction of clerical errors in the revaluation list without the parties needing to go through the revision process, and linking the definition of "charitable organisation" to that set out in the Charities Act 2009.

I would like to draw the attention of the House to a possible amendment that I hope to be in a position to move on Committee Stage. As part of the establishment of the new Department of Public Expenditure and Reform, it was the Government's intention that all land and buildings previously held by the Minister for Finance would transfer to the Minister for Public Expenditure and Reform. To this end, the statutory functions under the State Property Act 1954 were transferred by SI 418 of 2011 and property related to those functions was transferred by SI 480 of 2011. However, concerns have been expressed by the Office of the Chief State Solicitor that there may be property in the ownership of the Minister for Finance that cannot be directly related to any particular statutory function and may not, therefore, have transferred from the Minister for Finance under the legislative provisions mentioned above.

To address these concerns and for the avoidance of doubt, this Department, following consultations with the Office of the Attorney General, the Office of Public Works, OPW, and the Chief State Solicitor's office, is of the view that it would be prudent at the first available opportunity to provide in primary legislation that all land and buildings previously held by the Minister for Finance be transferred to the Minister for Public Expenditure and Reform. This is being done in one fell swoop. That is what I call power.

Subject to the agreement of the House and the completion of the drafting process, it is envisaged that the necessary amendment will be included as part of this Bill as a Committee Stage amendment. It is a purely technical matter, although I suspect it might not be that technical for the Minister for Finance, Deputy Noonan, and is being proposed to provide certainty for those involved in transactions involving particular State properties.

This is important legislation. The previous Government was also working on it. The Bill has been a long time in the offing. Its provisions will make the revaluation process more streamlined, effective and clearer for the user. In the context of public sector reform, it is right and proper that we advance this work.

When I first encountered this Bill, it was with some surprise that I discovered it fell within the remit of the Department of Public Expenditure and Reform. It should be under the Department of Jobs, Enterprise and Innovation. The question of rates is central to the issue of jobs, especially given the fact that small and medium-sized enterprises, SMEs, are being crucified by rates. An employer in my constituency is paying more in rates than he is in rent. His landlord has been willing to reduce the rent to keep him in the premises, but no such leeway from the local authority is possible, statutorily or informally. It is a retrograde situation. The Bill contains little or nothing to help him or the many other business people who are being crucified by the rates system. On this basis and for other reasons that I will outline, Fianna Fáil will oppose the Bill.

Last summer, Fianna Fáil tabled the Valuation (Amendment) Bill 2012 in the Dáil. A key provision was an inability-to-pay clause. Many businesses cannot pay because they do not have enough income. It is a choice between local authorities, rent and staff. The business people themselves probably come last in their own considerations. The Bill before us will do nothing for them. It does not go far enough to alleviate the pressure on struggling SMEs. It does not include an inability-to-pay clause or a subsequent occupier clause.

That the self-assessment system will initially be limited will pose a problem. The Minister of State has proposed a pilot basis, but it has been written into the statute, which refers to one or more rating authorities. In this light, the Bill will be meaningless for thousands of struggling businesses.

Fine Gael and the Labour Party in government and in local authorities, predominantly since 2004, have failed to overhaul local government financing to give businesses a fighting chance of survival. Let us consider the differences in rates. Rates have not changed in my county of Meath since 2009 when Fine Gael and the Labour Party took over the running of the council. I will hand it to Donegal County Council, Drogheda Borough Council and North Tipperary County Council, which have reduced their rates the most.

It is still less than a 7% reduction in the annual rate of valuation of all councils. It is a retrograde process that is not helping business; it is one of the key problems faced by businesses at the moment.

This Bill has not introduced an inability to pay clause, which is a standard feature of the UK process and a key measure to help alleviate pressure on struggling businesses. It is a central demand of various business associations concerned in the vision they have for a reformed rate valuation process in Ireland. The self-assessment method in the Bill is highly limited, although self-assessment would be the fastest way to speed up the process. We already have self-assessment for the most important of civic duties, the payment of taxes, for self-employed and business people. This Bill does not appear to make self-assessment standard practice, as it will be used in one local authority initially. The law provides for one or more rating authority. Fianna Fáil has consistently called for self-assessment to be introduced across the country, as evidenced in our Bill from last summer, in order to speed up the process and help businesses which are bearing a disproportionate burden with regard to rates.

The Bill allows for the subcontracting of valuation procedures away from the Commissioner of Valuations. That may be a welcome step and I hope it will reduce costs. Nonetheless, questions remain about how much this would cost and what quality control procedures would be put in place to ensure speedy, effective and fair valuation procedures for businesses. This is similar to the septic tank inspection issue, as what kind of quality control procedures will exist when this type of very important work is outsourced with considerable economic consequences for business people?

The Bill does not include the removal of the subsequent occupier clause, which penalises businesses moving to premises where rates are owed by the previous occupier. This clause is hurting occupancy rates and discouraging new start-up companies. One judge wrote off a bill for a previous occupier but that is not standard practice. As a result, premises are kept empty. The system is unreal as these rates will never be paid. Who will take on these premises when rates are attaching to them? There is no point in the clause as it creates a vicious circle that will continue until an economic recovery returns at some stage. Removing that clause could help accelerate economic recovery, get businesses into empty shops and open our towns and villages once more.

The appeals mechanism is deeply flawed as the discretion of the tribunal will not provide a fair procedure. Representations have been made to the Minister in that regard. I am concerned about the work the tribunal will have and there are many examples of intermediate decision making within the public sector, including the social welfare system, where a person can have a review before an appeal. I am concerned that there will be an intolerable burden on the tribunal which will delay rectification of these matters for businesses and employment. We should keep bringing this issue back to jobs, as rates are a key part of that issue.

Businesses and small employers are bearing the burden of financing local government to an unsustainable degree. For their sake, the focus of the Government should be on reducing costs in local authorities. We should be considering every angle of local authority services, what is being provided and if there is duplication of services. Is there a cost to the process that is unnecessary but which is being paid by businesses? There has been no effort to examine the streamlining of costs in local government. I will not say too much about that as my colleague, Senator Barrett, will reference a number of reports in the area that are sitting on various desks.

Businesses need a break, and people are questioning what services local authorities are providing. I would not be too critical of Meath County Council but only two years ago I saw a photograph in the newspaper relating to the county council's climate change policy launch. I wondered if that was a fundamental function of a local authority or something that should be done. Perhaps it is provided for in statute and it is only doing its job. Nevertheless, the fundamental services of authorities relate to roads, water, planning, housing and related services. There are many other services hanging around local authorities and I wonder if they are needed or if the process could be different. Why should small businesses pay the bill for all that?

The point has been raised by interested parties about the discretion provided by section 22, which will become section 48 of the Act, to the Commissioner of Valuations. I understand the Minister may well be open to amendments in the area but that was not indicated in the Second Stage speech. The wording of the provision gives the Commissioner of Valuations unfettered discretion on the net annual value of properties, and although he or she may well have regard to subsequent subsections, he or she is not obliged to do so.

Everybody agrees that Ireland needs an accelerated valuation process to establish a rates system based on current economic property values. Local authorities must, in conjunction with the rating system, reflect the reality facing businesses across the country. Senator Gilroy has been involved with a swap with a parent in Waterford, and perhaps Ministers, civil servants or politicians should swap with small businesses and see how they are struggling. We have many small business owners in this House, and they know exactly what these struggles are. I wonder about people like us, employed by the public sector, and if we know the realities or are aware of the struggles. Do we know what it is like for a cheque to bounce because there were no funds in the bank that day? Do we know the embarrassment that businesses face because they want to pay their bills even when a cheque bounces? Perhaps these people must beg in order to keep staff employed. This is the struggle facing people but we do not seem to want to lessen the burden with this legislation.

Unfortunately, we will oppose this Bill and have set down a number of amendments. A substantial number would have to be accepted for us to agree with the passage of the Bill. The legislation does nothing to address the other problem which Fine Gael promised to tackle, namely, the rent review clauses. I know that issue has nothing to do with this Bill but it is a related matter. Not much has been done to tackle that issue but even less is being done with regard to rates. This is not indicative of a Government that is in touch with small businesses.

I welcome the Minister of State to the House. As one of the more vocal Members on the rates issue, I got excited when I saw this Bill. Nevertheless, I am disappointed. All is not lost, as amendments could be worked through with the Minister, but we could have been more imaginative. I look at business every day and there are people who struggle while others may be working out of a small two-room premises. Some professionals may pay small rates while other businesses may include a supermarket with 4,500 sq. ft. or 5,000 sq. ft., which could employ 25 or 30 people and have a turnover of €2 million. A professional with two staff may turn over €2 million from two rooms. Rates are in no way linked to profitability but we should be more imaginative and there should be a link between profitability and the amount paid in rates. The rates for the supermarket in my example would be significant and, on the other hand, a small business with the same turnover could have greater profits but minimal rates. We must examine the issue. We have an opportunity with this Bill but we could be more imaginative about it.

This process began in 2005 and the projected end date will be 2018. Provisions are being made for outsourcing, etc., which is welcome. Self-assessment, however, will only be done in one pilot area.

If that was expanded, this job could be finished prior to 2018. We should remember that in 2005 when all Dublin properties were being revalued, property prices were at their ceiling. For the purpose of clarity, I point out that rates are calculated on the basis of the square footage of the property plus the best achievable rent. Rents in some areas are 40% of what they were in the 2005 to 2009 period. A businessman who opened a new business told me yesterday that he is paying 40% of the rent the previous occupier, whose business went to the wall, paid on the property, yet this man is paying the same rates. Where is the calculation of his rates falling down? It is provided that the calculation of rates is to be based on the best achievable rent of a property and rents have dropped by 50% and 60%, yet rates remain the same. That does not add up.

My colleague Senator Byrne referred to the section amending section 48 of the Principal Act regarding the powers that will be given to the commissioner. There is concern about that provision, which needs to be more specific. The word "unconstitutional" has been used in this context and I understand negotiations are taking place on it. There is fear about this among certain sectors of the business community. The commissioner will be given the almighty power to estimate the value of a property. The provision states that the value of a property shall be estimated "in the manner the Commissioner considers appropriate". Therefore, the commissioner will be judge and jury.

The Minister of State mentioned the appeals system. The High Court route is not an option for business people. It might be for the Minister for Finance when we hear all the property previously held by him is being taken away from him, but for business people the appeals process and the High Court route are not an option. I question whether the removal of an element of the appeals structure to which people have access is wise, advisable and necessary.

Senator Byrne raised the issue of inability to pay rates, but I would consider this from the profitability side. To be blunt, if a person is unable to pay his or her rates, how can that person remain in business?

They may have paid everything else.

Yes. How can a businessman at the top of the High Street continue to pay his rates if the fellow at the bottom of New Street is not paying his rates because he cannot do so?

They might have to pay the banks.

If we are talking about transparency, we have to be honest about this.

I agree very much with the outsourcing of elements of the work. The provision regarding estimating the net annual value of groups of properties needs to be examined because the valuation comes down to the best achievable rents and rents have fallen. Will there be an all-encompassing sweep to collect rates from people who to date have not paid rates, those who were exempted from paying them? Is the amount involved in terms of those who were exempt from paying them significant? Can the Minister of State give a guideline on the amount involved in terms of exemptions from rates? I ask the Minister of State to examine the streamlining of the appeals process as the constitutionality of this has been raised.

On the rolling revaluation process, the Minister of State said there will be a revaluation every ten years. It has taken us a century and a half to bring this one about and it will take at least 13 years to carry it out. Is he being a little ambitious to think that there will be a revaluation every ten years?

Ambition is my middle name.

The self-assessment process should be rolled out. I would like the Minister of State to take account of people's fears about the powers that will be bestowed on the commissioner and about the right of appeal and access to appeal. I will leave it at that for now but I may have to speak again on this.

I welcome the Minister of State to the House. I wish to address with the Minister of State a specific aspect of the legislation relating to small businesses that often gets overlooked - that is, the area of child care. Currently, there are 4,700 notified early childhood care and education services in Ireland, which employ 22,000 staff and provide sessional full-day and after-school care for 67,000 children and their families every day. In 2012 it is estimated that they will inject €425 million into the economy. The services cover every corner of Ireland and range from small outfits catering for ten children to large day care centres that cater for 300 children. I should declare I am speaking from the perspective of being the chair of Early Childhood Ireland, which covers 68% of these organisations.

We are all convinced about the value of high-quality early childhood education and we have seen the studies that show us the cost-benefit analysis of children participating in early education. They show that by the age of three, 80% of a child's brain is developed and at just 22 months a child's development can accurately predict educational outcomes at 26 years of age. Therefore, education and learning happens in preschool. I can provide the Minister of State with much evidence on that, but today we are considering the valuation legislation. However, I want to put on record that I am convinced about this.

In 2010 the State introduced the early childhood care and education scheme, a universal scheme that effectively provides each child with one year free of preschool in the year before entering primary education. It currently has a 96% take-up rate. To participate in this scheme, services must be legislatively compliant, have Garda vetting for staff, implement a curriculum and adhere to the principles of Síolta, the national quality framework. Unlike other businesses, the services under the early childhood care and education scheme are limited in the number of children they can register. The number of children dictates the adult-child ratio - in short, the number of staff such a centre needs to meet legislative requirements. Under the scheme additional charges cannot be made to parents. This sector is labour-intensive, with salaries accounting for 75% of costs; the remaining 25% is running costs, the largest expenses of which are rent, mortgage and rates.

I welcome the change to align the definition with that set out in the Charities Act 2009, but I believe the Bill should also align with the Child Care (Pre-school Services) (No. 2) Regulations 2006, which specify the required spaces per child that a service must have across the varying age ranges and provides for inspection for compliance under the HSE. These are State regulations on the space and type of infrastructure child care services must have in place. They are not allowed under the scheme to charge additional fees to parents.

There are 88 rating authorities and each one differs in the criteria it uses for the services that come under this scheme. The Government indicates what these services must charge and provides the same capitation per scheme, yet there are 88 different rating authorities. In 2010 the services engaging with the scheme were led to understand that in order to qualify for rates exemptions at least 51% of the service had to be provided in the form of preschool places under the State scheme and that the use of the term "education" applied to all services participating in the scheme, as they must have a curriculum. This was fine.

In 2011, there was a change in the application of rates across the country which stated that the exemption only applied to those child care services that are exclusively, that is 100%, funded by the scheme, and did not offer any other service, as additional services were not considered to be educational.

This places an enormous pressure on services and has a detrimental impact on some children, especially children with special needs who may need a second year in preschool to prepare for primary school. In the past, a second year could be accommodated. Under the current guidelines, however, if a service allows a parent to pay for a child with special needs for a second year, the rates exemption is invalidated.

I am asking the Minister to take another look at this. Obviously, the schemes would like to be fully exempted, but we realise the difficulties that exist in the economy and that we are in a challenging position. Could be look at an equitable and standardised rate of valuation scale for all early child and education services, irrespective of their location? I propose that the rateable square footage in each service would be aligned with the space requirement outlined and inspected through the Child Care (Pre-School Services)(No. 2) Regulations 2006. A stepped approach, as proposed by Early Childhood Ireland, would yield income to local authorities. Rates vary at present. I have heard reports of a demand of €10,000 for one setting and €20,000 for another similar setting, yet everything in this sector is defined by the State. The State regulates the size of a facility, the number of children, the capitation grant and how much it is allowed to charge parents. There is no room to move.

Is there a way to bring this sector into this valuation Bill to deal with the challenges it has?

I will raise more specific points on Committee Stage. I raise this issue today to give the Minister of State a chance to consider introducing Government amendments on Committee Stage.

I welcome the Minister of State to the House and I apologise for being late, although I heard most of his speech outside the Chamber.

I broadly welcome the legislation. It is long overdue. I would have liked it to go a little further and to have seen some correlation between the profit a business is making and the rates it pays. The Minister of State might respond that commercial ratepayers would say that, now that we are in a recession. Did I say the same thing during the boom? I probably did not, but I am reflecting what is being said by small business people. I come from rural Ireland and I deal, in the main, with small businesses in my own area. One evening last week, I was in a small shop and the shopkeeper told me that what was in the till would not pay for the heat and light for the day. Many small retailers in rural Ireland are simply trying to keep their doors open, hoping things will turn a corner. In some cases, rates are 20% of baseline costs, which is a massive amount. For all the explaining politicians like myself might do, small business people do not accept that they should be paying such an amount of money into the local government system.

I welcome the Bill although I have some queries on it. As we go through the Bill, I hope the Minister will look at some more imaginative proposals. In my own town of Carrick-on-Suir, we introduced a system of giving a business rates holiday to new businesses that did not cause displacement of existing businesses. The holiday was for a five-year period on a sliding scale. In the first year a business paid no rates and then paid an extra 25% until it was liable for full rates after five years. That scheme has worked well and has encouraged the filling of small retail outlets in the town and we have seen the main street fill up again. Something like that could be considered at this point. The scheme represented a lack of opportunity to raise more money, but not an actual cost. The Minister might consider such an idea when we go through the legislation on Committee Stage.

I welcome section 6, where it is proposed that some of this work will be contracted out. The last time I checked with the Valuation Office, when I was a local councillor and frustrated by people's lack of response from it, there were 13 staff in the office. I believe it has increased since then. Even with a massive increase in staff it cannot be possible for the office to deal with valuations for the entire country. The idea of contracting the work out is a good one.

The Bill contains a proposal to introduce self assessment. Earlier today, I rang an official who deals with this matter every day, to get his view on self-assessment. His initial reaction was that all self-assessments would be on the low side. What is the Minister of State's view of this? When we allow people to self-assess, as in other tax areas, we do not always achieve the best outcome.

My colleague, Senator Sheahan, has expressed concern about the appeals system. I welcome the fact that it has been ratcheted up somewhat and that it kicks in as soon as a valuation is done and before the rate has been put on the building. That is important. There have been cases where the rate is applied and there is then a long process of trying to have it changed.

I also welcome the provision for gaining access to a building where the business owner is not co-operating with the Valuation Office. An owner can avoid paying rates on a premises by putting up a "For Sale" or "For Rent" sign and notifying the local authority that he or she is no longer trading at the premises. The owner can then turn the lights off downstairs and continue the business upstairs. This is happening across the country. This loophole needs to be closed because it is disgraceful. I know of many businesses who see their competitors behaving in this way. A certain profession is taking advantage of this loophole but I will impart that knowledge to the Minister of State privately later. This is unfair to other business people. As the Minister of State said, every time someone avoids paying rates they are increased for others in the town or city. I agree totally with that view.

There are often delays in rating a premises. I know of a business premises in my own area where I had the honour of cutting the ribbon when it opened, and six years later the rates office had not even visited it. The person concerned has since retired, so I can tell the story. Those premises were rate free for six years. The current system has no provision for retrospection and I see no such provision in the Bill. If there is, I hope the Minister of State will correct me. I am looking for fairness across the board with existing businesses. A person who has not been rated has a competitive advantage over other people and is trading unfairly.

How is it proposed to contract in staff to get the first round of this valuation done? Senator Sheahan said it could take ten years, at the rate we are going. I would not be so pessimistic. I hope the Minister of State can give me some answers on this matter.

I have other questions that I will ask on the next Stage of the Bill.

I welcome the Minister of State. In our own mini-Croke Park agreement, the last time the Minister of State was in the Seanad we saved a large amount of money by not building a high wall in Clontarf, making the people there much happier. I make it my object to invent new reductions in public expenditure every time the Minister of State comes to the Seanad, to help him balance the books.

Earlier, we heard good news from Senator Coghlan that Committee Stage of the Bill would not take place until after negotiations with people who are involved. That is very welcome. It is a lucky omen that the Acting Leader was from Killarney, when we were discussing the submission by the Irish Hotels Federation. At €1,500 a room, rates have a major potential impact on the Killarney area and on Irish tourism. It is important that we get this right.

The concern they had was that the commissioner has an unfettered right to set the valuation in the manner he considers appropriate. No objective criteria are prescribed in legislation as to how the commission could arrive at such a valuation. We could end up under this Bill with the same situation as in the past when there was no meaningful appeal procedure in the rating of agricultural land. The documents the hoteliers prepared were not the usual advocacy documents Deputies and Senators receive. They were making a serious point and had important legal advice in that regard. It is welcome news that this will be discussed before Committee Stage.

Senator Byrne teed me up when he said I had reports that comment on the efficiency of local government. I was rivalling Senator Coghlan to find out where the reports were. However, I did find it. The McLoughlin report says that local government in Ireland is over-manned - I will give the list because this is the Clontarf wall equivalent of public expenditure reductions for today's presentation - to the tune of ten county managers, 50 directors of services, 170 corporate JAAs, 50 corporate others, 225 middle and senior replacements, 62 in human resources and payroll, 15% of Dublin and Cork senior managers, 180 professional senior, middle and replacement people, 250 from the roads departments and 171 from planning. That McLoughlin agenda should feature this afternoon when the Taoiseach has the meeting on the Croke Park agreement. In fact, when Mr. McLoughlin gave a presentation to the Kenmare conference two years ago he said that this is teed up for the Croke Park agreement.

The committee that prepared the report included Mr. McLoughlin and the Secretary General of the Department of the Environment, Community and Local Government, so these are the agreed reductions that are needed in Irish local government. I presume some of it relates to the fact that we have transferred many functions to regional and national bodies. It is time to extract the productivity gains at management level that are needed in local government. We are looking at the price of local government. If there is a Government report, as Senator Byrne mentioned, showing that large scale efficiencies are needed and available, and there is an agreement to facilitate those, let us do it and, perhaps, not have the rates charged for a hotel room going above the current €1,500 figure.

We must also examine rateable valuations for empty properties. Earlier speakers have referred to that. If there is no economic activity, and there is a report today outlining concerns about the town centre in Sligo having so many boarded up shops and premises, that issue must be considered. Upward-only rent reviews must also be examined. Then there are the activities of the National Asset Management Agency, NAMA, ghost estates and all the forbearance measures. What we must find out is the real taxable capacity of these premises. We must also find a good value way to organise and produce local government services, and ensure that anything we do here does not damage the productive sector of the economy. Members spoke earlier about The Gathering and so forth. When people arrive here next year we will want to have a hotel sector that is still solvent and a local government sector with improved efficiencies.

We reduced VAT from 13% to 9%.

I compliment the Minister and will support any further measures he has in mind along those lines.

I will table amendments on Committee Stage. The concerns of the hoteliers about appeals and that the commissioner must be subject to checks and balances in his activities, are important. The agreement by Senator Coghlan earlier that the views of those directly involved will be heard and putting the McLoughlin report very firmly on the agenda for the Taoiseach's meeting with the Croke Park implementation group this afternoon, will give us a good roadmap on how we proceed with this. However, it is important that sectors of the economy that are struggling at present, with retail sales so heavily depressed during the recession, are not further burdened and that they feel they are getting value from local government.

I welcome the Minister and I welcome this Bill. When I was a member of South Dublin County Council all the council members were excited in 2001 about the revaluation process starting but here we are today, so many years later, only at the beginning of the process. It shows the need for very significant change. The Minister has outlined today how the process can be accelerated by ensuring that the measures he described will be implemented.

There are issues in the Bill which I wish to discuss. The Minister outlined the various changes in the Bill to the Valuation Act 2001 regarding the basis of valuing commercial property to which local authority rates apply. The basis of valuing property is set down in statute, as Senator Tom Sheahan said, but we must ensure that the basis of valuation reflects the economic side of the spectrum. We all know that what pertained in the boom will not pertain in the bust. We must ensure that the methodology laid down for rateable valuation is cognisant of and based on the economics of the day.

The major changes introduced in the system for revaluing all commercial property in Ireland started in 2001. It is taking a long time. The timetable for revaluation given at that time proved wildly optimistic and the current estimate for the completion of the revaluation process is 2020, almost 20 years after the Valuation Act 2001 was passed.

The Valuation (Amendment)(No. 2) Bill seeks to introduce a number of measures to speed up the valuation process. This includes allowing work to be outsourced. On the outsourcing, we are all familiar with seeing signs throughout the country for valuers, auctioneers, undertakers and everything else under the sun. What training must the valuers have to ensure that when this work is outsourced to them they will all have a value based, uniform system? I heard only recently that when the banks were employing outsourced valuers, the valuers asked what price they wished to put on the property and how much they wanted to loan. That is how many of the valuations of property were carried out. That cannot happen in this case. We must have statistical guidance and analysis for valuation for the people who are doing the valuing. The same would apply to self assessment.

The Minister stated that it is a pilot project. If the valuers are not satisfied with the situation, they can ask for the records. I presume the records they can ask for are available under the tax, freedom of information and other legislation and that the valuer will not be able to look for private records or whatever that are not available to the public. What valuers can ask for when they go into a premises must be tabulated and set out exactly. What provisions are made for persons who carry out self-assessment? Senator Landy said he rang somebody who said the natural instinct would be to put it on the low side. To be fair to people, they want to pay a fair rate but they do not want it to be abused or to result in X in a certain county who is making far more money paying a smaller rate. How can we ensure that the self-assessor is enabled to make a proper self-assessment?

Questions have been raised by many businesses about the appeals system. The Irish Hotels Federation and many other bodies have made representations to us. The Minister must ensure that he is taking the proper road. My interpretation of it is that it will speed up the process and make it less cumbersome. There are three or four appeals systems at present, which is slowing down the process. We must ensure, however, that in speeding it up we get it right as well.

I would compare it to the planning process, where there is one appeal system. There is still the appeal to the tribunal and the appeal to the courts. We are left with the various appeals systems but are cutting out one. Will the Minister of State ensure everybody is satisfied that the appeals systems will ensure everybody gets their due rights?

In my other life and wearing my other hat, I travelled around the country inspecting preschools. The difference in rates for crèches, preschools and so on was brought to my attention so often. I could paper the walls of South Dublin County Council with the number of times I brought it up to try to have the rates for crèches and preschools examined. Other countries give assistance to preschools and crèches and free preschool places. I welcome the free preschool year, but Senator van Turnhout pointed out an anomaly. I was trained in the Montessori system - preschool education to senior level. This is definitely an area we must consider. Will the Minister of State examine the system of rates for preschools to see if it could be made fairer?

What people pay crèches and preschools varies around the country, and 88 different local authorities are charged with the responsibility for setting rates. More than €400 million comes into the economy from this sector. Will the Minister look at it? We cannot look for a full exemption but there are ways around it.

Naming the State bodies that are exempt is very good because there are so many that are denuding local authorities of a rate base which could be valuable. We have always looked for that at local authority level. It is good that they will be named.

The Senator's time is up.

Northern Ireland was mentioned and I think we are coming into line with it in regard to the bad debts rates element, which I welcome.

As other speakers mentioned, this is an area in which reform is badly needed. There is no question about that. There was much expectation that this Bill would change all the things that were wrong, particularly the pressures the current valuation system is putting on struggling businesses at the worst possible time. Senator Byrne said there were businesses in his constituency paying more in rates than in rent. We all have examples of that and of businesses which have been driven to the wall due to inability to pay costs put on them by the State. That has resulted in people losing their jobs and the consequences for the State are unemployment payments and so on.

As stated by Senator Sheahan, there is a need and an opportunity for creativity in this Bill. I share his view that the opportunity has been missed. The failure to include an inability to pay clause is a glaring omission in this Bill. It is included in the UK system and there is no reason we cannot do so here. It is the change that is most needed as we try to help struggling businesses over the next few years until things pick up. The failure to include such a clause will cost more jobs, and that is hugely regrettable.

Senator Byrne referred to the limited provision for self-assessment. If we are to try to speed up the process - and there is an acceptance that over the past few years re-evaluations have taken an insanely long time - self-assessment can and should have a role. It works perfectly well in the Revenue Commissioners context and there is no reason it cannot have a stronger role here. The Bill is unnecessarily limited in that respect. There are no changes to the subsequent occupier clause and the appeals mechanism is deeply flawed.

Like Senators van Turnhout and Keane, I support the calls by Early Childhood Ireland for a special provision for child care providers. We need to consider this issue and I hope it is one the Minister of State will revisit between now and Committee Stage and that he will engage with groups on it. We need to have a sensible, fair and affordable system for child care providers because to treat them like any other business makes no sense. We must come at this from a whole of government point of view. It is nonsensical to have one half of the Government saying that we need to support child care and make it more affordable to parents and then put impossible costs on child care providers which are passed on to parents who find it impossible to cover the cost of child care. It feeds into their decisions about whether they can afford to go back to the workplace. We need some joined-up thinking on that and I hope it is something on which the Minister of State will reflect between now and Committee Stage.

Other Senators referred to the concerns raised by the Irish Hotels Federation in regard to the possible unconstitutionality of the Bill. This is a really serious issue. As a House, we have a responsibility to ensure we do not pass legislation which we believe runs a serious risk of being unconstitutional. The test for that is set out not only in Article 15 but in well-established case law. Senator Barrett referred to Brennan v. the Attorney General. The City View Press case set out the principles and policies test and the John Grace Fried Chicken and JLCs case provides very clearly that we must ensure, when we pass legislation delegating functions to other bodies, that test is satisfied. I do not believe it is, and other Senators also have concerns. It is important that this is revisited before Committee Stage.

As the Irish Hotels Federation pointed out, the new powers being given to the Commissioner of Valuation effectively amount to an unfettered right to set rates in the manner he or she considers appropriate. No objective criteria are set out in the legislation as to how we arrive at a valuation. Effectively, the commissioner is being given a power, which was shot down in Brennan v. the Attorney General, to levy taxation, which is a function of the House and not something that can be delegated to any other body. It is up to the House to set charges. If we delegate this function to another body, it needs to be clear in the legislation what principles and policies that body will work under. We cannot give somebody an unfettered right to decide. The Minister of State knows that.

Read the Constitution.

I have read the Constitution. I hope the Minister of State will read in detail the John Grace Fried Chicken case. The last Government fell foul of this with the system that had been put in place for the JLCs. I encourage him to read that carefully, because many of the principles set out in that case seem to apply here. Instead of giving a half-hearted response in the House, I hope he will reflect on the legislation because it is a serious issue and we have a responsibility, as a House, to ensure it is addressed.

There was an opportunity to do something positive in this Bill. Senators on all sides have pointed to the flaws in the current draft. We will table a number of amendments on Committee Stage to seek to improve the Bill and to address flaws such as the lack of an ability-to-pay clause. I hope the Minister of State will consider those in good faith. This is an important issue and I hope he will reflect on the legislation and on previous court cases in regard to Article 15 with a cool head and give them due consideration.

I welcome the Minister of State. I have called for the re-evaluation of rates three times in this House and I welcome some movement on it. However, I must agree with some Senators that we are not going far enough in this Bill.

The reality is that there is a world of difference between life and business in the larger towns and cities and that in rural areas. For four days of the week in rural areas I listen to business people complaining they are facing closure owing to many issues related to the running of business and that people do not have the money. I was aware of a revaluation of rates in three areas in Dublin which meant a 35% reduction in rates. I welcome that reduction being rolled out across the country. As a result of the national spatial strategy, all the activity is happening in the larger towns and cities. I agree with Senators that inability to pay must be taken into account. There are small shop owners who employ one or two people but are unable to pay a rates bill of €4,000 or €5,000 and are threatened with closure. The reality is that if the business closes, the two staff members will cost the taxpayer €42,000. That the business may have closed because of the non-payment of €4,000 means that these issues must be taken into account.

In Roscommon we have the ludicrous situation where the rates for most of the land near Athlone is €74 per square foot, the third highest in the country while the area probably ranks 30th in terms of business activity. Across the bridge in Athlone, which is a hive of activity, the rates are €52 per square foot, a difference of €22 between two counties divided by the Shannon. That issue needs to be examined. If the Minister is considering piloting the issue in another area he should do so in Roscommon because there is an acknowledgment from officials in Roscommon County Council that they are flabbergasted at the rates payable in the county.

I agree with Senators Keane and van Turnhout in respect of child care facilities. We should examine that issue with different goggles. There are child care facilities, small retail businesses, large retail businesses and blue chip companies which should be examined on the basis of four bands. There should be a significant reduction in the rates payable for child care, not quite the same amount for small businesses and a scaled back means of assessing rates for the various business outlets. I ask the Minister to consider a pilot project in Roscommon by virtue of the exorbitant rates payable there and the inability of businesses to pay them. If they unable to pay rates and people are put on the dole that will cost us in the long run.

Tá céad fáilte roimh an Aire Stáit. Bille iontach tábhachtach é seo agus tá sé thar a bheith tábhachtach go mbeimis á phlé. Is léir, ó gach taobh an Tí, go bhfuil géarghá dul i ngleic leis an deacracht seo atá ag cur bac le dul chun cinn cúrsaí gnó ar fud an oileáin. Is maith liom go bhfuil deis againn cur leis an díospóireacht seo. There is no doubt there is a need for the Bill and for the measures to modernise the valuation system. The last attempt by a different Government in 2001 was woefully unrealistic and is the reason we are discussing this Bill.

Rates are of great importance in supporting our local democracies and it is that importance that needs to be balanced against the needs of small and medium-sized enterprises in particular, and their capacity to survive and thrive in towns and cities. On the broader question of how rates are levied, perhaps it is time we were more imaginative and moved away from the simple valuation as the means of rating. Another approach may be to use a rating mechanism based on profitability in order that larger enterprises would pay a larger proportion. That is obvious when a large multiple based in a regional town pays rates at the same level as a small family-owned business or shop in the same town or village which is barely keeping people employed. The effect of this would be to give smaller typically indigenous enterprises a better chance of competing with large multinational stores who could afford to contribute more to the community. That may be a question for another day.

This is an important Bill. The valuation process underpins the rates system and must be fair, efficient and transparent. It must also place as little burden as possible on businesses, the State and local authorities. It is only right that measures be proposed to accelerate and modernise the rating process. We share the concerns of the CPSU regarding the outsourcing or contracting out of valuations. While revaluations will not be outsourced there are still many questions about what exactly outsourcing will achieve. It is hard to separate this concept from a broader agenda of cuts and the privatisation of public services. It seems unnecessary and ill-thought out.

There are also questions around the self-assessment proposal. While it could be a worthwhile and sensible proposal, there are questions around how practical it is and if the proposal could lead to more costs for struggling SMEs as they may be compelled to employ professionals to carry out this work. I have an open mind on the issue of the appeals procedure. On the one hand, any attempt to limit the right of appeal should be taken only after discussion. On the other hand a move to simplify and remove bureaucracy is welcome but it is not clear if the proposed change would even achieve that much. Likewise the inclusion of more State and State-related property could be an administrative mountain which simply transfers State funds from one body to another. We will make a call on that issue after today's debate and the information that comes forward. We will listen to the Minister's summing up and decide our final position on what amendments to propose on Committee Stage.

In the broader sense, Sinn Féin is concerned about the creation of growth in the economy. Our jobs plan which was launched today, alludes to the issue. A claim often made in the House is that we do not have any plans and that we practice a type of economics which is in fairytale land. This is not in fairytale land, this is hard copy which I recommend to the Minister for weekend reading.

Words, words, words.

It alludes to the issue of creating jobs and is a source for debate. Some of the proposals relate to the cost of rents, while another proposes to abolish upward-only rent reviews. Upward-only rent review leases are one of the leading problems faced by businesses. These businesses are locked into contracts with rents fixed at boom time levels. This is despite the subsequent 50% drop in property prices. These businesses are facing increases in rent, while sales decline and costs rise. This is a potent mix which will lead to business failures. The State itself is locked into contracts with upward-only rent clauses costing €53 million per year. The Government recognises the problem and during the 2011 general election campaign, the Labour Party committed itself to introducing legislation to deal with upward-only rent reviews. The commitment dovetailed with Fine Gael's commitment, given in the coalition's programme for Government, yet in December 2011 that commitment was abandoned, purportedly for constitutional reasons.

Our report also outlines the impact of utility costs and rates. We also have proposals on broadband. The State is the sixth most expensive in the euro area with download speeds among the lowest. Landfill and commercial rates vary by geographic location with the State average being more expensive than the European norm. In 2011 Ireland was ranked sixth highest for energy provision costs in the euro area but only thanks to a temporary rebate for large energy users. For smaller businesses, in particular, energy costs have risen, reflecting global trends. We suggest capping utility costs for a period of three years, more investment in broadband, as set out in our stimulus plan, and a review of commercial rates. We suggest beginning the process of reviewing the commercial rates across the State in a cost-neutral reallocation exercise. We believe businesses should pay rates for the services provided by the State but that they should be reflective of the size and scale of a business and should be affordable, not designed to plug the gap in Government funding for local authorities. That relates to the point made very succinctly by Senator Keane and others regarding child care facilities. This would be an enormous exercise that would require the co-operation of all local authorities and should be carried out under the aegis of the Department of the Environment, Community and Local Government.

I recommend the report to my fellow Senators. I hope I will not hear the claim in future that Sinn Féin does not have any ideas or does not have any plans. We have one and I recommend it to them. Enterprise will be the driving force and there is a need to create growth. The Bill is an important one and I look forward to the Minister of State's reaction to the points raised.

Cuirim fáilte roimh an Aire Stáit ar ais go dtí an Seanad. I welcome the proposal on revaluation of rates but it should take less time to complete.

There are premises throughout the country with unsustainable rates that were established in the good old days. I encourage the Minister of State to examine them again.

Ten days ago I met four young men who were contemplating re-establishing a business in Dundalk. As well as having difficulty obtaining finance from banks, they are facing an outstanding bill of €18,000 in rates, which is astronomical, and an ESB bill. Three of the four men are trying to get off the dole, as Senator Kelly mentioned. I do not know exactly how much dole they are in receipt of but they wanted, and still want, to recommence a business in Dundalk. The sum of €18,000 is a phenomenal amount of money. Senator Keane mentioned the situation in Northern Ireland. In Dundalk 14% of retail premises are vacant, that is one in seven.

The Government is serious about creating jobs but people are discouraged by having to pay an outstanding rates bill. In Northern Ireland, businesses get their first year in operation rate free. What about deferring payments to local authorities? Does a deferral depend on how serious a view is adopted by a local authority's county manager, town clerk or financial controller? Prospective business people should be allowed to defer paying rates. Keeping people on the dole costs the State money. We need to balance the books.

I remind the Minister of State that the vast majority of businesses with outstanding rates have paid their just reward over the years. People who have paid their rates are asking what local authorities give in return.

I want to raise the issue of child care but I will not elaborate on it. There should be more child care businesses because they do a lot for preschool children. For example, they encourage young boys and girls to go to national school and give them a great start. We should, therefore, consider the great contribution that such child care has made to society.

Outstanding rates are being sought in Dundalk so the same must be happening in Roscommon, Killarney and elsewhere. I agree with re-evaluating rates. Could we re-evaluate the rates for the 14% of retail premises that are vacant in Dundalk? Could we prioritise businesses that are finding it difficult to pay their rates? Could we include vacant premises in the re-evaluation, particularly those on high streets? If we did then we would create jobs in the immediate future.

I welcome the Minister of State at the Department of Public Expenditure and Reform, Deputy Brian Hayes, who is accompanied by Mr. John O'Sullivan, Commissioner of Valuation, and Mr. Terry Walsh, of the Department of Public Expenditure and Reform.

I was delighted to listen to the contributions that have been made. Senator Terry Brennan has expressed his views in a solid and reasonable manner, as have other Senators. The Minister of State intends to provide the best solution. He is aware, as everyone is, of the difficulties rates pose to anyone running a business. One hotel in County Kildare must pay €600,000 per year in rates but that cannot be sustained. The valuation system is unfair and rateable valuations for each council vary, a point made by Senator Kelly.

In 1977, well before the Minister of State's time, there was a famous rate amnesty for houses. At the time, valuation rates varied between counties. The then Government should have introduced one rateable valuation for the country, thus making the system equitable. Unfortunately, that was not the case and rates were abolished. The current Bill is an effort to ensure that valuations are accelerated. Senators on this side of the House would agree that some aspects of the Bill do not go far enough.

Senator Brennan made a good point about the difficulty faced by people who wish to start new businesses. Let me be quite clear that I am not talking about a business that was closed down and wishes to start again. Rates are a large burden for new businesses in their early years. They need a reduction in rates or some exemption that will assist them in commencing their businesses. The payment of rates is a major issue for them. I know that the Government is also concerned about job creation and maintaining employment. A small company in my area must pay €20,000 in rates per annum, an enormous amount of money. Rates are also an enormous burden on hotels with leisure centres that must work very hard just to pay their overheads.

Several contributions have been made. I welcome the presence of the Commissioner of Valuation at this debate because he plays a particular role in this regard. There have been questions on an appeal system that operated successfully. It was also suggested that each local authority manager could reduce or waive rates where it is shown that a company or small trader was unable to pay. Such a suggestion was appreciated. It would be more difficult for each manager because he or she is trying to maintain revenue for his or her local authority. Managers realise that rates place an enormous financial burden on individuals.

When Bertie Ahern was the Minister for Finance there was an issue about the rate valuation for licensed premises, such as public houses. He wanted to charge a large amount for every premises, irrespective of size, but I fought the case. It was like comparing taxes for a Mini and a Mercedes. There was an agreement to base the amount for the licence on a company's revenue turnover.

This is an important Bill. The Minister of State is in discussions with interested parties and we will have an important debate on it when it comes before us again. I shall leave the Bill aside.

I want to highlight the fact that today, 11 October 2012, is the first international world day of the girl as designated by the United Nations. It celebrates the lives of young girls, ladies or women. The day is being celebrated throughout the world with inspirational displays at political forums and events, including at the Empire State Building in New York and the iconic London Eye.

Councillor Orla Leyden has brought this to my attention. I am surprised colleagues on all sides of the House did not mark this day-----

That is a subject more suitable for the Order of Business.

We are on the Valuation Bill.

I appreciate that. However, I think the Seanad should mark this day and this is my only opportunity to say it.

Most women run crèches so the Senator is on to something there.

Senator Leyden without interruption. I have to conclude the debate.

More than 150 students will be in Roscommon town today from the convent of Mercy primary school, Roscommon community college and the convent of Mercy, to celebrate the day for the girls. We will recognise the day in Seanad Éireann.

I thank the Cathaoirleach for his liberal approach. He is a person with a great heart and a great interest in the development and the position of women throughout the world.

I welcome the Minister of State to the House. I have been approached by people in small towns and villages who are in the pub trade. One person told me that he pays rates of €4,500 for the pub even though he has only a few customers during the week and a few more at the weekend. The rates are a significant burden for such businesses. The possibility of a reduction of rates for such businesses will give them a chance of survival.

Will rates be applied to the piers and buildings in County Leitrim which are connected to the Shannon-Erne canal? This is a tourist attraction which draws people into the county. I note the Bill will reduce the overall rates by spreading the burden across more areas and that rates will be retained in the council area. I ask the Minister of State to elaborate on this point.

I refer to another problem with regard to arrears of rates. I hope that the arrears will not be attached to the premises because a new owner hoping to start a new business would not want the burden of historic arrears. This is the current position.

I thank colleagues for their very constructive contributions to this debate. One of the benefits of reading the concluding speech which is provided by the Department is that it gives an idea of what the reaction may have been. I note it states that those Members who contributed have given a general welcome to the Bill. However, I will change that to "a more subdued welcome", which I am on safer ground in assuming. I assure Members that we look forward to a partnership between this House and the Department on Committee Stage of the Bill. There is much experience on all sides of this House and we will do our best to agree to constructive amendments. This is very important legislation which has been a long time in the offing. We must ensure that the Bill is supported by all concerned.

I enjoy listening to contributions from Senator Byrne. His view of more recent history is that history only began in March 2011. Rather like Pol Pot and his regime-----

It is not like that.

-----that the world changed in March 2011. I agree it did.

It did. We were rejected out of hand and out of office.

However, I think the Senator needs to be a little more humble in his appreciation of history. Much of what has been included in this Bill was also worked on by the previous Government when Senator Byrne's party was in office.

I know it was meant humorously but Pol Pot in Cambodia-----

The Minister of State without interruption.

Pol Pot maintained that his first day in office marked the beginning of history.

One million people died during his time.

I am not suggesting that the Senator killed one million people.

It was an unfortunate reference.

This Bill represents the cumulative work of two Administrations-----

We did not present this Bill to the Oireachtas.

I agree with Senator Barrett about the reorganisation of local government. I agree with his opinion that it is top heavy with managers with too few cognitive staff undertaking specific work. Wearing my public sector reform hat, I assure the Senator that the Minister, Deputy Phil Hogan, will present radical proposals over the next few weeks which will examine the question of amalgamation, how local authorities can be streamlined and how better procurement systems can be implemented. I agree with the Senator that a root and branch reform of local government is required in order to achieve savings. The piece of work to which he referred is part and parcel of that.

This Bill is an attempt to do things differently by including provisions for self-assessment and external service delivery. In both these cases, it is proposed to set up pilot programmes and these can be discussed on Committee Stage. This is evidence of the Government's intention to take a different approach to the delivery of this key aspect of government. I am confident that the pilot projects which are provided for in this legislation will help in implementing self-assessment and external delivery.

The purpose of the Bill is to introduce a rateable valuation system that is clear, equitable and uniform in its application. I note that all speakers have referred to the inequity and lack of uniformity in place up to now. The Bill will enable a national standard application which will provide certainty. I assure the House that the Government is cognisant of the very difficult business climate for businesses and shop owners in all parts of the country. Members spoke about the very difficult trading environment in the domestic economy. The Government has reduced the rate of VAT in the hospitality sector from 13% to 9%, a decision which was opposed by the Opposition. We have introduced a PRSI holiday for employers taking on additional staff. A micro-loan facility is in place and this will be followed by a partial loan guarantee system. The Government has a jobs plan which is focused on building up the capacity of the small and medium enterprises sector. We must ensure that additional burdens are not imposed on businesses of any size that are creating employment and keeping the domestic economy alive. This Bill will help by providing a clear, uniform assessment for the whole country which has not been in place heretofore.

Some speakers have argued for exemptions in areas such as child care facilities. The difficulty is that if exemptions are granted then the general financial hole becomes bigger and it will fall to existing ratepayers and the local authorities to fill the gap. Business is business. If a business is surviving, then it must pay its rates. Senators Sheahan and Landy questioned whether it was fair that those exemptions should be in place in cases such as inability to pay or child care facilities when other businesses are surviving and paying the full amount. We need to tease out this issue on Committee Stage. I reiterate that we will consider all serious and well thought out amendments. I do not suggest for a moment that any Member would ever put forward an amendment that was not serious or well thought out. This is a once in ten year opportunity to produce a satisfactory Bill and we hope for the co-operation of colleagues in doing so.

Senator Leyden raised the matter of rolling evaluation. The intention is to speed up the first national re-evaluation.

At the moment we are up to approximately one third, if one includes all of the areas to which I referred in my opening speech, but we are not happy about that. In the first instance we will get a total valuation and then there will be a rolling revaluation every five to ten years after that to take account of changes in values in the interim.

On the question of self-assessment, the Valuation Office will be able to give a great deal of direction and help to ratepayers, who should not need professional help. We will pilot this and can have a discussion on Committee Stage on how best to achieve our objective. Colleagues have suggested that by opting for self-assessment, the Government is giving a carte blanche to people to reduce the totality of what they pay in their rates. That is not our intention, although admittedly what we are doing is novel.

It is important to make the distinction between valuations and rates. The levying of rates is a function of local authorities and falls under the jurisdiction of the Minister for the Environment, Community and Local Government. Having a modern and balanced system of valuation is essential and, effectively, that is what this Bill is about.

On the question of self-assessment and how it will be rolled out, the Government is of the opinion that this could be a potential game-changer in terms of the valuation system if it successful, but we must get it right. We must make sure that the pilot works and is done on the basis of clear criteria. If it is successful, there is no reason it cannot be rolled out in other parts of the country. The same applies to outsourcing. The question was asked as to who would do the valuation work and whether there would be a conflict of interest if we were to employ local valuers or auctioneers in a certain area to do the work of the Valuation Office, because such people might have an interest in other properties in the same location. However, we could have, for instance, a group of valuers from one part of the country doing valuation work in another part of the country. I must stress that this work would be outsourced to them through the Valuation Office. It would not be paid for by ratepayers. Outsourcing would act as an arm of the Valuation Office, so to speak.

In response to Senator Landy's question, 135 people work in the Valuation Office.

There has been a tenfold increase since I inquired.

There has been a tenfold increase in staff numbers since the Senator inquired some years ago.

We are very cognisant of the administrative changes within the Valuation Office. There has been a reorganisation of work teams, an extensive development of a computer system and the development of an integrated database for both the revision and revaluation programmes. The whole objective of the Valuation Office, with its increased staff and changes in work practices, is to be much more customer focused.

Senators have suggested that we include an inability to pay clause, but that would effectively increase the burden on other ratepayers and taxpayers. We do not want a situation to arise whereby the net effect of this Bill is that the total amount collected will decrease because that hole would then have to be plugged by other taxpayers. Once we start doing that, either selecting certain groups of people who are excluded or exempting people on the basis of an inability to pay, we are going down a very slippery slope. However, if serious amendments are tabled which suggest that such a clause could be included without reducing the overall amount collected, then we will examine them, although I maintain that this would be difficult to achieve.

As Senator van Turnhout has said, the thrust of the Bill is to minimise exemptions so that there is a wider base and, as the economy recovers, so too will the total amounts that can be raised. We go into our deliberations in this House, on Committee and Report Stages, with an open mind, knowing that we probably have hearts and minds to win between now and the end of the process. The Bill will be greatly helped by a thorough engagement by Senators on Committee Stage, and I look forward to that, as does the Minister for Public Expenditure and Reform, Deputy Howlin. This Bill has taken so long to get to the House and has been in process for many years. We now have the opportunity to get it right. Certainly, if good ideas come from Senators, especially those who are former members of local authorities, we will be open to considering them.

Question put:
The Seanad divided: Tá, 28; Níl, 10.

  • Bacik, Ivana.
  • Barrett, Sean D.
  • Brennan, Terry.
  • Burke, Colm.
  • Coghlan, Paul.
  • Comiskey, Michael.
  • Conway, Martin.
  • Cummins, Maurice.
  • D'Arcy, Jim.
  • D'Arcy, Michael.
  • Harte, Jimmy.
  • Hayden, Aideen.
  • Heffernan, James.
  • Higgins, Lorraine.
  • Keane, Cáit.
  • Kelly, John.
  • Landy, Denis.
  • Moloney, Marie.
  • Moran, Mary.
  • Mulcahy, Tony.
  • Mullen, Rónán.
  • Mullins, Michael.
  • Ó Clochartaigh, Trevor.
  • O'Keeffe, Susan.
  • O'Neill, Pat.
  • Sheahan, Tom.
  • van Turnhout, Jillian.
  • Zappone, Katherine.


  • Byrne, Thomas.
  • Daly, Mark.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Ó Domhnaill, Brian.
  • O'Donovan, Denis.
  • Power, Averil.
  • Walsh, Jim.
  • White, Mary M.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators Thomas Byrne and Diarmuid Wilson..
Question declared carried.

I wish to acknowledge the presence of a former Cathaoirleach of the House, Brian Mullooly, in the Distinguished Visitors Gallery. When is it proposed to take Committee Stage?

Next week on Tuesday, 16 October 2012.

Is that agreed? Agreed. When is it proposed to sit again?

At 2.30 p.m. next Tuesday, 16 October 2012.