I welcome the Minister of State, Deputy Phelan, back to the House.
Local Government Rates and Other Matters Bill 2018: Committee and Remaining Stages
I move amendment No. 1:
In page 8, between lines 31 and 32, to insert the following:
“(6) (a) The Minister may allow for a multi-annual increase in a rate payment and multiannual decrease in a rate payment following a re-valuation if requested by a local authority.
(b) The Minister may by direction in writing amend or revoke a direction under this section (including a direction under this subsection).”.
The Minister of State is very welcome. This amendment allows for the Minister to facilitate a multi-annual increase and a multi-annual reduction in a rate payment following a revaluation, if requested, by a local authority. The amendment is a response to the valuation process, particularly where the local authority area completes the process but has not done so in a number of years. As the Minister of State will know, many business owners can then experience a drastic and very abrupt spike in their rates. This may happen where the property itself has not undergone any improvement works but the area around it has. As was mentioned on Committee Stage in the Dáil, some of these businesses have experienced a 300% to 400% increase in the space of a year, although such increases are rare.
I give credit to Deputy Pat Casey who first introduced this amendment on Committee Stage in the Dáil on behalf of Fianna Fáil. We wanted to make sure it was discussed in this House also. My colleague, Deputy Eoin Ó Broin, is also very much in favour of it, as is our entire party.
In the absence of an effective valuation system that is not sensitive to what large increases can do to a small business, and after possibly decades of radio silence from the Valuation Office, this should not be acceptable. In many ways, this amendment addresses the resource issues of the Valuation Office. If it is not able to hold more regular revaluation processes, another mechanism must be created that allows sensitivity to be shown towards businesses that experience large increases in rates.
I put it to the Minister of State that this proposal is common sense. I understand this type of model is already in place in Irish Water, so we know the Government can put such a model in place. It would mean that businesses would not face either a sharp spike or decrease in rates as increases would be introduced in phases in line with the Revenue's overall rules to keep this revenue neutral. If the Minister of State does not adopt this amendment, he will let down business people throughout the country. That is the bottom line. It is common sense and has broad support across the Seanad. I hope this Chamber today is used respectfully. I do not want to hear the Minister of State say the amendment cannot be adopted because we are finishing up this week. It is the right thing to do and I ask him to do the right thing.
Fianna Fáil is also in total agreement with this amendment and will support it. As Senator Gavan said, Deputy Pat Casey spoke about this issue in the Dáil. I also believe it is important to provide for phased increases or decreases for that matter. As the Minister of State will be aware, businesses, especially smaller companies, often cannot afford large increases in rates, whether they are doubled or tripled. Rates are important to businesses and jobs and we have to make sure we protect our businesses. Changes should be phased in. I support the amendment.
I support the amendment but I understand the Minister of State's need to get this Bill through the House. Will he give some indication that, once the Bill has passed, he will introduce a statutory instrument or use some other method to reflect the spirit of the amendment? I fully understand how a massive hike in rates may put small companies over the cliff edge. Last night, we heard of a petrol station in, I believe, Cavan which saw-----
It was Monaghan.
-----its rates shoot through the roof because the forecourt had been upgraded. The Bill needs to pass and an undertaking to act afterwards would satisfy me this evening. I will bat that one over to the Minister of State.
I have no difficulty whatever in supporting the amendment. My roots are in the midlands and I sometimes visit County Laois. In many of the small towns I see that small businesses are closed, many because of rates they cannot afford. I very much agree with the possibility envisaged in this amendment that rates may not only be increased but also decreased. It is absolutely right in a circumstance where a business is struggling and is on the margins that the council should be allowed to decrease its rates to allow the business to continue and survive.
Senator Humphreys looks a little agitated. I will let him in at this stage.
The Acting Chairman is very good.
I very much support the spirit of what is being said. We all hear from individuals who have experienced a large spike in rates but we do not always hear from those who have experienced a large decrease in rates. Within the current legislation, rates income must be neutral following a revaluation. This is the difficulty we face.
As I understand the amendment, it will empower the Minister to provide for phased increases in rates. I am not sure if a phased decrease is legally possible because a case could be taken by a commercial ratepayer on the basis that the rates applied to his or business should be much lower, yet the Government was providing that the necessary decrease would be phased in over a number of years to allow the local authority's funds to balance.
I remember distinctly the previous revaluation, which disadvantaged small businesses and shop owners and was of major benefit to hotels and offices. We never heard anything from the hotel sector when rates in the industry decreased significantly in urban areas. That revaluation put small shopkeepers, pharmacies and small restaurants to the pins of their collars because it resulted in an unplanned increase in costs, which they found difficult to manage. Spikes in rates, especially when unforeseen, are difficult for marginal businesses to manage. We have to try to empower local authorities to assist such businesses over a period.
I understand the bind the Minister of State is in arising from the way in which the legislation is currently laid out. Senator Craughwell proposed addressing this issue through a statutory instrument at a later stage. A more in-depth examination of the matter is probably needed because there could be serious unintentional consequences. While I agree with the spirit of the amendment, I understand the difficulties in framing legislation to allow this to happen.
Senator Humphreys has put his finger on the nub of the issue. All of us understand the intent and spirit behind the amendment and the need for understanding to be shown if there is a sudden increase in the rates payable after a revaluation. If we go back to the whole framework for rates, we all agree that they should be fair, sustainable and neutral. During yesterday's Second Stage debate, I highlighted that where revaluations have occurred, there have been winners and losers. Senator Humphreys referred to a previous revaluation. While we hear about the losers because they are concerned about the increase and the spike in their rates, we rarely hear about the winners who see a reduction in their rates.
I am concerned about the consequences should this amendment be passed and implemented. I would like to hear from the Opposition Senators who proposed the amendment how they would address the shortfall in rates income which would be faced by local authorities if the amendment was in place. I presume those who I would categorise as the winners, namely, those who have had a reduction in rates, are constitutionally entitled to have those reductions and would rightly seek them because they are provided for in the revaluation. This would leave a gap in the funding available to the local authority to deliver the vital services we all want. The question I ask the Opposition, rather than the Minister of State, to answer is how we would address the shortfall in funding available to local authorities in the event that the amendment is passed? I presume the Senators will answer that it will come from central government's magic tax revenues.
The rates system has to be sustainable in its own right. As was said on Second Stage yesterday, rates are a major and fundamental mechanism for funding local authorities to deliver services. I fully understand the intent around the amendment and perhaps there is a compromise or solution the Minister of State might consider when a significant spike in rates payable arises. Perhaps ratepayers could be given time to become accustomed to the higher rate. Rates are a big overhead in any business. Anybody who has run a small business will agree that the rates bill is one of their largest overheads. Local authorities could allow an increased rates bill to be paid over a period. I offer this solution as a matter for debate but I want to know where the shortfall would come from if this amendment was to pass.
I am not in a position to accept the amendment, not so much due to time pressure but for the reasons given by Senators Coffey and Humphreys. Phased decreases would certainly be illegal and would be challenged in the courts by any business.
Yes, phased decreases would be illegal. Senator Norris may have been slightly wrong. Decreases in rates are accepted and the revaluation process will produce decreases. One section in the Bill proposes that decreases would become instantly applicable and the rate book would change immediately. Senator Norris's concerns are already addressed in the Bill in that sense. If, for example, a valuation were to fall from €10,000 to €5,000 for a shop in Rathdowney or another town in County Laois-----
County Laois has been hit.
-----any proposal to phase in that decrease would certainly be challenged in the courts. The shopkeeper would ask why he or she is paying €7,000 one and half years after the new valuation had been set.
Very good. I thank the Minister of State.
That is the point I am trying to make. I have no problem with what the amendment is trying to achieve, but the reality on the ground is that this is implemented wholesale across the country. I was in Donegal County Council with some of my officials last week or the previous week. The first thing I always raise when I visit a local authority is the rate of rates collection. The Donegal rate was lower than I would have liked it to be. The reason it was lower was that over a period of years through the recession the council introduced its own version of an alleviation scheme, which saw some rates written down. The freedom that currently exists, which I accept is not exercised by every local authority, is retained in the Bill. The problem I have with it is the illegality of a phased decrease but also, as Senator Coffey pointed out, in a rates revaluation situation that the proportion from different businesses would change but the overall figure coming to the council would not change. My concern is where Carlow County Council would find the extra €250,000 that it loses in that process.
Shops closing is a bigger issue. We see shops closing all the time. We should be able to introduce an incentive in that regard.
Senator Murnane O'Connor will get an opportunity to contribute again.
The Minister of State should be allowed to speak without interruption.
I agree with Senator Murnane O'Connor, but Carlow County Council already has the freedom to do that. The situation varies from county to county on whether such a power is exercised by the members, through the management. All local authorities will work with ratepayers who are in distressed situations if the ratepayers engage with them to devise an appropriate payment plan. One of the things this legislation does is it gets rid of the old archaic system of two moieties and will allow a staged payment system over the course of a year, which for some businesses might mean they have good months and bad months and they will know when they are able to pay more rates perhaps than in other parts of the year. We are putting that on a statutory footing in this legislation. Equally, I reiterate that such discretion already exists and is used by some local authorities and should be used by more.
I will refer to some of my notes before I get sacked. Once a ratepayer engages with a local authority, the local authority can work with the ratepayer to facilitate an appropriate payment plan. The liability remains, however, and that cannot be defrayed. It would be inequitable to other ratepayers. I am thinking of two retailers on the same street; one whose valuation was more up to date and whose rate did not change and another who experienced an increase in rates due to an out-of-date valuation. It would not be equitable for one ratepayer to continue paying rates at a higher level while subsidising a lower rate payment by a neighbouring retailer. That situation could arise, in particular in light of the fact that, as Senator Gavan pointed out, there have not been revaluations for years but they may have occurred if somebody carried out substantial work to their premises. Therefore, one could have, in effect, two different systems operating on the same street. Furthermore, how would the provision apply to ratepayers whose valuation has reduced? Should they be expected to pay more than they legally owe if there was a multi-annual decrease?
It is worth noting at this point that global utility companies such as the ESB, Eir or Vodafone pay approximately 33% of overall commercial rates. The amendment, as proposed, would have the effect of allowing for a phased approach to an increase in the valuation of a global utility company, such as Vodafone, the ESB or Eir, as well as for the more traditional ratepayers who, proportionately, are a smaller group in many local authorities in terms of the amount of rates they collect. It is expected that utility companies would also be subjected to a phased reduction in the case of their valuations decreasing. The question is whether they would legally challenge it, which of course they would. For context, in 2015, the seven global utilities being revalued that year had their collective rates bill reduced by €24 million following a decrease in most of their valuations. It would be safe to assume that local authorities would have to defend costly legal actions in a scenario where they try to impose a greater rates demand on a ratepayer than is merited by the actual valuation of their property or business.
The local authority has the flexibility to engage with individual ratepayers in such cases. In response to Senator Craughwell, the circular that will issue following enactment of this Bill will ask local authorities to be cognisant of those ratepayers who have experienced significant increases in valuations. In recent years, the Minister has requested that local authorities exercise restraint in the determination of the ARV and, to give them their due, local authorities have done as requested. I have committed to looking at valuation issues and the impact of valuation in the autumn. As I said yesterday, that may require primary legislation on the valuation side rather than on the rates side that we are looking at today, and in particular the impact on businesses which had a significant increase in valuation and hence in their rates bill. The likelihood of such increases occurring will lessen as the revaluation programme completes, and the revaluation cycle becomes regular. As Senator Gavan pointed out, it has been far from regular in the past 30 to 40 years and that is what has led to the significant jumps in valuation because we have not had an ongoing revaluation process. I referred yesterday to progress with clearing the backlog of revisions in terms of the resources that are available to the Valuation Commissioner.
I wish to speak very much to the spirit of the amendment. We are going through a major transition period regarding the main shopping streets, but even in urban areas, shopping centres in town centres find it very difficult because people have changed their way of interacting and they now purchase online. It is always the most vulnerable in society who are worst affected by the transition. We must manage the transition to make sure that the services remain in place. I accept what the Minister of State said about local authorities having discretion to work with businesses but, unfortunately, not all local authorities do so. We must make sure, as we have done in the amendment, that the Minister is empowered to give stronger instruction to local authorities on the management of the transition. We are not going to prevent change. Change is happening in every town and shopping centre. Whether one is in Dublin, Carlow or Donegal, we all see that the shopping centre is changing. We must work to make sure that there is a shopping centre, gym or small community facility in Clondalkin, Tallaght or elsewhere.
The spirit of the amendment gives the Minister a little more direction. I do not think the language of the amendment is quite right yet. What we want to do is empower the Minister to act when local authorities do not engage with businesses or assist them with the transition. There is no role for local authority councillors in that regard because the manager has executive functions in the matter. I refer to setting the rates, the valuation and how the ratepayer is treated. The Minister of State could examine the spirit of the amendment and consider whether he could introduce a statutory instrument to empower the Minister to instruct local authorities to work with small businesses that experience a sudden spike. We could look at percentages for the spike. If the rates go up by 5% it would be automatic but if it is greater than 5% there should be a transition management because the business itself could not support a larger increase suddenly. I will not give the Minister of State the percentage increases but the matter could be examined.
I do not wish to delay proceedings further. I support the intention of the amendment. I can see where it is coming from in terms of the business sector. I have dealt with people who have experienced a large spike. The Minister is constrained regarding the rates. I urge the Minister of State to look again to see if there is a way to achieve what he wants to do as well. I do not say that it is not the intention of the Minister of State because this is what he would like to see as well.
The Minister of State might give a commitment to the movers of the amendment that he will work with them to try to resolve the issue, which is well highlighted. It was highlighted by Fianna Fáil on Committee Stage also. There is a willingness on the part of everybody to work with him to try to resolve the problem. I seek a strong commitment from the Minister of State that he is clear about the problem and that we will work together to come up with a solution.
I understand the Minister's point but the level of rates can be different in local authorities. Some can be much higher, others can be much lower and some can be in the middle range; they all get their lists. In terms of the higher levels of rates, for businesses that may be under pressure or are closing, is it not better to work with and reach an agreement with them on rates rather than have a shop close on a main street? We need to consider talking to businesses.
Local authorities are not a bank. It is taxpayers' money. When we are dealing with business people who pay their rates we need to ensure there is a balance. If a business is not in a position to pay its rates - some are and others are not - there must be leniency shown and more discussion between local authorities. Everybody needs to work together in that regard. As other speakers said, some local authorities might have more correspondence with businesses than others and may meet with them but the Minister must make sure that local authorities work with businesses because we do not want to see businesses closed on any main street. Businesses are competing with online shopping, which does not involve paying rates. Many of my friends and other people I know shop online but I always ask them to support local, shop local. Businesses are now competing in an entirely new era in terms of shopping malls and online shopping. We must make sure that we look after business people by dealing with them and giving them the chance to phase in their rates payments if they are not in a position to pay them.
I thank the Minister of State for his response. In fairness, he always gives a thoughtful response on these matters. I will make a couple of brief points, and I thank my colleague, Senator Humphreys, in respect of this aspect. Section 6(3) is important. It states: "The Minister may by direction in writing amend or revoke a direction under this section (including a direction under this subsection)." We have built in the power to address that in the Bill.
On the point my colleague, Senator Coffey, made, I fully understand that this has to be revenue neutral. There will not be a loss of revenue here. The legal issues referred to by Senator Coffey, and the Minister of State, are issues for the Minister but I believe businesses expect a more subtle and realistic approach to rates.
We support this Bill. We are not opposing it overall but we believe the Minister of State has missed an opportunity to phase in these increases in particular. I refer to Irish Water which, I have been informed, has introduced just such an undertaking. If a State authority can do this in one area, I am at a loss as to why the Minister could not consider doing something similar.
Before I ask the Minister of State if he has anything further to add, I would like to welcome Maria Lehane and Pat Davitt from the Institute of Professional Auctioneers and Valuers, who are guests of Senator Aidan Davitt. You are very welcome to Leinster House.
Does the Minister have anything further to add?
Yes. First, I am not sure in what context Senator Gavan is speaking but Irish Water does not pay rates yet. It is envisaged in the immediate term as part of the provisions of this Bill, particularly in respect of the changes to the existing section 56 of the rates legislation, that Irish Water will start to pay rates. That is one of the time sensitivities to this. Some local authorities such as Wicklow County Council, for example, and others that have big water utility and Irish Water facilities potentially would be at a severe financial disadvantage if this legislation is not passed because of the revaluation process.
I absolutely agree with Senator Murnane O'Connor about the competition from online shopping. It is not just small towns that are being affected by that. The main streets in many big provincial towns like Carlow or Kilkenny are more in the food and beverage line rather than the traditional hardware and drapery-----
-----we would have seen over the years. I do not disagree with her at all but there is a twofold answer. First, and I accept it is not uniformly exercised across the country, the provision for councils to take account of difficulty to pay is exercised by many local authorities. I gave a particular example of work done in Donegal where, in the teeth of the recession, a conscious effort was made by management and councillors to do exactly what the Senator said, namely, keep businesses open and have rates into the future rather than have large rates bills upfront.
The other aspect this legislation specifically deals with is the introduction of a staged payment process. As it stands, the two moiety system still exists on the Statute Book. In reality, local authorities will take money whenever they get it in most cases but this legislation allows for a payment plan to be agreed between the local authorities and the ratepayers. It goes back to what I said yesterday. Traditionally, almost everybody on the local authority was a ratepayer, whether they were paying domestic or commercial rates, or both. Following recent elections, however, there are far fewer commercial ratepayers on local authorities. As a result, a "them and us" attitude has built up where businesses sometimes feel that local authorities see them as a soft touch for collecting funds if there is a shortfall when it comes to the annual budget meeting.
What we are doing in this legislation is enabling local authorities to set up modern payment systems with businesses. To use the example of the traditional retailer on the high street, the period after Christmas is a slower period once the sales are over and one might not be paying any rates. One might have an agreement with the local authority not to pay any rates in February, March, April and May and then one pays commercial rates for the rest of the year. That is what the Bill is doing in terms of its provisions.
What is proposed in the amendment presents me with two impossible things I cannot accept. The first concerns the point made by Deputy Humphreys. We cannot have phased increases because that would be challenged, and successfully so, in the courts by any business paying more than it should lawfully have to pay. The other point was from Senator Coffey about making up the shortfall. I believe local authorities are being given the power in this legislation to make sensible decisions. It is being put on statute for the first time in terms of those payment schedules. I told Senator Craughwell that we will be circulating those to the local authorities following the enactment of the legislation.
To answer Senator Humphreys, there is a general regulation making power under section 18, which I spoke about in the Dáil debate. I believe that would cover some of the aspects of the amendment that I accept or at least believe would not be illegal, and might be able to be implemented. I believe the power exists under section 18 to make such a regulation.
I agree with Senator Murnane O'Connor that the local authorities are not a bank, nor are the ratepayers. What happened here in the Second Stage debate was interesting. A much broader discussion on funding local government has to take place. We have a situation where €1.5 billion annually comes from business to pay local authorities and many times businesses do not see where that money is being spent. We cannot strip that out because we will ruin the financial base of local authorities but there is a bigger picture. Should a local tax be levied in the future on those businesses doing online sales into Carlow or Kilkenny from other jurisdictions or other parts of the country? We have to consider online sales tax and such issues. I saw the Tánaiste and another commentator talking about the potential impact on online sales if a hard Brexit happens in that people would have to claim back from the Revenue Commissioners for returned products. I see that in my extended family where packages are coming in the post.
People's lives are much busier and they might do their shopping online at home at night. They are able to return products freely to Britain at present but in the event of a hard Brexit that would not be the case. That might be a boon for the shops on the high street and might be one of the unforeseen positive consequences should a hard Brexit happen, not that I want to see it happen.
I understand what the Senators are trying to address, but there are two issues. One is the phased decreases and the other is the shortfall in funding and from where that shortfall could be met.
I wish to make a quick point. The Minister of State is on the ball regarding online taxes. He should remember that there are many jobs in delivering products for stores such as Tesco and the like, so he should not be too quick to start throwing taxes onto online shopping.
A typical knee-jerk reaction.
I did not say that.
- Bacik, Ivana.
- Conway-Walsh, Rose.
- Gavan, Paul.
- Humphreys, Kevin.
- Murnane O'Connor, Jennifer.
- Nash, Gerald.
- Ó Ríordáin, Aodhán.
- Ruane, Lynn.
- Wilson, Diarmuid.
- Burke, Colm.
- Burke, Paddy.
- Buttimer, Jerry.
- Byrne, Maria.
- Coffey, Paudie.
- Conway, Martin.
- Craughwell, Gerard P.
- Feighan, Frank.
- Lawlor, Anthony.
- Lombard, Tim.
- Marshall, Ian.
- McFadden, Gabrielle.
- Mulherin, Michelle.
- Noone, Catherine.
- Norris, David.
- O'Donnell, Kieran.
- O'Mahony, John.
- O'Reilly, Joe.
- Reilly, James.
- Richmond, Neale.
I wonder how a situation such as that outlined in section 6 might arise. How would it work in reality? When the manager of the local authority brings forward his estimates for the end of the financial year or the year going forward and the councillors debate the estimates or the budget and decide to increase or reduce the rate by a certain amount, would the direction be given at that stage? How does the Minister of State see this mechanism for the power to limit the annual rate on valuation working? I do not really understand how it would work in practice. It seems the manager would have the power at the end of the day. From reading the section, if the councillors were to adopt a rate that the manager was not happy with, he could override their decision and amend the rate with a direction and his word would be the last word. Is it the case that we are giving more power to the manager? While it is a reserved function of councillors to set the estimates and so on, section 6(5)(c) of the Bill states "which amendment the chief executive is hereby authorised to make". It seems to me that the Minister of State is giving ultimate power to the local authority manager to override a decision made by the councillors.
No. The ultimate power is being given to the Minister. A similar provision was in existence until the 1980s, when it was last used. I am not sure when it was removed from legislation. The provision allowed the Minister a power of limitation on the setting of the ARV, which is the annual event that takes place at the budget meeting, as the Senator outlined. Essentially, however, the councillors will be made aware before the budget takes place as the Department circularises the councils every year. It did so particularly during the years of the recession, with the need to keep the ARV as low as possible. Not every local authority has done this over the past ten years. To that extent, this facility already exists. Section 6 provides for the power of limitation. Ultimately, the power rests with the Minister, but the chief executive in this case is, I suppose, an agent of the Minister in the local authority ensuring that such provision is adhered to. I emphasise, however, that the setting of the ARV is still the prerogative of local authority members. Furthermore, in section 15 a new reserve power is being created for members of local authorities. This is the establishment of an alleviation scheme, which must be based on the provisions of a development plan, an area plan or a national Government strategy such as the spatial strategy or the Project Ireland 2040 provisions currently in place. Again, the ultimate power will still rest with the members. The provision under section 8 for the power of limitation is a ministerial one. The chief executive in this case will act as an agent of the Department and the Minister in ensuring that when councillors strike the annual ARV they do so within certain parameters.
Generally speaking, in the 20 years since I joined a local authority, there have not been huge annual increases in commercial rates during what were called the Celtic tiger years. There were certainly increases in various local authorities but they tended to be within fairly modest parameters such as 2% or 3%. We are anxious that local authorities would still act independently but we are conscious that overall national economic circumstances may change, as happened a decade ago. Local authorities voluntarily decided, through their membership, not to have large annual increases in commercial rates because they recognised the value of keeping businesses open and having some money to pay rates in the future, as well as keeping premises occupied on streets in towns and villages throughout the country. This provision places on a statutory footing the existing capability of the Department to circularise the local authorities asking them to use their discretion.
What the Minister of State is really saying is that the councillors set the budget and if the manager is not happy with it, he notifies the Department or the Minister. The Minister then issues a direction and the county manager implements it.
No. What I am saying is that this provision is about the Minister having control over the range, generally speaking, of rate variation that a council may implement. It is not designed for a scenario in which the manager does not like what the councillors have done in a budget and can therefore overrule the budget they have passed. It is about placing on a statutory footing a limitation to the increases or decreases in commercial rates in-----
That is the same thing.
It is not. What the Senator outlined was essentially that if the management of the council did not like the budget that was passed, it could write to the Minister to seek to have it overturned. That is not what this provision will enable the Minister to do. It concerns merely the annual rate struck by the local authority. It ensures that local authorities do not pass on their entire net losses in a given year to the commercial ratepayers in their respective areas. In this way, the losses would be spread more evenly throughout the different sources of funding available to local authorities. However, there is no provision here to the effect that just because a county manager does not like a budget, he can seek to have it overturned. It must be on the basis of the local authority members voting through a rate of valuation change which is outside the parameters within which local authorities normally vary their commercial rates at budget time.
Having experienced this first-hand in Kildare County Council, I agree with the Minister. That council would have voted against a budget at local authority level if the members and the manager had proposed a rate increase on the commercial sector of 10% while the annual rate of inflation was 2%. That would have been an 8% increase over and above the rate of inflation, which would impact not alone the ratepayers but also their customers in the area, the people who go into the shops and other retail outlets. It is, therefore, very prudent of the Minister of State to put a provision such as this into the legislation. The reason for it is to curtail irrational behaviour on the part of councillors and managers in local authorities.
As far as I can see, those who go above the rate of inflation in the context of increasing rates is doing harm to local businesses in their own areas. This is a very prudent amendment. On Second Stage, I proposed that when the Minister of State sends out the circular it should be consistent across the State rather than being selective for various counties.
The budgetary function of local authorities is extremely important. I speak from experience as the leader of the Labour Party group on Dublin City Council for several years where there were year-on-year reductions in the commercial rates. We said at the time that it was prudent to reduce the commercial rates. It is worthwhile compiling the circular letter and including the information provided to councillors through the strategic policy committees. Often, this information is not provided in a timely manner. Generally, there is a budget information meeting for councillors which is followed very quickly by a vote on the estimates within two weeks. If councillors are to be fully engaged in setting the rate and a budget for a local authority, that engagement has to start at a very early stage. If a budget is to be set in October or November, for example, the engagement needs to be on a department-by-department basis, which is also resisted by the CEOs, formerly the county managers. It is not good enough for overall figures to be provided at a budget information meeting. If councillors really want to have that extensive control and democratisation of local authorities, then they must have the right to get the information to which I refer at a very early stage and at a departmental level. A week into the system is too late to start fiddling around with budgets. One cannot do it. The only way one can have a real impact on budgets in a local authority is to have the engagement four or five months prior to the estimates. That is the only way a councillor can act in a responsible manner. He or she can see money being moved from one section to another and the impact this has on services.
It is not just the rates that affect local businesses; it is also the services provided to such businesses and how that happens. In my experience, this information is not given in a timely manner to councillors in order that they can act in a prudent manner. Members of Dublin City Council were given that information. I am aware that it has not operated in the past five years because the council has been in chaos to some extent. In fairness, Mr. John Tierney, the much maligned former Dublin City Council manager, bought into that level of engagement with the political parties and councillors were able to stand over the budget as a result. It was not a budget that was implemented by the manager at the time, it was proposed by the councillors who took questions on that budget. When looking at powers, and if we really want to empower people by sending out circular letters relating to budgets and estimates, it would be very prudent if the Minister of State issued a circular letter in the new year instructing the CEOs of local authorities to carry out proper engagement with councillors at a very early stage.
On the issue of rates and the curtailing of powers in cases of a sharp increase in rates, there was rates equalisation in place at the time the town councils were abolished. Three town councils were abolished in County Mayo. Rates equalisation brought all the rates up to the higher level, which was the county council rate. Within the Ballina Town Council area, all the shops and businesses experienced rate increases. This may have happened to a lesser degree in Castlebar and Westport - Castlebar is a county town and has a county council and Westport may be a different kettle of fish. I can safely state that in my town of Ballina, the rates have increased and the services have diminished. Already there are issues in Ballina. I am aware that the matter has been well debated, but the abolition of the town councils has resulted in a greater centralisation of power to the chief executives of the councils. I do not believe it has had the desired result in the context of helping all parts of a county or a local authority area.
Commercial rates are a bigger burden on a small independent shop, retail outlet or cafe than they ever are on bigger businesses. This is a general statement, but it is true. The problem with smaller businesses on high streets is that they are competing with online retailers. They cannot compete. We can talk about market forces and it being the changing face of retail but another issue has to come into the debate, which is that we want vibrant town centres and we want these independent shops because their presence serves a public good. They are, however, being treated pretty much like the big guy and cannot compete. Compare this to a business that sells online, does not pay commercial rates and takes the money out of an area.
I feel that we need a new model for the smaller shops. The bigger retailers, multiple retailers and franchises can look after themselves. There could be a threshold established for special treatment for some people in identified two centre areas. Those town centres could be identified in conjunction with local authorities. I can tell that I will get a good answer in respect of that proposal. Hand in glove with that would be an incentive scheme to see people living back in the town centres. There are schemes under the housing programme and other initiatives, but when one goes to the rural market towns or even some of the bigger centres with urban sprawl around towns they are not very appealing places. Frankly, I am of the view that we need a more targeted approach. By leaving it to market forces in some of the towns and villages, people will continue to go elsewhere, spend their money elsewhere, live elsewhere and shop elsewhere. We need something radical.
I agree with the previous speakers. The Minister of State can realise that all of us here are fighting for the smaller shops that are finding it hard to survive. It is important that the Minister of State would meet the chief executives and local authority members. Sometimes there is a lack of information for councillors or a lack of awareness among them. It would be good for the Minister of State to send out regular letters to local authority members. These are the councillors who do the work on the ground and deliver. If the information was to come from the Minister of State and the chief executives of the councils, it would mean a lot to the councillors. They would have more information. I agree there should be more meetings with the local authority members and the chief executives of the council. All of us should work together because we have a very big problem. The smaller towns and rural towns are absolutely feeling the effect of this, and the smaller shops, cafes and businesses are fighting hard to survive. I understand that we have to look after all businesses but we need to have some kind of a mechanism in place for the smaller shops.
I agree with Senator Lawlor. This is a very important section. I totally agree with the section but I would be happier if the variation or the direction the Minister of State may give was tied to something. If it was tied to inflation, as Senator Lawlor stated, I would fully agree with that. There might be 5% in one local authority area and 6% in another. As has been stated, there are many money streams for the local authority members to take into account when finalising their budget. Where does the relevant Minister draw the line in a local authority? Would it be at 5% or 2% in one county, 0% in another county or would it be tied to inflation? The guidelines might state that it is tied to inflation and once it went above the rate of inflation, the local authority would have to notify the Minister. It does not, however, seem to be tied to any relevant piece of work. I would be happier if it was. Otherwise, I fully agree with the section.
Some councils and local authorities may feel it is very easy to put a huge burden on the ratepayer. I saw situations where previous county managers felt 70% or 80% of the rates of the local authority were being paid by big business and multinationals when, at the same time, they were crucifying the smaller people who were getting huge increases, those of them that had lasted in business. I totally agree with this. I hope the Minister of State will limit it to some reference point, whether annual inflation or an average of annual inflation over a number of years, or something like that.
Because this is a reserved function of the members, perhaps the circular that is sent out to the local authority should also be sent to each of the members, given they are the ones who make the decision on it.
I agree wholeheartedly with Senators Mulherin and Murnane O'Connor about the small shops. One of the centrepieces in this Bill is the alleviation scheme that is provided for under section 15. I spoke to the officials, when we were drafting this Bill originally, specifically with reference to rural towns and villages where the main street has suffered. There is now online shopping and people's travel habits and work habits have changed, and it is all of those things. It was a question of nailing down that alleviation scheme so that it can be designed by the members of a local authority. For example, in the municipal district of Ballina, they would pick not just Ballina town but Killala and Crossmolina and say that on the main streets in those towns there would be a reduced rate for a period of time, and that is underpinned by what is in the local area plan or the county development plan for the Ballina district of County Mayo. This legislation, for the first time, will give local authority members that power to introduce an alleviation scheme to target town centres in particular, because the Senators are correct that they have a social function.
I had a situation recently where two constituents, a couple in their 80s, came to me. They had an electrical shop in a town in my constituency and their valuation had increased to a level which was above their annual turnover. The way the husband looked at it, he was going to work in his shop until he died and that was just it. However, it was also the case that, within their town, it happened to be a big shop premises. The way around it, in terms of reducing their valuation from the Valuation Office, was to divide their premises so that more than half of it would be vacant. However, this defeats what the Department of Rural and Community Development is trying to do in terms of keeping town centres looking well and active.
Section 15 allows for the six councillors in Ballina district, for example, to say that, on the basis of their local area plan or their county development plan or the targets of Department of Rural and Community Development, they want to do something for the town centres in their district. That is what section 15 enables councillors to do for the first time. I probably did not explain that.
Will it allow them to introduce thresholds for smaller businesses and larger businesses?
It will. At present, out-of-town shops that have been built, whether some of the German multiples or others, can detract from the town centres. If the local area plan has a particular segment of the town of Kilkenny, the city of Kilkenny-----
What was that?
He corrected himself.
-----where it wants to see targeted development, the councillors will be able to say there will be a reduced rate in that part of the town because there might be a lot of dereliction on that street or in that quarter. That freedom is in the section.
On Senator Paddy Burke's point about linking it to something, the issue is that there is such a variation. Over 50% of the income of Dublin City Council is rates whereas it is 13% for some local authorities. I would like to see it set at inflation but that might not be practicable in every local authority, particularly ones with a very small commercial rates base, which is why we have not specified it.
I point out this is for use in extreme circumstances where councillors go off the reservation, so to speak, in terms of deviations from the ARV. It is not something I would envisage being used generally. To take in the point made by Senators Lawlor and Humphreys, that information is key and they are right, but some local authority members are better than others at looking for it. I would have no problem if a similar letter were to be sent to the members of the local authority as well, and no problem in requesting early access to information for councillors before the budgetary process gets into full swing.
This section deals with the provision for abatement of rates in respect of vacant properties. I welcome the section. This issue comes up quite often in certain areas, especially where a business is struggling and may find it is only using half of the premises. We then have to go to the local authority to try to find a way to get some sort of alleviation. Will this apply not just to a whole building and could there be circumstances where it could apply to a portion of a building for a short period?
What we often find is that the person goes to the local authority but it will effectively say it is only implementing the valuation put in place by the Valuation Office. This could be a common-sense measure if it were used properly. We do not want it to be open to abuse, whereby some people would retain vacant properties where they could let them at a reasonable rent and bring businesses into towns and villages in particular, as well as areas of the cities. I am assuming this is not retrospective and that it will only apply moving forward. I am linking it to section 10, which proposes that there would have to be a database.
In the context of Limerick city, places like Castleconnell, Murroe, Cappamore and Caherconlish are towns and rural villages where we would like to encourage businesses to set up. However, in many cases, SMEs would be reluctant to take a whole building and the owner of the building would be unwilling to let a portion of the building. I note it is a reserved function. Will this level of flexibility be available to allow a local authority to come up with a scheme?
When does the Minister of State anticipate that the regulations for the scheme will be issued to the local authorities? When will this come into being? When will the local authority in Limerick city and county be able to come up with a scheme that allows abatement of rates over a period for hard-pressed businesses, for businesses that may be downsizing, or for businesses that want to set up but which cannot pay the rates for the entire building? Section 9(3) reads, "The Minister may make regulations for the purposes of this section". When will the Minister of State make the regulations? Will the flexibility I propose be available? What role does the Minister of State have thereafter in regard to the reserved function in the context of a scheme that may be devised by councillors?
Does the Minister of State have any further function on the basis of the scheme as designed? It is important for there to be a sense of fairness. We spend time going to the local authorities and sitting down with staff to try to get some leeway for businesses. What was done here was done in a practical way and could encourage businesses to set up in rural towns and villages as well as certain areas of Limerick city where buildings are available.
I have a comment on vacant properties relating to sections 9 and 10. It is important that we have a timescale for small shops with an upstairs not in use but which might have been used for storage. That is so important. Another person came to me about a garage. Half the garage was being used and it was too big. He shut off half of it. There are major issues with that.
Certain counties were revalued. The work was privatised and carried out by a company. Some of the revaluations were done off a map. Those doing the work did not go down to each shop and measure the premises. Does the Minister of State have any concerns about that? I know of shops that would have been left with valuations from years ago. The same size would have been on the map but if someone had gone into the shop and revalued it, then the calculation would have been different. Can the Minister of State clarify the position on revaluation? Who is doing it? Does every local authority have someone doing it? Is the Minister of State going to have it privatised? What is the timescale? Can the Minister of State clarify those points?
My questions are on section 9 and the abatement of rates as well as section 15 and the waiver. Are they both the same? Will the Minister of State outline the difference between abatement and a waiver? This is an important section. My local authority introduced an 85% waiver. For a closed property, the local authority charges rates at 15% of the value. Is that a waiver or abatement?
It is an abatement.
Previously, if a premises was not occupied, then zero in rates would have been due. Obviously, rates would be due but the collection would be zero and they would have been written off at the end of the year by the council or the manager. How does it operate under this section? A person could be letting a property. It might be let for two or three months of the year. There might be change or a new lease drawn up and the place might be closed for a further two or three months. Does the person look for an abatement or waiver for that? How does it operate? Does the person apply for the waiver? What if the owner cannot rent or sell the premises? What if there are other complications associated with handing down properties, including disputes and so on? There are many complications with properties when they are closed for one reason or another. In any event, when the Bill is enacted will someone have to apply for the abatement or waiver? Heretofore, if there were problems with the property or disagreements within families, no one took action until D-day came and the asset was disposed of. If the waiver or abatement is not applied for, will a bill have accrued over time? Do the people who own the property or estate find that they owe a sizable amount to the local authority with interest and so forth?
I have some quick questions. How soon after the legislation, subject to it being passed, will the Minister of State have the regulations ready? Will the Minister of State ensure that the regulations are sent on to all members of local authorities? This is another reserve function of the local authorities. Will the Minister of State ensure that happens? Will he give me his word on that?
It is a new reserve function and it should rightly be given. I thank the Senators for the good and practical questions. I will start on Senator Lawlor's point. Senator Kieran O'Donnell said something similar at the start. I hope to have the regulations in place for the next budgetary cycle that is coming for local authorities in the fall of this year. However, I am unsure, because there are two officials across the room and two here - all holidays are revoked.
Is that by abatement or waiver?
That would be more a matter of abatement.
There used to be a cup called the Bateman Cup.
As I understand it, the point that Senator Kieran O'Donnell was making was whether it would still be a requirement on the new occupier to seek a revaluation. If a new occupier was taking possession or occupation of a portion of a building, then it would have to be revalued for that portion.
I cannot really get into the nitty-gritty referred to by Senator Murnane O'Connor about whether the Commissioner for Valuation has the same status as the Revenue Commissioners. The Senator is right that a private company carried out work. As I understand it, there may be more of that. We may require more of it because there is a backlog. I will certainly raise some of the issues pointed out about maps and so on. These are legitimate questions.
Senator Burke asked about the difference between abatement and alleviation. Abatement effectively is a refund. At the end of the year the local authority in most counties may decide that, while there might be €10,000 owing on a given commercial premises, since it is unoccupied the bill will effectively be written off. Whether we call it a waiver or alleviation, the alleviation scheme is really on the basis of achieving objectives of a local area plan, county development plan or the national development plan. As I said to Senator Mulherin, there may be a target in the Mayo County Council plan for the ten largest towns in the county if we want to get people working and living on the main streets. That would be the basis of the alleviation scheme.
Senator Mulherin raised the question of a business closing. Section 4 for the first time allows a pro rata system to be established for the payment of rates. Heretofore if a business closed for a portion of a year, the owner would effectively still be liable for the full rates to be paid. Now, if a business closes for a period for renovations or if it closes through natural causes, notification to the local authority will cease the liability for rates. Equally, if a new occupier comes in, then he or she will be liable for the remaining portion of the year. This is a change from the old legislation of 1836.
They were at the mercy of the chief executive.
We interpret abatement as applying for a refund of rates rather than getting a write-off or suspension of rates.
In practical terms, it is a write-off and not a refund. Let us consider an example where a person pays €10,000 and gets it refunded. That would not be such a case.
It really will get down to the details of the scheme, which will be key.
There will be no consultation on the regulations. We will leave it in the good hand of the Minister of State.
Does this section cover where a property would be de-rated?
Some properties that are vacant are currently rateable but many such properties in rural areas will never open for business again. Does the section cover de-rating?
Must an application for abatement be made every year? Will that be covered in the regulations?
I move amendment No. 2:
In page 13, line 27, to delete “Act of 2001.” and substitute the following:
“Act of 2001;
(e) charitable purposes within the meaning of the Charities Act 2009.”.
I thank the Minister of State for coming to the Seanad this afternoon. This amendment would amend section 15 of the Bill, which permits the Minister for Housing, Planning and Local Government to issue regulations to allow a local authority to develop schemes for the waiving of all, or a portion of, the rates due by ratepayers under the Bill. The section lists certain strategies, plans and objectives within different Acts which the local authority can use to justify waiving rates for ratepayers. These include a national spatial strategy under the Planning and Development Act 2000 and other plans which allow for balanced social, economic and physical development Local authorities are essentially being empowered to waive rates where certain existing public policy and urban and rural development objectives, set out in legislation such as the Planning and Development Act 2000 and the Local Government Act 2001, are met and where the waiving of the rate is justifiable to achieve those aims.
My amendment adds a provision which would allow a local authority to cite charitable purposes in accordance with the Charities Act 2009 as grounds for developing a scheme to allow ratepayers to apply for a waiver of rates or a portion of rates if in keeping with the charitable purposes in the 2009 Act. Examples of these purposes are listed in section 3 of the Act and include important issues such as the prevention or relief of poverty or economic hardship, the advancement of education, as well as more specific issues such as the promotion of civic responsibility, health, conflict resolution, racial harmony and harmonious community relations and the protection of the natural environment. I have not mentioned a number of other excellent purposes listed in the Act but I recommend that Members look at them.
My motivation in tabling this amendment is to give local authorities the space and legislative basis to develop charitable purposes as grounds for exempting groups and organisations engaging in this crucial work. The State needs to support these organisations and exempt them from the financial obligation of paying rates in light of the excellent and worthwhile work they do in supporting community development and positive change. They deserve the opportunity to apply for waivers on their rates. I have in mind in particular youth groups and premises in local authority areas, such as charity shops. Some smaller charity shops are more of a service than a shop in a retail sense. For example, there is a charity shop in Tallaght called Manna, which is run in partnership with the YMCA and a local church. Its annual profit of approximately €1,600 goes straight back into YMCA activities. However, the shop is considered a retail organisation and is paying rates at a level that will see it close its doors at the end of July. It applied for a charitable waiver in 2017 but South Dublin County Council has not yet engaged in communication with it. It has not even received a response to its application and is now receiving sheriff's notices. The shop operates in a community with a high level of poverty and provides a space where people can engage with its workers, have a connection to Christian organisations and the YMCA and buy clothes at a price of €1 or €2. It is a worthwhile shop in the Tallaght community.
Many other health and well-being services were set up during the years of austerity. I have seen how young men have done training in health and fitness to enable them to open up gyms in the community and provide local jobs. Such organisations would not be seen as charitable but nevertheless contribute to a community and its health. During the years of austerity, many of these places kept people's lives together when, due to harsh economic realities, they had no control in other areas of their lives. People engaged in fitness at a much higher level during the years of austerity than they did at any other time. The number of gym members increased, as did participation in local boot camps and wellness activities, because the only aspect of their lives people could control was their appearance, as they had lost control of everything else. As the economy picks up, many smaller organisations and charity shops that do not make a profit are being forced out of the local economies they were crucial in maintaining during the worst economic period in our generation. I hope the Minister of State will look favourably on this amendment and introduce a decent appeals and waiver system that is transparent and does not operate like the current system, where charity shops such as Manna have to close because they are being threatened with sheriffs.
I strongly support this amendment because it is important that charities, particularly charity shops, are treated favourably. I would like to see them fully exempt from rates. Whatever about gyms, it is important that charitable activity is encouraged, especially in villages with derelict or empty shops. Why not put them to use for the community? As Senator Ruane said, people can buy cheap clothes in these shops, which is a socially useful thing to do. I got myself a magnificent overcoat by a well-known designer for €50 in one such shop. I gave the shop an extra €50 because I wanted to support the charity. This was during my presidential campaign when I was wandering around meeting and greeting people, and I got a bloody good coat out of it.
It was for a good cause.
I think they are wonderful, although I am not quite so sure about gyms.
They are not gyms in the commercial sense but more like local boot camps.
In that case, I completely agree with Senator Ruane and strongly support her amendment. I raised this issue a couple of years ago in the Seanad but I got nowhere. I hope the amendment gets through today.
I call Senator Lawlor.
I am sorry. I spoke yesterday-----
Do not be sorry, just be alert.
Just sit down.
I was shocked that Senator Norris finished so quickly.
I spoke yesterday about certain charity shops on main streets being run by national organisations, some of which have CEOs on salaries larger than the Minister of State's salary. However, I see merit in what Senator Ruane is saying. This issue could be addressed in the regulations. These shops could be included in an abatement-type programme so they are at least seen to be paying something or included as part of the scheme within local authorities. If the Minister of State wishes to have the Bill progress quickly, perhaps he could give a commitment to address this issue in the regulations. I will speak further on this section later.
I express my support for this amendment. The high street was devastated a few years ago and is now doing very well, albeit only in certain areas. One of the downsides of that is that community spaces will be squeezed out. Senator Ruane has explained extremely well the damage that is being done and the severe pressure charity shops are already under. This amendment strikes me as very reasonable and I hope the Minister of State will respond to it in a reasonable manner.
The Minister of State can correct me on this but my understanding is that charities are entitled to apply to the Valuation Office for a waiver if they have charitable status, provided it is for the benefit of the charity. It is a cumbersome system and it is important that the Department makes charities aware that such a scheme is in place. Many of them are not aware of it and, having dealt with them, I know the system is cumbersome and awkward. We are talking about a waiver scheme but the bulk of the charities Senator Ruane is talking about should be entitled to charitable status under national policy.
They are put through a very onerous and cumbersome system to qualify for it.
Unlike the vulture funds.
This is an important issue because, as Senator Kieran O'Donnell stated, certain organisations achieve charitable status but others cannot. It is very difficult to get it. There needs to be a balance for charities which make very little profit but give so much to the community and have many people depending on them. We need some sort of waiver or regulation such that we ensure that we look after such charities which provide a service. I support the Bill. The charities will understand the importance of working with their local authority, which is dealt with in this section of the Bill. I support this section of the Bill.
I support Senator Ruane, who made an excellent case for charitable status for these organisations. I can see that will present a problem for the Minister of State. I would not like the House to divide on the matter but rather find another way around the problem. I look forward to the reply of the Minister of State.
Senator Ruane emailed me to inform me of her amendment. I must confess that I put forward a similar proposal when I was a finance spokesperson in this House in a previous life. Senator Norris said he did likewise. All those who spoke on the amendment are in favour of it. I support what it is trying to achieve, but I wish to get into some of the detail referred to by Senator O'Donnell.
The intention of the amendment may be to allow for the exemption of charity shops from rates. However, the Valuation Acts already provide that certain categories of property are not rateable. These details are set out in Schedule 4, which is currently the subject of a review which will conclude in the near future. The exemptions include a property occupied by a charity and used exclusively for charitable purposes and otherwise than for profit. As Senator O'Donnell outlined, it is probably that many organisations do not avail of the exemption, possibly because they are not fully aware of it or, as Senator Murnane O'Connor stated, because charitable status is no longer as straightforward as was previously the case.
The difficulty is that the exemption does not cover retail activity. Senator Lawlor yesterday referenced a town in his constituency in which there are several charity shops, some of which are in direct competition with small draper-type shops. I do not hold a candle for the big multiples, whether in a shopping centre or on a main street, but I do for the few surviving small drapery shops and similar that exist in towns throughout the country. In effect, some of the bigger national charitable shops are in competition with those drapers.
There has been no change in policy in this area in recent years. I think Deputy Harris was the Minister of State who oversaw the passage of the most recent valuation legislation in 2015. I am mindful that many Senators expressed concerns on this matter. The aims of Senator Ruane in the amendment can be achieved under the alleviation scheme in section 15. To use her example, if the kind of wellness centre referred to by the Senator which is not just a gym but deals with other issues, possibly mental health issues, were stitched into South Dublin County Council's development plan or the local area plan for Tallaght, it would be covered by the alleviation scheme. I do not wish to enshrine in national legislation a measure from which some of the big charity shops that are in competition with local small businesses will benefit. That is not the Senator's intention either. Local authority members on the ground in Tallaght, Kilkenny and elsewhere know the type of organisations in their area, including the shop she mentioned which is run in partnership with the YMCA as well as wellness centres, and are able to design their development plan or local area plan to provide for such facilities without giving a blanket free-for-all to the charity shop sector. Section 15 will allow the local authorities to achieve what the Senator is seeking to do through the amendment.
As the Minister of State identified, the issue arises in respect of retail premises. I am not an expert on local government and, unlike certain other Senators, did not come to the Seanad from that area. Some of the shops which were visited were told they possibly should not have identified themselves as retail premises. The shops were just trying to be honest in their engagement. There must be some sort of upper and lower limits on what is seen as profit. The annual €1,600 profit turnover of the charity shop to which I referred is being swept up with the larger charity shops which pay lots of wages and so on from their profits, but they are different situations. There needs to be some sort of communication to or guidelines for local authorities regarding an upper limit on what is seen as profit and a consideration of the ultimate goal of small sums such as that to which I referred. Is the ultimate goal to pay a wage or employ someone new or is it a charitable goal? In the case to which I referred, the outcome is charitable - the organisation runs a youth service - even though it is a retail operation. It is about the level of flexibility of local authorities in terms of how they frame what is a retail business and the consideration of its profit. Can we give them more discretion in terms of how they determine what profit-making means in real terms?
The best way to achieve the Senator's aims is through section 15 because if the amendment were to be introduced, it would allow the bigger charitable shops competing with existing smaller retailers, particularly in smaller towns, to get through a gap. The requirements she outlined could easily be stitched into the local area plan in Tallaght, for example, such that organisations involved in community development etc. would be exempt. They are already exempt in terms of certain properties they occupy, but that could be extended to their retail premises.
The Senator is correct to point out that there is a significant difference between making €1,600 and investing it in charitable purposes and companies that are making significant profits. That is why stitching the amendment into national legislation would be akin to using a sledgehammer to crack a nut and could allow organisations through a gap, which is not the Senator's intention. There are 11 recently elected local councillors in Tallaght between the two districts who sit as an area committee and make the ultimate decision on what goes into the Tallaght local area plan. They have a level of local knowledge which I, my successors, the rates commissioner or the staff in the rates section of the Department do not. That is why the alleviation scheme in section 15 is appropriate to these circumstances. It is a new initiative. I outlined to Senator Mulherin its role in terms of planning objectives in the centre of some regional towns.
However, one of the other purposes is to allow for that level of local knowledge. The issue of people receiving letters from the sheriff about rates owed was mentioned. We want a rates scheme that is flexible and reactive to the reality of the situation on the ground, wherever that is.
If an issue is underpinned by the county development plan, the local area plan or the city development plan, it can form the basis of how an alleviation scheme or an aspect of same can operate. While that might not include a commercial gym, I see how it could cover the type of centre that was mentioned. The Senator is completely right. I have never been to a gym, but people are more conscious of other local issues and their role in same, particularly during a recession. The membership of gyms and the like has increased significantly. For half the people who go to gyms, it is a mental health issue as much as a physical health one, given that endorphins are, I am told, released when people exercise. The section 15 provision allowing for an alleviation scheme would cater for the types of scenario that the Senator outlined.
I am not in a position to accept the charitable purposes amendment in full. It would have other adverse effects, particularly in provincial towns where small draperies or retailers can be in competition with large charity retail outlets.
I hope that my answer is sufficient for the Senator.
Given that the Department or the local authorities would be developing the scheme, it could be designed to disallow the large charity shops. Does the Minister of State know what I mean?
The amendment gives the power to develop what the scheme would look like. It is not necessarily about providing for a blanket inclusion.
We accepted an amendment to section 15 in the Dáil to allow for public consultation in this regard, through which the likes of the organisations that the Senator mentioned would be in a position to highlight to the elected councillors, who will be making the decision, and the council's executive the unique position that they occupy. That is different from the position of some of the other - "more professionally run" is not the right term - more business-oriented charity shop organisations. As well as being drawn up and finalised by the councillors, the alleviation scheme will be subject to public consultation in much the same way as development plans and local area plans. Members of the public and businesses can seek to feed their own stories into the final decision on policy at local government level.
Is Senator Ruane pressing the amendment?
I will make a brief note. We cannot address circumstances case by case. The point I will make is very local. I never do that, so I will allow myself this once. The Minister of State referred to the public consultation process, but the likes of the Manna Charity Shop will not exist when this Bill is signed into law. The rates section of the Department and the local authority need to prioritise an appeal that was made in 2017 but which has not been denied or communicated on. If something could be done in the interim while we examined other parts of section 15 that could benefit such organisations, it would ensure that a vital service would not close by the end of the month before it could even avail of section 15.
The Senator might give me the details. This situation most likely pertains to the Valuation Office, but I see the point the Senator is trying to make. Anything that can be done to avoid what she described will be done.
I thank the Minister of State.
Is Senator Ruane pressing the amendment?
I will withdraw it based on the Minister of State's response.
I wish to make a couple of observations. I assume that the regulations will be made as quickly as possible. There are four hierarchical paragraphs in subsection (1), with one relating to the national and the remainder to the local. Which takes priority?
Subsection (4) reads: "A local authority shall not make a scheme under this section until the adjustment period (within the meaning of section 29 of the Act of 2014) ceases for every specified area within the administrative area of that authority." If Maura Higgins had said that on "Love Island" last night, the fella she was talking to would most definitely have walked away from her.
I was hoping he would walk away.
Will the Minister of State explain exactly what that means?
I ask Senator Lawlor not to refer to people who are not here to defend themselves.
That provision specifically relates to the harmonisation issue that Senator Mulherin mentioned. Once the period ceases, the local authority can make the alleviation scheme. It is referencing the abolition of town councils and the amalgamation of the various rates that existed. In Kildare, I am sure that Naas Town Council had a rate. I am not sure about Newbridge Town Council.
It did not.
Did Leixlip have a town commission?
No. Naas and Athy did.
Naas and Athy were-----
There is loads of money in Kildare anyway.
There used not be.
We have a small rates base in Mayo.
We hope to have the regulations as soon as possible. What was Senator Lawlor's second question?
The hierarchy of the paragraphs, which starts with the national spatial strategy.
There is no hierarchy. The local authority members will decide. They can agree an alleviation scheme that is based on their local area plan, their county development plan and Project Ireland 2040. It can have elements of them all, but there is no hierarchy. It is for the members to devise a scheme that has a basis in policy, be that local or national policy. This is meant to avoid willy-nilly decision making.
What happens if local policy goes against national policy?
Local policy does not go against national policy. The Office of the Planning Regulator, which was admittedly recently established,-----
Local authority members will know it is there.
-----ensures that such clashes do not happen.
I sit on the Joint Committee on Climate Action, and we have been discussing the issue of retrofitting. Large-scale changes will be required. We have been focusing on housing, but they will also affect businesses and others across the country. I reserve the right to try to table an amendment on Report Stage. If a local authority that is trying to achieve a climate or environmental target wants to give an incentive in the form of even a partial waiver of rates or a reduction in same in respect of those businesses that engaged in active retrofitting, how would that fit with this Bill? I may table an amendment on this.
It would fit squarely within section 15. If it is a policy objective of the local authority or, as in this example, the recently announced Government policy on climate change, what the Senator outlined is something that could have many impacts, particularly in respect of older retail premises. To use the example again of a small drapery shop on a main street in a rural town, insulation and energy preservation might not have been significant issues heretofore, but if the owners retrofit their shop, section 15 as drafted will allow the relevant council - it could be urban or rural - to reduce the rates payable in a given year under its alleviation scheme where premises have been retrofitted.
It will fall to each local authority and to council members to make their own scheme. The example given by the Senator is a perfect example of what would fit in section 15.
Amendments Nos. 3 and 4 are related and may be discussed together, by agreement.
I move amendment No. 3:
In page 18, line 43, to delete “year.”.” and substitute the following:
(e) in Schedule 4 by the insertion of the following paragraph after paragraph 22:
“23.—(1) Any building or part of a building occupied by a member of a local authority which is used exclusively for the purposes of accommodating his or her constituency office and the whole or part of the expenses incurred in maintaining that accommodation are defrayed by that member or representative.
(2) In this paragraph ‘constituency office’ means an office which is used solely for the provision of representative services by the member of a local authority concerned in his or her capacity as
such a member or representative but does not include the head office of a political party or any other office occupied by a political party.”.”.
In light of the presentation the Minister gave here last night, and his commitment to look after public representatives with respect to rates, there is no point in pressing this amendment today. I will withdraw it and I thank the Minister for his commitment to those who represent citizens.
The Minister has been in talks with the AILG and councillors, which I welcome, and I am aware that there is a review into the matter. We have many good public representatives who do very good work and it is important that the Minister meets with them. I am happy that the Minister has come to an agreement on this.
Senator Craughwell seems to be indicating that there is agreement but my understanding is that there is an agreement to meet to discuss these measures, not an agreement on the part of the Minister to concede to the amendment.
I have agreed to the amendment.
That is clear, then.
Despite everything Members have said, Senator Craughwell is not yet a Minister in the Government.
It would probably be a step down for the Senator to be a Minister, given that he had wanted to be President.
He may have to make a decision.
I welcome the announcement that the Minister made on Second Stage yesterday to the effect that any councillor who wishes to work in an office providing a service to the public should have a rates-free property. I know the Minister is committed to delivering this and I welcome that too.
I made a commitment to the AILG to address the issue, outside the legislative process if I can do that. I recognise that it is a matter of concern for councillors. It was an anomaly in the rates legislation of a number of years ago that the offices of Oireachtas Members were rates-exempt while those of other public representatives were not. I do not think this was done on purpose but was an oversight. The playing pitch has to be levelled fully and I would include MEPs in this also. Commercial rates should apply to commercial activity, whether it is in a charity shop or a large multiple, but they should not apply to stuff that is not commercial activity. It should apply to councillors' offices as well as those of Oireachtas Members.
What a surprise.
It is not a commercial activity.
Of course, it is.
The Minister, without interruption.
Does Senator Norris have a different view as regards Senators?
Senators' offices are included also.
I do not have an office.
I will meet a delegation from the AILG and on 16 July I will also ask LAMA to discuss how best to address it. A review of Schedule 4, which is the exempted properties list, is under way and it would be logical to amend that, although there may be other ways to do it without requiring primary legislation. In any event, it certainly will be addressed.
I move amendment No. 4:
In page 18, line 43, to delete “year.”.” and substitute the following:
(e) (i) in paragraph 19(1) of the Fourth Schedule, by the substitution of “a member of either House of the Oireachtas or of a local authority or a representative in the European Parliament” for “a member of either House of the Oireachtas or a representative in the European Parliament”,
(ii) in paragraph 19(2) of the said Schedule, by the substitution of “the member of a House of the Oireachtas or of a local authority or representative in the European Parliament concerned” for “the member of the House of the Oireachtas or representative in the European Parliament concerned.”.”.
When there is a revaluation of a county the Valuation Office issues the local authority with a global valuation certificate, with a new valuation for the whole county. However, I have been intrigued over the years by the fact that the valuation never changes. When new businesses start with huge rates, the valuations of other properties do not go down. In my county, the gas pipeline went right through the centre of the county, from the west coast to the east coast. It had a huge rates bill of over €1 million, which the local authority is lucky to be getting. It should mean the valuation relating to other ratepayers should go down. When new properties come online with big valuations, one would expect the global valuation certificate to change but I have never seen that. It always goes up, in every town, and the valuation of Dublin, for example, has probably quadrupled in the past 30 years.
The Senator is referring to buoyancy where new businesses open. When the revenue-neutral aspect of the revaluation process is mentioned, it means it is revenue-neutral in terms of the existing rates base. When a new business opens, such as when a wind farm is rated, the initial revenue does not go towards evening out the rates that are collected. "Revenue-neutral" refers to the existing rate base. Global buoyancy is included by amending section 56 of the Valuation Act. One of the main provisions which makes this legislation so time-sensitive is that there are a number of local authorities that will shortly embark on the revaluation process, at the same time as a revaluation for utilities is about to commence. Buoyancy created by new developments by utility companies could have been included in the overall pie of rates revenue in the relevant local authority and could have led to large utilities benefiting greatly from the rates revaluation, to the detriment of smaller businesses. This legislation separates the process of revaluation of global utilities from the process for mainstream business in a local authority area, such as Senator Paddy Burke's.
I want to ask the Minister of State about the local area development plans and economic and spatial strategies. We have seen a recent High Court decision regarding Barna in County Galway where the local area plan stated that the Barna population was now nearly 2,000 people. The plan was put in place in 2018. The projected population for 2021 was an additional 420 people. The councillors said that they expected the population of Barna to grow by 420 up to 2,420 people.
This would be a 20% increase.
Yes, that is a 20% increase. This was an application from a developer to build 190 to 200 units of housing. The judgment in the case, with which I have no dispute, said that this development would more than likely put the projected population of Barna over the projected 2,220 figure, and planning permission was refused.
Councillors could set a local area plan by saying that they do not believe the population of the area will grow by more than 10% or 20% over the period of the plan that they are adopting. This can have huge consequences at the end of the day for a country that has a significant housing crisis. This is an area at which the Minister of State should look very closely.
It was not the only reason that this planning application was refused but it sets a trend throughout the country. This is an area that the Government or the Minister of State's Department should look at. Local authorities should probably have more tools available to say what their projected population is going to be. The Government has the Project 2040 strategy which wants to grow the population of the country by over 1 million additional people by 2040. Area action plans that have been arrived at by just saying that the population will grow by 10% or 20% over a given period could have huge consequences for homeowners and for people who want to live or buy a house in a certain area.
This issue is not really directly related to this amendment and I cannot comment on specific cases but the target of a 20% population increase in any area is not an unreasonable one to set. In the example given, if the population of an area is 2,000, there are roughly 600 to 700 dwellings there. If a planning application comes in for another 200 dwellings, this would appear to be a very significant application in the context of the existing development. I will not discuss individual applications other than to say that I agree with Senator Burke that the population projection increases will have an impact on where people are going to live. That is part of its aim.
There is a clash in this, and it exists in the Customs House as it exists everywhere else, between the desire to ensure that people live in areas that are properly serviced with more than just water and sewerage, footpaths and lights, and that they have the other services that come with having a significant population base which is coupled with the other desire and need that people have to live in rural communities. The traditional Irish population dispersal which has always obtained - there is no better example than in the Senator's own county of Mayo - was whereby the population in the middle part of the last century was probably twice what it is now, and was higher again before that.
A balance needs to be struck. The Senator is correct in pointing this out. It needs to be struck between having objectives for reasonable and proper planning and development and ensuring that, in particular, rural areas have the necessary population increase to sustain services and communities into the future.
My point is that I do not believe that the limiting factor should be a percentage. I do not know what kind of facilities or services Barna has but if it had a lot of services for roads, sewerage and water that could accommodate 1,000 or 2,000 extra people, why should the limiting factor be 20%, as probably was set two or three years ago?
I believe that the upper figure should be limited or interrelated to the services that are available there. It should not be just a percentage that is taken out of the sky, where we are hoping the population will grow by 20% here and then we find that it could have an enormous effect on the development of much-needed houses in that particular area. If the services are there, with schools, water and roads, this percentage should not be a limiting factor.
The future of development, particularly what we saw during the worst excesses of the Celtic tiger period, was the sprawl of Dublin in particular into the neighbouring counties and into the midlands, as far as Laois and even parts of my own area in Carlow and Kilkenny, where so many people are commuting. The future population increases are largely going to be based on proximity to work, as we face climate challenges and ensuring that we meet targets. The awful situation that so many people face on a daily basis where they have a commute or drive up the M7 from the midlands to Dublin, and where they are sitting probably four hours a day in a car in traffic is not sustainable from an environmental perspective. It is the same on a smaller scale in every community throughout the country. We cannot have a situation where we see dormitory towns develop just because they are serviced. There needs to be proximity to work, education and to the services that people require as to whatever stage they are at in their lives.
Senator Burke is correct to point out that people are not aware of the potential impact that this might have for planning and development into the future, but it is equally important that we radically change from the planning and development strategies that we had up to 2010, in that era of so much development across the country.
We support the general thrust of the Bill but I and our party have a particular concern about section 25 which we oppose. In simple terms this is because section 25 refers to protected structures and suggests bringing the two-year limit down to one year. I have a problem with that due to the unintended consequence. By way of explanation, in a real example in Clondalkin, a colleague of mine rents a protected structure for €900 a month. The commercial rent for a two-bedroom house in Clondalkin is €2,200, which is kind of shocking.
If I was the landlord of that protected structure, I would take an economic decision and say that I will keep that house empty for a year because then I can move the rent right up to €2,200 and, effectively, I receive a much bigger profit on the back of it than if I continue to rent the apartment. The unintended consequence is that the house would remain vacant for a year in the midst of the worst housing crisis in the history of the State.
There is no need for this section. I have given the Minister of State a clear example as to why it needs to be removed. I hope he listens because the consequences are too significant. We have to legislate for the broad population, not the landlord population.
Senator Gavan's colleague gave an example in the House. If the 24-month period applied, it would still be more profitable for the landlord to hold the property out of letting for 24 months, let alone 12 months. The purpose of the 12-month change is to ensure that a limited number of protected structures are let out. It was felt after the passage of the most recent legislation in this area that there was a potential loophole left that could cause an unintended consequence whereby some of the existing protected structures that are let and some that might be let into the future for housing would not be let. In the example the Senator has given, even if his proposal were to be adopted, it would not prevent the landlord from holding the property out of letting for two years. He or she would still make substantially more money by doing that.
To give the specific answer, before my officials turn on me again, concerns have been raised that it is not possible for works undertaken to protect the structures to qualify for an exemption from the 4% per annum rent increase restriction applicable in rent pressure zones and that this might result in a loss of such units to the sector. Amendments to section 19 of the 2004 Act, enacted in May of this year, provide for works to improve building energy ratings as qualifying for the exemption. However, because protected structures are exempted from BER regulations, work to improve their energy rating cannot qualify. It was missed at the time the legislation was passing. In recognition of this and to encourage continued investment in protected structures for use in the rental sector, the Bill proposes to amend section 19(5)(a) of the 2004 Act further to allow the first rent set under the tenancy of a protected structure dwelling that was not rented out in the previous 12 months to be set at a level that does not exceed the market rent. Thereafter the 4% rent increase restriction will apply. For dwellings that are not protected structures, a vacancy period of two years prior to the rent setting will continue to be required to qualify for the exemption.
Enactment of the amendment to this Bill during the immediate aftermath of the 2019 Act should help to eliminate a potential negative impact by those changes on the planned refurbishment of protected structures in the rental sector and should help maintain the supply of that particular, albeit small, category of rental properties. It is true that a protected structure in a rent pressure zone might become vacant and a landlord could decide to keep it off the rental market for 12 months to qualify then for the exemption. We must remember that a landlord renting out a protected structure who decides to take this course of action will do so at the loss of a year's rental income. This would likely be a substantial loss, particularly in Dublin or any of the rent pressure zones. It is highly likely that the number of landlords with rented protected structures choosing to take this course of action would be low. I think it would be very low because there are just not that many protected structures being rented at the moment. We should be doing more to encourage protected structures back into active use. The return of the property to the sector 12 months later, even at a higher rent, is still preferable to its permanent loss to the sector. Without this exemption, it is likely that protected structures in the rental market that are in need of refurbishment will not be refurbished or will be sold on the open market with a possible loss of the dwelling to the rental market. We have to secure the supply of much-needed homes that comply with minimum standards for rental accommodation. A key point to remember is that the 2004 Act provides significant protections of tenants from eviction. Any suspected so-called economic eviction should be referred to the Residential Tenancies Board for resolution and redress. The amendment in this Bill should stand to benefit both tenants and landlords. We are talking about a very narrow category of dwellings.
Senator Mulherin mentioned vacancy levels in the centres of many of our towns and cities. Many of the buildings in the centres of towns and cities are protected structures. I was speaking at an event in City Hall in Dublin recently. I was having some tobacco outside the door and one of the ushers was there. We were talking about the upstairs of the buildings across the road from us. They are beautiful brick buildings, I do not know from what era. They are all vacant, most of them protected and not let out. We should be doing more to ensure that protected structures become available on the rental market. The effect of Senator Gavan's proposal would be to ensure that we would have fewer.
With respect, there is something of a contradiction in the Minister of State's answer. He thinks few people will seek to leave a place empty for one year because of the loss, but he says that if it was two years, they would equally benefit. He says he does not believe many will seek to use this as a loophole in terms of leaving a place vacant for one year. While he thinks one year is a disincentive, somehow he does not think two years would be more of a disincentive. I believe it would be. He mentioned the measure in the Finance Bill last year whereby we gave tax reliefs for refurbishment and additional tax reliefs for loans taken out by landlords for refurbishment. The loophole of refurbishment has been coming up repeatedly in respect of the security of Part 4 tenancies. This is the idea of a core of citizenry who have a sustained relationship with their dwelling place and can make plans. Anything that could incentivise disrupting such tenancies is a concern. It is a fundamental issue. We are going to have to address it not just in respect of protected structures but more broadly. It was raised in the climate committee, when we were discussing how to deal with retrofitting. It cannot simply be the case that these loopholes exist. There must be a mechanism, even if it is a temporary suspension of a Part 4 tenancy and a resumption of it at an established rate with a mind to the 4%. A 4% increase every year is not nothing. It is way out of step with increases in people's wages or incomes. We should not act as if the current rent control limit of 4% in rent pressure zones is not significant.
I sympathise with my colleagues and support their proposal. I am thinking of the description in Ulysses of people who are so fortunate as to reside in a Martello tower. That is one sort of protected structure. There are a wide range of buildings that are protected structures and a wide range of established tenants, some of whom are living in the same place for 20 years under Part 4 tenancies. I would hate to see what could be in many cases vulnerable and older tenants potentially being made more vulnerable if not enough thought was put into this section.
I understand the points the Senators are making. One of the purposes of the previous Bill on residential tenancies that was voted on here, I think in May, was to close off some of those loopholes. Some landlords were abusing the principle of refurbishment and using a lick of paint or whatever as an excuse to impose a rent increase of over 4%. Equally, though, I stand over my point and do not see the contradiction.
The point I was making earlier to Senator Gavan is that, essentially, to use his example, the difference between a rent of €900 per month versus €3,200 per month is approximately €15,000 per annum. If the landlord held the property out of tenancy for two years it would still be more beneficial for him or her to do it. The purpose of the amendment when it was introduced in the Dáil was to try to ensure that we do not have an adverse effect on the supply of protected structures that are in rental accommodation, albeit small. We should do more to try to encourage protected structures into rental accommodation.