In a way it is an anachronism that this Bill is before the House in its present form and that the Minister of State, Deputy Fahey, is here carrying the can in effect for a Cabinet decision in relation to the budget on which we must vote tomorrow at 7 p.m., I understand, because the Minister is asking us in effect because of the historical nature of the Department of Local Government—now the Department of the Environment—to give effect to a financial measure which fits into the Government's overall financial programme.
One effect of the Bill will be to increase the amount of revenue that local authorities with large agricultural sections within their administrative area will get directly from the rates, because the Bill lowers the threshold of those required to pay rates now and those who will be forfeiting the relief and to whom Deputy Fitzpatrick referred. While it is quite clear that one could have a budget debate on this measure, within the context of local government finance generally, we had the announcement in today's newspapers that 200 workers will have to lose their jobs because of a shortage of funds in one sector of the Minister's area of responsibility. Here we have the announcement that people who previously had been exempt from rates will now have to pay them because the Minister for Finance is seeking to extract funds from the agricultural community and is not prepared to do it openly by means of a direct tax on farmers. This is because of the way in which the Fianna Fáil party in opposition—and Deputy Gibbons was no saint in this respect—went out and pledged themselves prior to the last election that they would not tax the farmers, that the small measures introduced by the previous Government would be vigorously resisted by Fianna Fáil if they were returned to office.
Fianna Fáil bought their way back into office through the ballot box and through a manifesto of which they are not now prepared to give out copies—if we believe what we are told in the newspapers. What the Minister of State is now being asked to do is to tax farmers through the back door. This is one of the ways in which it is being done. If Fianna Fáil were in favour of abolishing rates in toto on residential houses, on the basis that it was an inequitable tax, they should be in favour of abolishing rates altogether on agricultural land on the same principle. Instead they are increasing the take from the agricultural community, on the basis of its land-holding, by means of a system of rateable valuations which everybody agrees is hopelessly out of date. The basis of that valuation no longer bears any accurate relation to the potential or even resource value of any of the holdings. So, not for the first time, we have a Fianna Fáil Government contradicting themselves in regard to their financial policy generally.
As the Minister correctly said, this is a short piece of enabling legislation and the principle involved is quite clear: we are reducing the level of rates relief, going against a tradition going back to the thirties and twenties when smallholders in particular were exempted from this tax because of inability to pay. That was the historical basis for it. Given the nature of accountancy system at the time and of communications within the country then, it was the only effective way in which relief of this kind, which was necessary, could be given to this substantial section of the community. But this is 1980, not 1925. Many if not all smallholders affected by this measure are members of co-ops or deal with co-ops and co-operatives are adequately equipped to enable any Department of Agriculture, acting in conjunction with the Revenue Commissioners and the Department of Finance, to begin to move towards a system of personal income tax for the farming community which would be based on their ability to pay.
Regrettably there are two contradictory streams running through this Bill. One could argue that the reduction in relief of rates is an equitable measure, because many people with a holding whose valuation is up to £40 are in theory well capable of paying income tax and rates. Many small businesses could be equated, in terms of volume and turnover, with a farm holding of £40 valuation and should therefore be treated in a similar fashion. To that extent there is no reason or justification for granting rates relief on that basis. It could be argued that there are people who will still retain the benefit of rates relief under this Act but who if they were on a proper accounts system and were running their agricultural business in a business-like fashion as far as accounts and the Revenue Commissioners are concerned would be capable of paying rates in addition to all the other taxes which would be payable by them. But we have not got that kind of system yet, and the Minister in his opening speech made no suggestion that the Government were attempting to move towards it.
The Minister made no reference to the possibility that in time the nonsense of a Minister for the Environment coming in here on agricultural rates relief Bills would disappear and that the whole basis of taxation for the agricultural community would be put on a sound footing that would take into account, having regard to the technology of 1980, the revenue that each farmer receives and his or her ability to pay, after due allowance has been made for depreciation and other allowances which all agricultural enterprises would be entitled to on a comparable basis to that of a small trader or manufacturer. There is no reference to any of that and to that extent the Minister and the Government have lost an opportunity to reassure sections of the farming community who can reasonably infer that with a drop of from £75 to £60 in the first year of Fianna Fáil Government and a drop of from £60 to £40 now in this year it is reasonable to assume that that downward trend will continue so that people with valuations of £30 and £25 can now expect to have a rates bill slapped on them next year.
Agricultural production is subject to price variation in a way that even manufacturing industry is not. It is essential if we are to attempt to move towards a planned economy that those sections of the economy over which we have some degree of control are set out and signalled with a certain degree of clarity that will enable people to plan. We cannot expect the agricultural community or the manufacturing community to try to make decisions about investment, about opting for one form of production as against another and evaluate the potential returns from those investments if they are not given some indication in advance over a period of two to three years of the likely balance of tax that would be due on the holdings they possess.
The short Bill to which the Minister referred was matched by the shortness of his opening remarks. While I appreciate that the Minister is not the Minister of State at the Department of Agriculture or at the Department of Finance because he is doing the work of the Minister for Finance in implementing, ahead of the budget vote, the Second Stage of this Bill it behoves him to indicate the Government thinking in this area and how for long this kind of measure will come before the House. The Committee Stage will enable us to get into some of the mechanics of the Bill but in fact the Bill is, largely speaking, a straightforward enabling measure. Taken with the previous and most recent Act which was passed it is clear that it is simply enabling the Minister for Finance to pay less money to the Department of the Environment because more money will be coming to local authorities.
By definition those local authorities who will now potentially be in receipt of extra money because of the lowering of the threshold of rates relief will, largely speaking, be local authorities of counties where there is a static or declining population or a population which is not growing in urban terms. Counties which are not experiencing a growth in their overall populations or a growth in the demand for different kinds of local authority services will, on the basis of this Bill, be in receipt of extra finance because the tax base upon which they are operating will be enlarged. The valuation base for the agricultural holdings which will now be liable to rates will be dropped from £60 to £40 if my understanding of the Bill is correct. The Minister for the Environment, each year since the abolition of domestic rates, set a national figure for increases in the actual rate for every local authority. Local authorities can only increase by 10 per cent generally. If that figure is taken on a national basis, it will compound the distortions that already exist in local authorities where some local authorities can survive within the guidelines set by the Minister because of the nature of their tax base and because of the nature of the demand for services within their area. Predominantly rural local authorities with a smaller demand for services than growing urban areas, because of the backdoor method of taxing farmers will have increased revenue. This proposal will enable the distortion of local authority finance to continue because the aggregate need for local authority finance taken nationally will appear to decrease because of this measure.
Dublin City Council cannot benefit from this measure. No ratepayer in Dublin city, the corporation's functional area, will come into the tax net as a result of this measure, but 200 Dublin city workers will lose their jobs next week because they are unable to get any additional money from the Minister for the Environment because of the way in which the finances are being run.
I am trying to illustrate the contradictions implicit in having a system of taxation for the farming community part of which comes under the umbrella of the Department of the Environment. If the Fianna Fáil Party had the political courage to tell the farming community that they would be taxed as part of the productive sector in the same way as manufacturing industry we would not be discussing this kind of nonsense and we would not be involved in compounding distortions in the local authority financing system.
I raised that second point because I believe—and I said so when the Local Government (Financial Provisions) Bill was going through this House—that the change away from the rates as they were then to the provisions which the Minister was taking upon himself at that time would have effects which would in time be compounded, with disastrous results for the autonomy of local authorities. I also feel that this measure will, ironically, begin to have an effect on people in some parts of the country who would not recognise an agricultural holding if they saw it. This is not just about taking some small farmers into the taxation net through the back door because Fianna Fáil have not got the courage to do so publicly by means of a budget or to say so locally in the various provincial, rural constituencies where Fianna Fáil Deputies went around in the last election claiming that the farmers would not be taxed. It does not just affect that sector of the community. It will distort the total amount of revenue coming directly to the Department of the Environment and will consequently affect the way in which overall funds are made available to the Minister when he comes to allocate an average percentage increase for every local rating authority throughout the country in the coming year. To that extent not only is this a bad Bill from the point of view of the agricultural community, because of the fact that it takes no account of the ability of agricultural rate holders to pay the tax, but it is a bad Bill from the point of view of the urban community as well because it further distorts the system of financial allocation in the Department of Finance and in the Department of the Environment.
This is enabling legislation. It is an anachronism that we are here discussing it at all. It is because of that anachronism that the distortions will get worse. Perhaps the Minister would be able to indicate if the Government propose to abolish the whole system of agricultural rates since they have abolished rates on residential property and since it has been argued successfully in the past that rates are an unjust tax based on an out of date valuation which does not take into account the ability of individuals to pay.