Dáil Éireann díospóireacht -
Thursday, 28 Jan 1999

Vol. 499 No. 2

Adjournment Debate. - Tax Reliefs.

Ms Shortall

Thank you, a Leas-Cheann Comhairle, for allowing me to raise this issue. In 1997 the then Government decided to give the green light to one of the most ambitious and deserving urban renewal programmes ever proposed in the history of the State, that is, the regeneration of Ballymun. This was one of the most disastrous housing developments ever witnessed in the State. Thousands of families were housed in a bleak wasteland on the outskirts of Dublin. Poor public transport, no jobs and abysmal community facilities plagued this massive suburb from the outset. Unemployment, drug abuse and poverty have torn at the heart of the community for decades. The huge regeneration project approved in 1997 is intended to tackle these serious problems and ensure that the people of Ballymun receive the investment, services and opportunities which will nurture a living community. After decades of neglect they have a chance to shape the future of their community and fight the prejudice and ignorance that has denied them the same opportunities in education and employment as other communities in this city and beyond.

However, the recent European Commission decision on tax incentives for urban regeneration means the project is in jeopardy. The regeneration of Ballymun needs a strong commercial element to ensure its success. It must compete for industry and jobs with areas which are currently much more attractive to investors. The threat to double rent reliefs and rates remissions undermines this goal. Capital allowances will attract development in Ballymun but this is only part of the picture. End-user reliefs, which will attract commercial development and, most importantly, jobs into Ballymun, are essential. It is these reliefs which are now in the sights of the Commission.

There is an urgent need for the Government to make the strongest argument to Brussels for the retention of generous tax designation for Ballymun. The Government must insist that in such a disadvantaged area as Ballymun, tax designation is regarded as regional investment aid, not operating aid. A huge amount of effort by the local community and Ballymun Regeneration Limited is now threatened because of the EU objection to end-user tax reliefs. The Government cannot allow this to happen. It would represent an incredible injustice if the people of Ballymun were denied the opportunity for a new start due to the deteriorating relationship this Government has allowed to develop with Europe.

I want the Minister – I regret the Minister for Finance is not here but the Minister for Education and Science is here in his place – to outline the steps the Government intends to take to retrieve the situation. To date, the Minister for Finance has shown no eagerness to fight the case of Ballymun in Europe. The Minister, Deputy McCreevy, and the Department of Finance seem to accept that the elimination of double rent relief and rates remission is a fait accompli. This attitude must change.

The regeneration of Ballymun depends on a generous tax incentive régime being put in place. A similar régime has benefited dozens of other urban centres in Ireland over the past decade. If the Government's proposals for Objective One status are approved by Brussels, these tax incentives will be even more important and will help to provide an even playing pitch, where Ballymun can compete for investment and jobs with Objective One areas which will continue to receive the highest supports from Brussels.

The successful regeneration of Ballymun now hangs in the balance. The attitude of the Government over the coming weeks will prove critical in the battle to ensure that Ballymun receives the same treatment that other urban centres have enjoyed in recent years. No other community has suffered the neglect endured by Ballymun since its construction over 30 years ago. Now a chance exists to make good the mistakes of the past and build a real community in Ballymun. The success of this project lies with the decisions and arguments that the Minister for Finance makes over the coming weeks. I hope this evening the Minister will be able to reassure me and the people of Ballymun that he is prepared to go to the wire to ensure that justice is done for Ballymun.

Mr. Walsh

I apologise for the Minister for Finance who could not be here this evening. I am also glad to represent the Minister for Education and Science, to whom Deputy Shortall referred.

I am pleased the Deputy has raised this matter and brought it to the attention of the House. In my previous role as spokesman on Social Welfare, I visited Ballymun and spoke to a range of people dealing with issues such as those raised by the Deputy. I can say with some authority that the designation of urban renewal status would be one of the very best things that could happen to an area such as that spoken about by the Deputy.

I live in a small rural town – there is exclusion, deprivation and poverty in rural towns as well – which was designated for urban renewal a few years ago. This has transformed the town, raised the morale of the people and given them new hope and opportunity. The Minister for Education and Science is present in the Chamber and such schemes, with the provision of vastly improved education facilities, are giving a tremendous ray of hope where there was no hope before. I greatly believe in urban renewal, either in areas such as Ballymun or in some of the towns which were decaying before people's eyes, with families leaving because they saw no future in them.

Last year, subject to EU approval, the Government approved a new urban renewal scheme, which was based on the recommendations set out in the consultants' study published in December 1996 on the urban renewal schemes which have operated since 1986. The new scheme provides for a more planned, integrated and focused approach to urban renewal designations based on integrated area plans – IAPs – produced by local authorities addressing the physical and socio-economic renewal of areas.

This new process is well advanced. Relevant local authorities seeking designation have prepared IAPs for parts of urban areas in most need of physical and socio-economic rejuvenation, and have identified targeted sub-areas or key developments within them for which designation is sought. The need for such designations must be justified by reference to the IAP's objectives for the area. This involves an analysis of the physical and social needs of the selected area and a vision statement as to how urban renewal could address these needs. The IAPs were submitted to the Department of the Environment and Local Government last year for assessment. The assessment procedure involves an examination of the IAPs by an expert advisory panel set up by the Department, following which the Minister for the Environment and Local Government is advised in relation to the proposals for designation having regard to specific criteria. The responsibility for selecting and prioritising areas for IAPs, and for the preparation of IAPs for priority areas, rests with the relevant city corporation or county council, and I understand that an IAP has been submitted on behalf of Ballymun.

Under the Taxes Consolidation Act, 1997, the Minister for Finance is empowered, on the recommendation of the Minister for the Environment and Local Government, and taking into consideration the IAPs, to designate areas within the boundaries of the IAPs for the purpose of one or more of the reliefs contained in the Taxes Consolidation Act, 1997, for urban renewal purposes.

Unlike the urban renewal tax legislation which has existed to date, there is no blanket entitlement to all the reliefs for any particular qualifying area and the incentives may vary in mix for different areas. There is provision to discriminate as between specific types of commercial development for tax incentive purposes.

On the issue of EU approval of the new urban renewal scheme, it is important tonote that the EU Commission has recently drawn up revised guidelines for the examination of tax incentives in the context of State aid for all member states. The recent difficulties in obtaining approval for this and other schemes is as a result of the EU Commission's implementation of these new guidelines and of the fact that, due to unprecedented economic growth, Ireland as a whole is moving from an area covered by Article 92(3)(a) of the EU Treaty to an area covered by Article 92(3)(c) of the Treaty.

Article 92(3)(c) allows for a more limited range of tax incentives then Article 92(3)(a) and the Commission has indicated to my Department that it considers double rent relief and rates remission for an Article 92(3)(c) area as operating aids, in that they lower the taxable income of an enterprise over the ten year period for which these two reliefs apply. The EU Commission has also indicated that it is opposed, on State aids grounds, to the granting of operating aids in such areas, except for small scale activities or locally based services in areas where physical dereliction is associated with social disadvantage or high unemployment. It is not expected that there will be a problem in regard to the capital allowances. Any delays or difficulties which have arisen are due to Ireland's improved economic position and to developments at EU level of a general nature.

The new urban renewal scheme and the business incentives for the rural renewal scheme were formally notified to the EU Commission on 17 September 1998. The Irish authorities have not yet received approval from the EU Commission for the new urban renewal scheme. The latest position is that the Commission has raised a series of queries arising from our initial application. A reply is currently being prepared.

I would stress that this is part of the normal process associated with obtaining EU approval and that the procedure may take some time to complete. Any final decision made by the Commission in this context will be announced at the appropriate time.

Finally, with regard to the designation of Ballymun or any other urban area for the purpose of urban renewal tax incentives, I would again stress that this is an integrated process in which several different elements, in particular the EU Commission approval, must be finalised before any designation can take place.