Dáil Éireann díospóireacht -
Wednesday, 14 Dec 2011

Vol. 750 No. 1

Local Government (Household Charge) Bill 2011 [Seanad]: Second Stage (Resumed)

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

Deputy Tony McLoughlin

I welcome the opportunity to speak on the Bill. Up to February of this year, I had been a member of Sligo County Council and Sligo Borough Council since 1974, which by anyone's standards is a long period of local representation and gives me a deep understanding and considerable experience of local government.

Many of the people who have served with me will say raising finance within local government and at the same time providing services is always a difficult balancing act. In 1978, when the then Fianna Fáil Government abolished rates, it stripped many local decision makers of the revenue raising power they had at local level. As a member of Sligo County Council at that time, I recognised that this political stroke would have a lasting impact. The lack of a local or property tax was identified by the troika and the continuation of a tax system that is over-reliant on personal tax is not sustainable, hence we are here debating this proposed household charge.

Between 2000 and 2007 local authorities were awash with funding from development charges and a central Government grant that ensured any thoughts of how local government would in some way self-finance were never on the radar or in the mind of a dutiful environment Minister — what a pity. If the Minister, Deputy Hogan's predecessors, including former Ministers, Mr. Noel Dempsey, Mr. Martin Cullen and Mr. Dick Roche, were to propose this type of charge, given the then economic boom, they would have found it a lot easier to sell it to the general public. While I am sure it was on their mind, I am also sure the then Taoiseach, Mr. Ahern, would have sent them to Brussels, Siberia or some other location as he feared his ambition to serve longer in office than Mr. de Valera would be thwarted. It is now much more difficult to introduce this Bill in a time of economic difficulty for so many people.

The Society of Chartered Surveyors Ireland has stated that the proposed household charge announced as part of budget 2012 will provide local government with "a more stable and sustainable source of income" than that provided previously by stamp duty. I welcome this statement from an organisation which is independent of Government and recognises the true worth of local government becoming self-financing, where possible. Some local authorities will raise funding through a number of locally based charges, including this proposal, metered water, second home taxes, motor tax, development charges and house rentals. Surely this is the model of funding to which we should all aspire so that, eventually, taxpayers' money currently funding the general purpose grant can be used for other sectors badly in need of funding, including health and education.

Many of the speakers on the other side of the House will level the usual criticism of these measures, namely, that introducing any charge or local tax is not welcome. However, we must look beyond this time to five or ten years hence when, hopefully, we will be in a better place financially. Our aspiration is to ensure that the local authorities are well placed to provide better local services and more of an all-round community and economic programme for local areas, properly funded and not reliant on the general purpose grant. In better times to come, hopefully, the State can reduce the tax reliance on the income of the lower paid, take more of them out of the tax net and allow young people who are not homeowners the chance to get a start in life.

Sinn Féin spokesperson, Deputy Ó Snodaigh, has stated on his website that by choosing to impose sweeping flat rate taxes on everyone, the Government is abandoning its pre and post-election promises to protect the most vulnerable and families on low incomes. I take issue with this statement on the basis that the opposite is the case. This proposal was part of the EU-IMF agreement imposed on Ireland and legally signed up to. The Bill will provide protection to many who are on mortgage interest supplement, who are residents of local authority housing or who live in certain unfinished estates. These are protected in the Minister, Deputy Hogan's, Bill.

As I stated earlier, it is incumbent on the Government and future Governments to continue to form a fair and equitable tax system. In time, when this interim household charge is developed into an equitable property tax——

Acting Chairman (Deputy Olivia Mitchell)

Deputy McLoughlin's time is up.

Deputy Tony McLoughlin

——it will ensure those with wealth and larger properties will pay more and, of course, smaller households will pay less.

The left cannot have it every way. While calling for better local services, they resist this tax which is a means to fund services. We must live in the real world where in this country there exists an Exchequer gap of more than €16 billion. The €160 million expected to be raised through this measure is a small amount in bridging the gap. However, in the longer term——

Acting Chairman (Deputy Olivia Mitchell)

Deputy McLoughlin is taking the Deputies' time.

Deputy Tony McLoughlin

——I hope that this will be the start of a proper funding mechanism for our local authorities the future.

Deputy Peter Fitzpatrick

I welcome the opportunity to discuss the Local Government (Household Charge) Bill 2011. It has received much discussion time and some of the debates among the national media have been anything but objective. There are a number of issues worth noting, foremost being the hitherto unconsidered EU-IMF programme.

The EU-IMF programme of financial support for Ireland commits the Government to the introduction of a property tax for 2012. The programme reflects a need in the context of the overall financial position to put the funding of locally delivered services on a sound financial footing, improve accountability and better align the cost of providing services with the demand of such service. This is hardly ground-breaking and relates only to the proper provision of local services.

In light of the complex issues involved, a property tax requiring a comprehensive property valuation system which would take time to introduce and, accordingly, to meet the requirements in the EU-IMF programme, the Government decided to introduce a household charge in 2012. The household charge is an interim measure and a proposal for a full property tax will be available for consideration by the Government in due course.

This proposal is an interim measure and should be viewed in such a context. As such, it may not meet all the requirements of a properly functioning system, but it is the initial foundation of a system that, with minor improvements, could provide a solid platform for the funding of much needed and valued local services. Property valuations are hardly the criteria on which to introduce a measured initiative given the wide price fluctuation available presently.

The charge will be set at €100 and will apply to the majority of owners of residential properties in the country at a point-in-time basis. It is expected to raise some €160 million on full collection and the revenue from the charge will support the provision of vital services provided by local authorities.

Internationally, local services are administered by local authorities and financed by local service charges. In Ireland, local authorities are responsible for, among other services, fire and emergency services, maintenance and cleaning of streets, street lighting, planning, the development services, public parks, libraries, open spaces and leisure facilities. These services are an integral part of local communities. However, these much valued services must be funded and the proposed charges are a small monetary contribution to the maintenance of these said services.

As stated, this is an initial contribution but I firmly believe that the people of Ireland are significantly aware and appreciative of the value they receive from community providers. I can only speak for my own constituency in Louth, that there is not a town which does not have its streets cleaned early on a Sunday morning. This does not happen by magic and these services need to be paid for. In addition, there is an outstanding library service that functions as both recreation and leisure facilities among the constituencies.

As with most legislation introduced by the Government, fairness is of paramount importance. As a result, there are notable exceptions to the charge and not every dwelling will pay the proposed charges as there are many wide-ranging exceptions.

I would encourage anyone to evaluate the proposed charges. However, as an initial measure to ensure the better funding of critical local services, I have no hesitation in recommending this Bill to the House.

Deputy Tom Barry

The reform of how local government is funded is essential given the collapse of the development contributions and the complete lack of a plan B from the previous Government on where the replacement local government funding would come from.

To meet our requirement under the EU-IMF programme of financial support for Ireland, a property tax is to be introduced next year. This €160 million, as other Members have stated, will obviously contribute towards funding the emergency, waste, library, recreation and leisure services. It is €2 a week. It does not sound much, but it is a charge. It is important that the exclusion of properties that are newly constructed or unsold is taken into account.

Where I have an issue with the definition of an owner under the liability of the household charge is that owners, not occupiers, will be liable here. This will be fine but in particular situations, it should not apply across the board. For the landlord, the property is not his or her household and it is only an extra charge. There is a situation here where many couples bought a second house as a pension or as something to pass on to their kids in old age. They now find themselves caught in a situation where they have a €200 second home charge and another €100 as a household charge tax. Those living in much of the rented accommodation have good jobs. They all are not on social welfare. They can well afford to pay this charge. However, it is being applied to those——

Deputy Joe Higgins

The landlords.

Deputy Tom Barry

——who own them. This is a little unfair where, for example, the cost of the mortgage is €1,500, the rent is €900 and there is a net loss of €600. When one adds in the miscellaneous charges, including that of the PRTB, these people are losing €750 a month. This is a difficult burden for these people to carry. Even though some Deputies here find it amusing and they are clever——

Deputy Joe Higgins

I do.

Deputy Tom Barry

——we cannot ignore the situation where middle-class people who bought these properties are now facing bankruptcy on the back of it. We need to be cognisant of that. I would remind Deputy Higgins that these are citizens of the State as well.

Deputy Joe Higgins

It is amusing that the landlord becomes the victim and the tenant should be the payer.

Acting Chairman (Deputy Olivia Mitchell)

Deputy Barry has the floor. Deputy Higgins will have his own time later.

Deputy Tom Barry

Deputy Higgins's form of politics is the ABC version and I will not even go there.

Essentially, it is something that needs to be recognised. These people, as citizens of the country, need to be recognised. These are not the traditional landlords. These are genuine people who had a little extra in their cashflow and bought a property. They invested in the State and now they are being crippled. I would ask the Government to look at this a little more carefully in the future.

Second, it would be nice to see the post office being allowed to deal with these charges and administer them. I would like to see more business being given to post offices, especially those in rural areas which could need help.

Deputy Heather Humphreys

I welcome the opportunity to speak on this Bill. It is a significant Bill in that it will have an effect on almost every homeowner in the country.

The introduction of a property tax in some form is something that has been mooted for quite some time. At present, Ireland is one of the few countries that does not have a property tax. In that respect, I believe that the introduction of this necessary legislation represents a further difficult decision which has been left to the Government due to a lack of will on the part of the previous Administration.

I appreciate that at a time when many are working within tight budgets a €100 charge on their household will be unpalatable and unwelcome. However, the fact of the matter is that under the programme of financial support which has been agreed with the EU-IMF, the Government is committed to the introduction of a property tax for 2012. In this regard, the Government has no choice but to introduce the measure on an interim basis until the process for the implementation of a full property tax can be considered fully.

I welcome the fact that there will be certain exemptions from the charge. In this regard, the Government has adopted a common sense approach. That social housing will be exempt from the charge stands to reason. Making it liable to the charge would simply result in what the Minister has described as a circular flow of income. It would result in further administrative costs, which we can all do without. This is also true for the exemptions related to properties owned by the HSE and Departments.

That the household charge will not apply to those who pay commercial rates also makes sense. By definition, the charge will be for domestic properties. In this regard, it is only fair that those who pay commercial rates should not have to pay the household charge as a further charge. One of the most important provisions in this Bill is the exemption from the charge for people who have been forced to vacate their homes due to long-term illness or infirmity. This provision is aimed at preventing elderly people having to pay the charge. This stands to reason. If a person were left with no option but to leave his home and enter a nursing home, it would be most unfair to expect him to pay for a property in which he no longer lived. It is also unfair to expect the relatives of the infirm to pay the charge when they most likely have to pay the charge on their own homes. These are small but very important measures in the Bill. I welcome the fact that the Government gave due consideration to these aspects before introducing the legislation.

I welcome the fact that the period in which the charge may be paid will run from 1 January to 31 March. This allows sufficient time for the national information campaign by the Department and the various local authorities to raise awareness about the charge and ensure people fully understand whether they are liable to pay it.

It is a good idea that households will have the option of paying the charge in four instalments of €25. This will mean an unnecessary burden will not be placed on families by having to pay the €100 charge all at once.

In the current economic circumstances, the decision to impose any additional charges on households is not one that can be taken lightly. However, as alluded to earlier, this decision comes as part of the agreement with the European Union and the IMF.

Deputy Catherine Byrne

I welcome the Bill. The Minister for the Environment, Community and Local Government, Deputy Phil Hogan, and other Ministers have a tough time ahead of them, particularly because the IMF deal requires that a property tax should be paid for 2012, and that it should increase in 2013. As we all know, the country is in a very dark place. It is €18 billion in debt. Significant savings must be made in all Departments, particularly this year, in which €3.8 billion must be saved.

It is reasonable to ask people to pay the household charge of €100. There will be many exemptions. The charge will be based on self-assessment and the owner of a residential property must register to pay. Owners will be given until 31 March to do so, which I welcome. I thank the Minister for allowing people time to pay the charge in instalments of €25. If one puts this into perspective, one will note this amounts to a payment of €2 per week, which is reasonable enough. The charge will raise €160 million, including for local authorities. Members, including those of us who sat on councils, know the importance of local authority services. It is important for everybody that our streets remain clean and that there be proper lighting and footpaths and, above all, emergency services. I am thankful much of the money raised will go towards these.

While the charge is to be the same for everyone at first, the Government will proceed to applying it according to the size of one's dwelling or individual property. This is right and just. Those who live in bigger properties should, naturally, pay a higher property charge.

For many of us, especially the young, it seems alien to be asked to pay the charge. However, many of the older generation will remember when rates were very much part and parcel of annual domestic budgeting. The charge is a small one. Many will be able to avail of a waiver. I refer to the many people in my constituency who are in social, voluntary and charitable housing and to young people who are living in unfinished estates where the roads, footpaths and lighting need to be completed. I hope some of the revenue will be directed towards such areas.

This morning and yesterday, I heard many Members of the Opposition state there would be massive protests. I agree with massive protests. We live in a democracy, in which one has a right to protest. There was a protest that lasted four years on foot of waste charges imposed by Dublin City Council. In my constituency, people arrived on Davitt Road every Saturday morning and left mountains of bags behind them. Unfortunately, the protestors went away and left the bags to be cleaned up by many of the residents living in the area. I hope that if there are protests, they will be properly controlled and that residents will not have to deal with their aftermath. I welcome the Bill and I am grateful for the opportunity to speak.

Deputy Seán Crowe

I am sharing time with Deputies Aengus Ó Snodaigh and Sandra McLellan.

Some months ago in this Chamber, we debated the revenue that could potentially be raised from untapped natural resources believed to lie in Irish coastal waters. An interesting point made by one speaker was that the revenue was referred to as Sinn Féin's leprechaun gold. This was a puerile attempt to denounce Sinn Féin's view that our natural resources should benefit all our people. The idea of spreading the tax burden was dismissed. Nine months after the debate, there are attacks that will target the little people with an annual charge of €100 that is entirely indiscriminate and punitive for householders, many of whom do not have the means to pay.

As the dust begins to settle on last week's budget, all of us have had the opportunity to absorb the implications of the regressive austerity measures that have been rammed down the throats of the State's most vulnerable citizens. People voted for change but we have a Government that seems hell-bent on implementing the same grossly unfair policies of its predecessor.

The household charge, an indiscriminate flat tax, will have a disproportionate impact on those struggling to make ends meet. There is no equality regarding the payment of the tax. It fails to take into account or differentiate between the individual circumstances or hardship faced by individuals or families. The millionaire householder is to pay the same as the pensioner or person on carer's benefit.

When the Taoiseach addressed the nation on the Sunday before the budget, he stated quite clearly that the average citizen was in no way responsible for causing the catastrophes that have led to the loss of our economic sovereignty. This is not much comfort to those families who must do much of the heavy lifting and meet the State's financial burden. Those responsible for causing the crisis remain immune from any real sanction. They are free to live a cosseted existence and are exempt from having to face any real consequences of their actions.

By any standard of fairness, it is wrong that the household charge will be imposed on people regardless of their ability to pay. One hundred euro may not seem a lot to some politicians who believe it is appropriate to pay advisers in excess of €135,000 and at the same time draw down a wage that greatly exceeds that amount. To the unemployed or working poor, however, it represents a significant burden. This is especially true given that the latter face additional stealth taxes, cuts to their benefits and changes that deny them a decent education and health service.

The number of unemployed is close to 450,000 and the rate of unemployment is 14.5% of the working population. In my constituency, Dublin South West, the rate of joblessness is one of the highest in the country, with over 11,000 people on the live register in Tallaght. The most recent CSO data show that in November, 2,261 people who found themselves unemployed were under the age of 25 and have little or no prospect of employment.

To make matters worse, the cuts in funding to CE schemes will deny many people the opportunity of finding work.

Poverty, deprivation, hopelessness, alcohol and substance abuse, marital break-ups and growing despair are the consequence of unemployment which, coupled with forced emigration, makes this a very bleak time for families. How is it fair that families depending on social welfare or low paid jobs are expected to pay the same household charges as those who earn 100 times more than what the State pays in benefits? Nobody on the Government benches has answered that question. The implementation of the household charge is yet another example of the Government's abandonment of its pre-election promises to protect the most vulnerable and families on low incomes. This charge will mean there is less money to spend in the local economy, which in turn will lead to further economic stagnation.

The new poor are not all living in local authority housing or unfinished estates. A considerable proportion of the new poor are living in estates all around the country. That is why I have a difficulty with this tax.

Deputy Aengus Ó Snodaigh

Tá an Bille seo ag cur cánach nua anuas ar phobal na tíre seo. Cáin teaghlaigh €100 a bheidh ann i dtús báire, ach tá a fhios againn cheana go bhfuil sé i gceist ag an Aire cáin réadmhaoine agus táillí uisce a chur ina áit chun athrú a dhéanamh amach anseo. Ní cáin fhorchéimnitheach an cháin seo mar níl sí ceangailte, ar aon bhealach, le hábaltacht iad siúd ar a leagfar í chun í a íoc.

This Bill imposes the first of a series of ultra-regressive taxes. The Minister has indicated that the €100 flat tax will be quickly followed by a property tax and water charges, both of which will be significantly more than €100. Progressive tax regimes link taxation to the ability to pay. Even the exemptions to this charge, limited as they are, pay no heed to ability to pay. An individual who lives in an established housing estate can face a financial struggle that is equal to somebody living in a ghost estate.

The Minister is introducing the scabbiest waiver scheme ever. Even if one subtracts social housing, the private rental sector and ghost estates from our 1.6 million households, more than 1 million households remain. The Government gave a waiver only to the 18,000 social welfare recipients who are entitled to a repayment of the mortgage interest supplement. Almost 500,000 people are out of work and last week's budget will suspend the mortgage interest supplement for 12 months for many people. How many of those 18,000 waivers will remain?

Between 200,000 and 300,000 families depend exclusively on social welfare payments. Not all of these families are living in local authority housing or rented accommodation. Hundreds of thousands of families who own their own homes will not get waivers. Older people who depend on the meagre State pension will not get waivers. Struggling families who are excluded from the mortgage interest supplement by the 30 hour rule, which was not reformed as promised in the programme for Government, will not get a waiver. By introducing a provision for payment by increment, the Minister acknowledges that he is targeting people who do not have €100 to pay the charge.

The €10 transaction charge for making payments in cash is an outrageous additional burden. The Minister is targeting the poorest of homeowners with this extra charge. According to the ESRI, banking exclusion in Ireland is three times higher than the EU-15 average. Some 20% of Irish households do not have bank accounts, a figure that rises to 40% among those with low educational qualifications, 38% among households in the bottom quartile for income and 27% among those over the age of 55. Many people in our society are functionally illiterate or have no access to computers and others do not have bank accounts for a variety of reasons, including fear of the banking system. Who can blame them given what has happened recently?

While it would be easy for me to jump on the do not pay campaign bandwagon, I urge caution because people should be fully aware of the consequences of such a stance. I do not want to see a repeat of what many people in Dublin are facing as a result of weighing in behind the anti-bin charges campaign. They were encouraged not to pay but are now facing charges of up to €2,000 and the campaign has all but disappeared.

Deputy Joe Higgins

That is not true. The Statute of Limitations applies.

Deputy Aengus Ó Snodaigh

If I decide not to pay, as I am going to, that will be based on a decision I take with my family in the knowledge that I may face fines and a further tax of €2,500. I will stand with others of like mind and I will organise alongside those who take a similar stance but I am not going to encourage people to act without knowing the full facts.

This tax is unfair and our pre-budget submission has shown it is not necessary. While the household charge will not break the bank for many, it will be the last straw for thousands of families. It is only a matter of time before the fines are deducted at source from pay and social welfare cheques once the relevant legislation is introduced. The cumulative effect of several Fianna Fáil-Green Party-Independent Government budgets, along with last week's vicious Fine Gael-Labour Party budget, means that concurrent payments have been abolished, rent supplement has been reduced and community employment schemes and fuel allowances have been slashed. These cuts impact on the limited incomes of those who depend on social welfare. They are now being asked to pay a further €100 this year.

We have no idea what will happen to this charge in future budgets. The Government intends to follow the household charge with water meters but it could achieve greater savings by preventing water wastage in the distribution network. International evidence suggests that household meters may reduce water usage by 16%, whereas the Comptroller and Auditor General found that local authorities are losing more than 40% of their water supplies through the distribution network. Instead of investing where it counts, the Government proposes to spend almost €1 billion on household meters. In the meantime, it is cutting expenditure on vital remedial works by 12% or more. The budget for water services investment has been cut by €60 million this year, which will exacerbate the legacy of under-funding mains rehabilitation. Local authorities and the Department of the Environment, Community and Local Government have routinely failed to spend the money allocated to them in the past but the funds were not diverted to local authorities which were willing to spend and had greater need. For example, in 2010, the Department failed to spend approximately €140 million of the money allocated to it. That should have been diverted to Dublin City Council or other councils that had a greater need. The Government has stated that it intends to borrow €500 million, paying it back over a period of time at a cost of €1 billion, for water meters. It is committing money for non-vital household meters, yet it has not made available the €10 million or €20 million that would be required to secure the Vartry tunnel, which supplies 20% of the water in this city and which is facing collapse at any moment. That is the level of regard the Government has for the welfare of our citizens, and that is the context in which this regressive tax is being introduced.

Deputy Sandra McLellan

This Bill was published only nine days ago, yet already the charge it exists to bring about has been the subject of much discussion in the streets and workplaces of the country. I understand that when speaking on the Bill in the Seanad, the Minister of State, Deputy Fergus O'Dowd, stated that the charge was a relatively modest one. Whenever Government Deputies speak about this charge, or the septic tank charge, it is implied in what they say that it is a charge that people can afford. This is not stated explicitly, but it seems to be beyond question as far as they are concerned that people will be able to afford it. This is a sign that they are not in touch with the reality on the ground. People have already been cut to the bone. I do not believe the Government Deputies fully appreciate the sacrifices that families are already making. The weekend following the budget, numerous constituents made contact with my office to tell me how worried they are. They told me they simply did not know how they would manage. I find all this deeply troubling.

This is a very unfair tax. It is not right that somebody living in an apartment and struggling to pay a mortgage must pay the same as someone living in a very big house with no mortgage. Many people simply do not have the money. They cannot afford their mortgages and, on top of the recent budget cuts, this household charge will push them over the edge. I recently came across a case in Cork in which a family had to stop sending their sons to the Scouts as they could not afford to pay the registration costs. Like the household charge, this was around €100. As with the septic tank registration charge, they could have paid it in instalments, but they simply could not afford it. This was no spendthrift family. They had made numerous sacrifices to cut costs, stopping unnecessary purchases and even giving up cigarettes before they were forced into the decision. They wanted their sons to be able to participate in the Scouts, but they simply did not have the money — it just was not there. This is just one of a legion of examples I — and, I am sure, my colleagues — have come across of people who simply have nothing left to give.

This Bill takes little or no account of ability to pay. The exemption categories are far too narrow. Aside from certain exemptions regarding commercial properties and local authority housing, everyone living in most types of housing is expected to be able to pay. This will hit many categories of people hard. I am particularly fearful for the elderly, who also saw their fuel allowance cut in the budget. They may own their own homes, having spent many years prudently paying their mortgages, but many of these people are cash-poor. I am sure we will see the charge being passed on to tenants in private rented accommodation by landlords. Most incredibly, those in receipt of social welfare in various forms will be expected to pay if they own their own homes, even if they are at risk of poverty. This charge is a blunt instrument and it is gratuitous. I am not sure by what metric it can be described as fair that a millionaire and a single parent struggling on a weekly basis will have to pay the same rate regardless of their incomes or the properties they live in.

I am reminded of a political broadcast produced by the Conservative Party in the late 1980s promoting the community charge, or the poll tax, as it was better known. The broadcast, which can be found on the Internet, stated that the charge was fair as everyone paid it and everyone paid the same. It was an insult to the intelligence of the British people, and they saw right through it. Our Government is making a similar argument that because everyone pays the same, the charge is fair. It is my view that the Irish people will not buy this argument. I can do nothing but oppose such an inequitable and grossly unfair charge, and I call on the Government to reverse its decision. I am sure the Government Deputies will have the worries, concerns and anger of their constituents ringing in their ears this Christmas if they proceed with this legislation, and rightly so.

Deputy Olivia Mitchell

I wish to share time with various Deputies.

An Leas-Cheann Comhairle

Yes.

Deputy Joe Higgins

Sharing with whom?

An Leas-Cheann Comhairle

Deputies Hannigan, Maloney and Dowds.

Deputy Olivia Mitchell

The hot topic of the day when I was first elected to a local authority a frightening 26 years ago was the funding of local government. We have had various stabs at local charges and taxes over the years, none of which stuck, even though local charges or taxes are regarded as the norm internationally. This is not only because they broaden the tax base and make the Exchequer less dependent on a narrow range of what may be quite volatile taxes, but because they are good for services, good for consumers and good from the point of view of efficiency and value for money. A direct financial link between the customer and the service provider ensures greater accountability. It fundamentally changes the relationship if one is paying for a service.

In normal circumstances, the introduction of a local tax such as this would be accompanied by a reduction in central taxation, and it is a tragedy that we are introducing it in circumstances in which it must be a revenue-raising tax. We had no choice about that, given the demands of the troika. It is being introduced in a hurry for this reason. As a household charge it will not survive because it will eventually be replaced, in tandem with the non-principal private residence tax, with a property tax.

The real tragedy is that we did not have a property tax during the Celtic tiger years, and that we ever abolished rates for private houses, onerous and dreaded as they were at the time. If there had been rates or a property tax over the last 15 years, we would have had no property bubble, no bank guarantee, no over-lending, no Anglo Irish Bank and no bailout. We would be in a very different position. A tax such as that would have acted as a brake on the madness that prevailed. However, instead of having taxes and charges to put a brake on the property bubble, we had incentives to accumulate property. Local authorities received development levies, which encouraged limitless granting of planning permission and ever-increasing densities. There is no doubt that Irish people have historically been obsessed with property and apart from the necessity of this tax now as a revenue-raising measure, it makes good sense to establish a tax that will act as a stabilising mechanism should the property madness ever overtake us again.

There are two issues I would like to raise with the Minister. Given that this tax and the NPPR tax will be consolidated into the property tax, I draw the attention of the Minister to the problems and inequities in the NPPR tax as it currently exists. First, it is not eligible for tax relief, despite the fact that it is a legitimate business expense. Second, the policy of charging per unit in converted houses is unfair; for example, the owner of a house that has been converted into five small flats pays five times the charge levied on the owner of the house next door which is also rented out but as a single dwelling. I ask the Minister to consider, for the remaining years of this tax, at least putting a cap on the total amount of tax that can be collected on any one property. For example, if an owner is currently paying a NPPR tax of €1,000, maybe it could be capped at €600, or something similar.

The method of payment for this new charge will be similar to the method of payment for the NPPR tax, which is efficiently and effectively managed by the Local Government Management Services Board on a shared basis for all local authorities. At the moment, however, it is completely inflexible. If I send my cheque in late without the penalty, it will be sent back to me. People are beginning to accumulate debts because there is simply no tolerance at all in the system. This is too draconian for a tax which, after all, people do not get a bill for. It is a self-assessed tax; one does not get a bill or a reminder, yet if one does not pay, one is charged a penalty which must be paid. These are difficult times for people and, unlike the non-principal private residence, NPPR, charge, this charge will be paid by people in a variety of circumstances. The elderly, infirm, redundant and bankrupt will be required to pay it. Although I accept that they must pay their taxes, the collection system should facilitate easy payment, rather than make it difficult and have such inflexibility that it is almost impossible to pay, as a result of which people accumulate huge debts very quickly.

Deputy Dominic Hannigan

I will share time with Deputy Robert Dowds and Deputy Eamon Maloney.

The biggest challenge this Government faces is getting the public finances in order. That is the legacy of the economic mess in which the Fianna Fáil Party left this country. Fianna Fáil signed the deal that has led us to this day. It agreed the terms and conditions which resulted in us introducing this charge.

Last night, some of the Fianna Fáil Party Deputies asserted that we could put the introduction of this charge on the long finger because the new Government has lengthened, until 2015, the time in which we must reduce our deficit to 3% of GDP. One Fianna Fáil Party Deputy's idea was that we could delay its introduction and deal with the issue of financing local government at another time. That is just more of the same from the Fianna Fáil Party, putting things off. It postponed the introduction of the septic tank charges in the same way. The attitude is to put off until tomorrow what one should really do today. Long-fingering the hard decisions was its policy and it is one of the main reasons the country is in the current mess, where it must borrow to pay the teachers, doctors and nurses. We are getting our country back on track and back to work, but to do that we must make some tough, hard decisions. We are trying to do it in a way that is as fair and progressive as possible. We will continue to do so over the next four years.

Everybody knew at the last general election that a property tax would be introduced over the lifetime of the future Government. I was asked at the doorsteps in County Meath what we would do about a property tax. I told people out straight that we had to introduce a property tax. I have no doubt that I lost votes as a result, but that response was necessary because we had to be up-front and truthful with the people. We had to tell them that it had to be done. We are tied into doing it so we can continue to get funding from the troika.

We want this tax to be levied in as fair a manner as possible and to ensure that we protect the people who cannot afford to pay it. To ensure this happens the Minister has put together an expert group that will design a fair and progressive property tax. This group will look at the scope of the tax, the assessment criteria and what exemptions and waivers can be put in place. The group will report back to the Minister in the middle of next year and decisions will be taken after that. I welcome that because I believe it will lead to a more progressive and fair system. Already a number of exemptions have been put in place, for example, for people living in social housing and those in receipt of mortgage interest supplement, which amounts to approximately 18,000 households. There is also an exemption for people living in the 1,300 unfinished housing estates throughout the country. The expert group will report on more options for exemptions and waivers by the middle of next year.

We recognise that this money does not come easy to anybody; it is hard earned money that people will have to pay. We are committed to making sure the money is spent as efficiently and effectively as possible at local level. We are making the hard decisions and we will continue to do that so we can reclaim our economic sovereignty and get our country back to work.

Deputy Robert Dowds

With regard to the comment by Deputy Ó Snodaigh concerning people who pay the charge in cash, I ask the Minister to re-examine that issue. People should not suffer because they are paying this charge in cash.

Obviously nobody likes paying tax. My colleague, Deputy Hannigan, has outlined why we are in the current position. However, a measure like this is more palatable than budget cuts. The main reason I support the Bill is that there is a need for a more adequate stream of funding for local government. I realise this is an interim measure whereby some funding to local government can be recouped. A household charge of €100 is quite small compared to what is paid in Northern Ireland, our nearest neighbour, where the charge averages £1,500 for an average sized house. It is also worth pointing out that Ireland is almost unique in not having some form of direct local taxation. One element of restoring power to local authorities is giving them a proper stream of funding.

There are some weaknesses in this Bill in the sense that it does not go far enough. The €100 charge per house is to be lodged in the local government fund, which is then passed on to local authorities. I have two problems with this and I ask the Minister to give serious consideration to amending the legislation before it goes on the Statute Book. The money collected should go directly to the local authority in which the dwelling is situated. If it goes into the general pot, the more populous local authority areas will not receive what its residents have paid. In this regard, it is the same situation as pertains with motor tax. The motor tax collected in each county goes into a general pot and is then divvied up. That means Dublin and other populous places such as Cork do not get the money that is collected in their areas.

Second, not only should the money go to the local authority for the area in which the money is collected, but each authority should be given the responsibility of collecting that money. It is important that local authorities have the ability to finance themselves. They should not be directly dependent on the Government. I realise this cannot be done immediately but I hope the Minister will consider it in the context of subsequent local government reform.

What I have outlined in my last two points will obviously be inadequate for rural counties with small populations, so some mechanism will have to be put in place to ensure they get central funding to make up the shortfall.

Another issue needs to be addressed as soon as possible. To be honest, a flat charge per house is unfair, in that it does not discriminate between the wealthy and less wealthy. The Minister accepts that this needs to be addressed. Ideally, the determination of a household rate should be influenced both by the size of the home and the wealth of its owners. Taxes related to the size of a home would encourage empty nesters to sell, thereby freeing up homes for young families. I appreciate that there are waivers. Will the Minister check that the waivers will actually go to the right people as the legislation is implemented?

This morning, I heard Deputy Pringle on the radio encouraging people not to pay either this charge or the septic tank charge. Frankly, that is highly irresponsible of the Deputy. It is important that people are encouraged to pay the tax that is imposed. None of us likes paying it, but that has been the case from time immemorial. If we do not pay the taxes that are imposed, it will set us on the road to chaos such as we have seen in Greece where many taxes are not collected at all.

Deputy Pringle's remarks highlight two further points. We need to work, in so far as possible, towards a more equitable system of income tax. There is also a need to secure greater fairness from the EU and IMF, because that would at least set a good example to people.

Deputy Eamonn Maloney

We would not be having this debate if our country was in a different position and if our economy had not been destroyed in the way it has been. The blame for that quite rightly rests with some developers, bankers, builders and politicians. We cannot blame outsiders for the economic crisis we are in. This debate would not be taking place today if it were not for that.

It is not mentioned sufficiently often that we exist under the benevolence of a handout from some of our European neighbours and our nearest neighbour, the United Kingdom, who keep the lights on for us and give us a cheque for €1.2 billion at the end of every month. We have to be realistic, deal with the state of the country as it is and not delude ourselves into believing we can oppose everything that comes in front of the House. It does not work like that.

The preoccupation of those on this side of the House is to turn the economy around, end the live register and get people off the dole and working. It is our single most important function. We know where we stand in this House. One is either for or against that. The priority is getting people back to work to fix the economy. This Bill is part of it. Do we expect more from those who have given us €1.2 billion? I doubt it.

I have heard people in opposition oppose the Bill and say the household charge is unfair. They are perfectly right; it is unfair. It is like a turkey voting for Christmas. I am one of the few people in the House who supports the principle of a property tax. Almost every other European country has one. Some of the people who have been the vanguard of that have been the Socialist Party in France. In Italy, the Communist Party has the policy that the greater the size of one's property and garden, the larger the amount of tax one pays. Those who say they are opposed to the household charge cannot oppose everything permanently for nine or ten months. What about proposing something? If this is not the answer they should propose a solution.

There has to be some means of funding local authorities. This is the best way, given that there are no other proposals. I wish to remind those in opposition who have opposed the charge that there are things more horrible than household charges. One of them was when some of the people in opposition walked in here in September 2008 and voted to bail out banks, at a cost of billions of euro — rather than €100 — to the taxpayer, and brought the country to its current crisis. I have listened to some of them crying about a €100 charge when they went through the lobbies to bail out Anglo Irish Bank for billions of euro. It says a lot about the political status of the House.

An Leas-Cheann Comhairle

Deputy Higgins has three minutes.

Deputy Joe Higgins

Why is that?

An Leas-Cheann Comhairle

The Minister is being called to reply at 5.35 p.m.

Deputy Joe Higgins

The Minister is not here.

An Leas-Cheann Comhairle

The Minister of State is here. The Deputy does not have much time.

Deputy Fergus O’Dowd

On a point of order, my speech will not take more than ten minutes maximum if that is helpful to Deputy Higgins.

An Leas-Cheann Comhairle

Deputy Higgins can have an extra five minutes.

Deputy Joe Higgins

I may share time with Deputy Seamus Healy.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Deputy Joe Higgins

The debate has been thrown into confusion by the readjustment of time earlier. It is totally unacceptable that this important debate is being curtailed in this way. The Minister of State has not been here for the discussion and has not heard the points we made, yet he is responding for the Government. It shows complete disrespect on the part of the Government for the Dáil. Where is the senior Minister who is piloting the Bill?

This is a despicable new tax. It is putting a burden on the shoulders of the majority of people at the diktat of the IMF, EU and European Central Bank as part of their general agenda that the Irish people have to pay sweat and blood from their resources, through punitive taxation and cuts, to save the European bankers, speculators, hedge fund operators and other financial gamblers that bet and lost in the Irish property market in private deals for private profit. That, in a nutshell, is what this tax is about.

The Labour Party Deputies and others who support this and other measures avoid the obvious and the truth of the situation. The argument of dismissing the tax as costing €2 per week is spurious. The ESRI, a Government think tank, has already laid out the future. There will be a property tax of €700 or €800 per household and a water tax of €500. That is the agenda.

This is the platform for a new swathe of taxation that will cost every household in the country up to €1,300 and beyond in due course. The so-called waiver scheme does not apply to the huge majority of low-income workers, unemployed people, pensioners and middle income workers who are already suffering grievously. Those in negative equity who were trapped by blackmail speculation in order to have the right to a home over their heads are now being treated to injury upon insult with this extra taxation.

The claim by a Fine Gael Deputy that there would have been no property bubble if a property tax was in existence is utter rubbish. Would a property tax of €500, €600, €700 or €800 have stopped the orgy of speculation by developers and bankers in the 2000s? It is notable that Fine Gael significantly and pointedly refused to call for a halt to the type of speculation and profiteering that was going on and created the current crisis.

The Labour Party Deputies are rolling in here pleading for local services and saying that the charge is needed. The Labour Party used to stand for taxation justice. Taxation justice would suggest that a tax on the €219 billion which exists in the financial and other assets of the top 5% of this society, as outlined by the Central Statistics Office and adjudicated on by Credit Suisse which is no left-wing think tank, would not just bring in €160 million for local government but billions of euro to enable the real development of local authority services.

We should stop paying the bondholders. We should not pay the €1.1 billion or €1.2 billion that is supposed to be paid by the middle of January. That is how we can raise the money. What happened to taxation justice?

It is not just the left that will oppose this. I predict that for a vast swathe of ordinary people who do not consider themselves to be political this will become a major issue of controversy in the next four months. I predict that hundreds of thousands of households, comprising ordinary, decent, law-abiding, tax paying pensioners and others, will exercise their discretion not to pay. They will use their right to non-payment as a protest and a means to stand up and be counted against the humiliations heaped on them in the last three years. The Government will have to contend with that. It will have to decide whether it wants to be the rack-renting landlord dragging decent people in front of the courts. There will be a major campaign of people power in every county, town and city to defeat this tax. The Fine Gael and Labour parties will rue the day they sought to impose this unjust burden on our people.

Minister of State at the Department of the Environment, Community and Local Government (Deputy Fergus O’Dowd)

I heard nothing from Deputy Higgins that I have not heard from him before. In the Seanad, where we had more than 11 hours of debate on the Bill, all of the arguments, including many which were not alluded to by the Deputy, were put to me and to everybody else who attended the debate.

I will begin by clarifying several important points. Tens of thousands of people in this country will not have to pay this tax. These include those who live in local authority housing. No tenant of a local authority will be eligible for the charge. Likewise, no person renting private accommodation will have to pay the charge; all such persons are entirely and absolutely exempt.

Deputy Jonathan O’Brien

Landlords will pass the charge on to tenants.

Deputy Fergus O’Dowd

I did not interrupt the Deputy and I ask him to afford me the same courtesy.

In addition, all persons in receipt of a subsidy from the Health Service Executive on account of their inability to pay their mortgage — there were some 18,000 in that position at the last count — will be exempt. In the case of home owners living in what are deemed to be unfinished housing estates — there are some 1,200 categories of estate listed in the Department's report — none will be eligible for this charge. Each of these estates will be listed by the Minister, Deputy Hogan, early in the new year. To reiterate, there are significant exceptions to the payment of this charge. Moreover, section 12 of the Bill makes clear that local authority managers throughout the State may examine individual applications and, where there is evidence of extremely difficult circumstances, choose to waive part or all of the charge.

The household charge is being introduced out of the necessity to ensure local authority services are funded in a sustainable manner, to close the gap in income and expenditure in the national finances, and, ultimately, to ensure we meet our obligations under the EU-IMF programme of financial support for Ireland. My colleagues in the Labour Party received no answer when they asked Members opposite what they envisage happening if we do not honour our commitments under that programme. The reality is that we would have to find some €18 billion immediately in order to close the gap between expenditure and taxation. That would lead to an absolute devastation of our social infrastructure, including health, education and social services. That is why we must raise this money.

In the time available to us since taking office, it has not been possible to design, legislate for and implement a comprehensive, valuation-based property tax. Therefore, the household charge is being introduced as an interim measure. It is preferable to the alternative of rushing through a poorly designed or badly implemented property tax in order to meet the troika timeframe. The Minister, Deputy Hogan, will establish an expert interdepartmental group early in the new year, tasked with designing a property tax that is equitable and builds on previous work carried out in the area. The group will consider the modalities of the tax, including its scope, assessment criteria, exemptions and waivers and the means by which it should be paid and collected. There will be an opportunity for input into the deliberations of the group, which will report back to the Minister by mid-2012. At that point, the Minister will revert to Government with proposals for consideration.

Many of the Members who contributed to the debate cited their concerns about inequity in the imposition of the household charge. Much of that criticism has been framed as if the Government was entirely unaware of or unconcerned by equity issues. This is simply not the case. It is precisely because of its concerns in this regard that the Government is taking the time required to ensure the property tax, when introduced, will be as equitable and as fair as possible. It is for this very reason that we are introducing the household charge as an interim measure. Equity will be to the fore of the deliberations of the expert interdepartmental group. In the context of the property tax framework, the Government will ensure that fairness and the implications for personal income levels, employment circumstances and property values are given full consideration.

The introduction of the charge is also necessary to ensure that local authorities across the county will not have to curtail local service provision radically next year. As part of the budget announcements last week, Deputies were informed that Exchequer funding to the local government sector in 2012 has been reduced by €164 million over the 2011 level. This was an unavoidable measure to help close the gap in the public finances. It is also the latest in a series of reductions which have already seen funding for local authorities' day-to-day expenditure cut by some 21% between 2008 and 2011.

Even as an interim measure, I accept that the introduction of the household charge is an additional cost to households. I acknowledge that the description of the charge as relatively modest may be difficult for some to digest. This description in no way underestimates the daily financial pressures faced by many households. I assure Deputies that, at €100, the charge has been set at the lowest possible level consistent with raising the required level of funding for local authority services in 2012. In order to ease the burden, the Minister has provided that the charge may be paid in four instalments of €25 over the course of the year. I am satisfied that many of the most vulnerable groups in society are either exempted or entitled to a waiver. In response to Deputy Niall Collins, I confirm that full waivers will be provided for those in receipt of mortgage interest supplement and those residing in certain unfinished housing estates on the liability date. For the reasons outlined, I hope Deputies from all sides of the House will support the passage of the Bill.

We all know only too well that our economy, especially our tax revenue, has been overly reliant on activity in the construction sector. The decline in the yield from transaction taxes such as stamp duty, capital gains tax and value added tax on property has been a major factor in the imbalance in the public finances. The necessary correction is sharp and difficult and, unfortunately, further corrective actions will be required in the coming years. We will not stand back from what must be done, but we will do it as fairly as possible. The introduction of the household charge on residential property is one of the measures that must be taken to close the gap between expenditure and revenue.

However, it should be seen as more than simply a measure to raise revenue. In addition, it is a structural change to the State's revenue-raising system which provides an alternative revenue stream that will not be subject to the volatility associated with transaction-based property taxes. In addition, the household charge represents a new local source of funding for local authorities and reduces their dependence on central government.

It has been said that the ideal taxation measure is one that is equitable, simple and flexible. The Local Government (Household Charge) Bill 2011 meets the criteria of simplicity and flexibility. The charge is simple and cost effective to administer and will be simple to understand and comply with. It has the flexibility to cope with varying economic conditions while maintaining a stable yield. I look forward to a high compliance rate when it is introduced in the new year. That is in everybody's interest. I thank the Deputies opposite and those on the Government side. Second Stage has given rise to an interesting debate and I look forward to its continuance on Committee Stage. I commend the Bill to the House.

Question put.

The Dáil divided: Tá, 90; Níl, 50.

Tá

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Bruton, Richard.
• Burton, Joan.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Carey, Joe.
• Coffey, Paudie.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Conway, Ciara.
• Coonan, Noel.
• Corcoran Kennedy, Marcella.
• Costello, Joe.
• Creed, Michael.
• Daly, Jim.
• Deasy, John.
• Deering, Pat.
• Doherty, Regina.
• Donohoe, Paschal.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• English, Damien.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzgerald, Frances.
• Fitzpatrick, Peter.
• Gilmore, Eamon.
• Griffin, Brendan.
• Hannigan, Dominic.
• Harrington, Noel.
• Harris, Simon.
• Hayes, Brian.
• Hayes, Tom.
• Heydon, Martin.
• Hogan, Phil.
• Howlin, Brendan.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keating, Derek.
• Keaveney, Colm.
• Kehoe, Paul.
• Kelly, Alan.
• Kyne, Seán.
• Lawlor, Anthony.
• Lynch, Ciarán.
• Lynch, Kathleen.
• Lyons, John.
• McCarthy, Michael.
• McFadden, Nicky.
• McHugh, Joe.
• McLoughlin, Tony.
• Maloney, Eamonn.
• Mathews, Peter.
• Mitchell, Olivia.
• Mulherin, Michelle.
• Murphy, Dara.
• Murphy, Eoghan.
• Nash, Gerald.
• Neville, Dan.
• Nolan, Derek.
• Ó Ríordáin, Aodhán.
• O’Donnell, Kieran.
• O’Donovan, Patrick.
• O’Dowd, Fergus.
• O’Mahony, John.
• O’Reilly, Joe.
• O’Sullivan, Jan.
• Phelan, Ann.
• Phelan, John Paul.
• Quinn, Ruairí.
• Ring, Michael.
• Ryan, Brendan.
• Sherlock, Sean.
• Shortall, Róisín.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Timmins, Billy.
• Tuffy, Joanna.
• Twomey, Liam.
• Wall, Jack.
• Walsh, Brian.
• White, Alex.

Níl

• Adams, Gerry.
• Boyd Barrett, Richard.
• Broughan, Thomas P.
• Browne, John.
• Calleary, Dara.
• Collins, Joan.
• Collins, Niall.
• Colreavy, Michael.
• Cowen, Barry.
• Crowe, Seán.
• Daly, Clare.
• Doherty, Pearse.
• Donnelly, Stephen S.
• Dooley, Timmy.
• Ferris, Martin.
• Flanagan, Luke ‘Ming’.
• Fleming, Sean.
• Fleming, Tom.
• Grealish, Noel.
• Halligan, John.
• Healy, Seamus.
• Higgins, Joe.
• Kirk, Seamus.
• Kitt, Michael P.
• Mac Lochlainn, Pádraig.
• McConalogue, Charlie.
• McDonald, Mary Lou.
• McGrath, Finian.
• McGrath, Mattie.
• McGrath, Michael.
• McGuinness, John.
• McLellan, Sandra.
• Martin, Micheál.
• Moynihan, Michael.
• Naughten, Denis.
• Nulty, Patrick.
• Ó Caoláin, Caoimhghín.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Snodaigh, Aengus.
• O’Brien, Jonathan.
• O’Dea, Willie.
• O’Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Smith, Brendan.
• Stanley, Brian.
• Tóibín, Peadar.
• Troy, Robert.
• Wallace, Mick.

Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.

Question declared carried.