A major undertaking of the Government's pre-election manifesto was that from January 1978 rates would be abolished on domestic property, the domestic part of mixed property, secondary schools, bona fide community halls and on farm buildings which were not previously exempted from rates. The Bill is designed to give statutory effect to this undertaking. Its other purposes are to validate the partial relief of domestic rates which obtained in 1977, and to provide for a number of consequential and miscellaneous amendments of the law relating to rating and local government.
Several investigations and studies of the rating system have been undertaken in recent years. It is fair to say that these have been prompted more than anything else by a dissatisfaction with the way in which rates bore on householders. No fundamental solution to the problem emerged, however, until our proposal to give total relief of domestic rates. For example, despite the last Government's action in phasing health and housing charges from the rates between 1973 and 1977, the average rate in the £ still rose in this period from £6.70 to £9.00. Our initiative has been bolder and more clearcut. It removes once and for all the burden of rates from over 850,000 householders and other ratepayers benefiting from the new reliefs.
A rather complex Bill has been required to give legislative expression to the derating proposals of the manifesto. However, the structure of the new rating reliefs is simple enough. Under section 3 of the Bill rating authorities will, each year, make an allowance to the rated occupiers of the newly relieved properties. Section 4 provides in the same way for the more limited relief of 25 per cent of domestic rates which was given in 1977. From 1978 onwards the allowance under section 3 will be equal to the full amount of the rates which would otherwise be payable on the valuation or part of the valuation of the properties concerned. The allowance thus has the effect of removing the burden of rates in whole or in part, as may be appropriate. Grants corresponding to the total of the allowances made will be paid each year by the Minister for the Environment to rating authorities under section 9 of the Bill.
The main advantage of this approach is that it allows the Exchequer to take over simply and directly the liability for rates on all property qualifying for the new reliefs. The Exchequer, in other words, is stepping straight into the shoes of former domestic and other relieved ratepayers. The full cost of domestic derating is being met fairly and squarely by the State and no part of the burden is being allowed to fall directly or indirectly on local authorities or other ratepayers.
Section 1 defines the categories of property which will qualify for the new reliefs and section 2 prescribes the amount of the rateable valuation of these properties which will attract relief. In case of a refusal by a rating authority to make an allowance in respect of a property, the rated occupier may, under section 7(1), apply to the District Court to have the allowance made. In effect, then, the District Court—and the higher courts if further appeals are taken—will have the role of dealing with appeals about the way in which local authorities apply the new reliefs.
A domestic hereditament is defined in section 1 as any premises which is used as a dwelling and which is not a mixed hereditament. The definition extends to yard, garden and the normal domestic outhouses. Where these carry a valuation separate from the dwelling itself they will still be regarded as domestic, provided the valuation does not exceed £1 in the case of land, or £2 in the case of buildings.
Use of a dwelling to provide lodgings which are not registered under the Tourist Traffic Acts, 1939 to 1975 will not of itself disqualify a premises from domestic status. This means that houses listed, as distinct from registered, with Bord Fáilte will not thereby lose their entitlement to domestic rates relief.
Registered guesthouses under the Tourist Traffic Acts are in a different category from ordinary dwellings and, as such, they cannot qualify for relief as ordinary dwellings under the Bill. Where, however, a registered guesthouse contains accommodation specially and permanently set aside as ordinary domestic quarters, it will be entitled to relief as a mixed hereditament in respect of this portion.
Domestic property will be relieved of rates on the whole of its effective buildings valuation and on any adjoining land valuation which does not exceed £1.
A mixed hereditament means a premises which is used partly as a dwelling to a significant extent and partly for another or other purposes to a significant extent. The point of the latter qualification is that, if the domestic use of a premises is insignificant, it will be regarded as wholly non-domestic, while if the non-domestic use is insignificant it may be regarded as wholly domestic.
Unless an application is made to the Commissioner of Valuation under section 7(2), the rateable valuation of the domestic portion of a mixed hereditament will be taken to be one third of the total valuation of the property or £18, whichever is less. I would like to emphasise, however, that where this formula is felt to bear unfairly, the rated occupier concerned may apply, through the rating authority, to the Commissioner of Valuation—with appeal from the latter's decision to the circuit court—to have the domestic and non-domestic elements in his valuation specially apportioned. The rating authority themselves are also empowered to take this initiative.
Secondary school is defined as a school not already exempted from rates which is recognised as a secondary school by the Minister for Education. Relief of rates will extend to all of the buildings forming part of the school complex. Relief will also apply, subject to a limit of £40 valuation on the amount relieved, to land belonging to and used in conjunction with the school.
The Government's undertaking to abolish rates on bona fide community halls responds to a long-standing aspiration of voluntary groups involved in community work. Community hall is defined in the Bill as a hall or similar building which is not mainly used for profit or gain but for purposes which both involve participation by inhabitants of a locality generally and are recreational or otherwise of a social nature. Use of a hall for sports purposes will not of itself make a premises a community hall. On the other hand, a hall is not disqualified from being a community hall simply because it is normally used by persons of a particular age group or a particular religious denomination.
Registration of a premises under the Registration of Clubs (Ireland) Act, 1904 so as to enable permanent bar facilities to be provided for club members will, however, rule out the recognition of that premises as a community hall. Community halls will be relieved on the whole of their buildings valuation.
Relief of rates is also being granted on those farm buildings which, because they were erected before 1 March 1959, do not already enjoy exemption from rates. Farmers with older non-domestic buildings had to pay full rates on those buildings up to now. On the other hand, farmers with modern buildings erected since March 1959 were totally exempt. I am happy to bring this anomaly to an end.
The definition of domestic hereditament extends to all property used for residential purposes, whether owner-occupied or rented. The Bill contains a number of provisions designed to ensure that the benefit of domestic rates relief is passed on to the tenants of rented accommodation. The position of rented small dwellings within the meaning of the Local Government (Rates on Small Dwellings) Act, 1928 is dealt with in sections 6 and 18. These comprise all local authority dwellings and all privately rented dwellings with a valuation of not more than £8 in Dublin and, in general, of not more than £6 elsewhere.
In relation to these small dwellings, liability for rates fell on the owner, or landlord, rather than on the occupier, or tenant. Heretofore the landlord could recover the rates paid by a series of additions to the rent spread through the year. Section 18 of the Bill has the effect of removing the authority from 1978 onwards for the rates-linked supplements to rents which were previously levied by landlords of small dwellings. Section 6 makes corresponding provision in relation to the 1977 rate.
Section 5 of the Bill deals with rented accommodation apart from small dwellings. Although the section is long and complex its object is simple. For a tenant who was not previously directly liable for rates, the section gives the right to an allowance from the landlord equal to the rates element which was in his rent before removal of domestic rates.
Difficulty may arise in calculating the amount of this allowance where a unit of letting is not separately valued. There is provision, therefore, for either landlord or tenant to apply to the rating authority for apportionment of the valuation. An appeal may be taken to the Commissioner of Valuation under section 7 against an apportionment made by the rating authority. If the proper allowance is not made by a landlord, the tenant is entitled, under section 5, to recover the amount as a simple contract debt in any court of competent jurisdiction.
The rate reliefs provided for in the Bill have the effect of increasing the proportion of the current income of local authorities which is being met by the Exchequer. In 1976, State grants met 40 per cent of local authority current income; for 1978 the figure will be about 61 per cent. In 1976, the State paid £1 out of every £4 which would otherwise fall to be raised by local authorities in rates. In the current year, the State will be paying nearly £2 out of every £3. The cost to the Exchequer of the reliefs under the Bill is estimated at about £80 million for 1978.
A financial liability of this size has important implications for the Exchequer, since it has to be fitted in with the needs of other programmes, including the capital requirements of local authorities and the needs of other services financed by the Exchequer, many of which are vital to the creation and maintenance of employment. There is a need also to take reasonable measures to protect the interests of non-domestic ratepayers, including farmers, small shopkeepers and people with businesses of one kind or another who remain liable for rates.
Section 10, accordingly, enables the Minister for the Environment, with the consent of the Minister for Finance, to issue directions to local authorities limiting the amounts to be provided in their estimates of expenses, and, in the case of rating authorities, in their rates in the £. If an authority seek to include an amount in their estimate of expenses or in the rate in the £ which is greater than any limit notified, the estimate or the rate stands to be reduced to the maximum amount allowed by the limit.
Section 11 requires that any decision by a local authority authorising expenditure over and above that provided in their estimate of expenses should have the sanction of the Minister for the Environment. Sanction may be given either generally or in particular cases under this section.
As a matter of policy, I propose to see to it that, with the responsible cooperation of all concerned, little if any interference will be caused by these new arrangements to the free ordering of priorities by local authorities. Rating authorities have been able to operate as freely as before within the limit on rate poundages which I notified for the current year. Last week, in authorising a 10 per cent increase in rate poundages for 1979, I made the particular point to local authorities that it would be entirely for them to decide the priorities which should apply to the services catered for in their 1979 estimates of expenses.
Among the remaining minor provisions of the Bill, I will draw attention only to section 13 which is designed to simplify the procedure for the making of the rate. For some time now, at least two meetings of a rating authority have been required: an estimates meeting, frequently extending over a number of meetings, at which the estimate of expenses is adopted and the consequent rate in the £ "struck" or determined, and a later "rates" meeting at which the rate as struck is assessed on individual valuations.
It is difficult to see why the law should require elected members to be involved in endorsing the rate on individual valuations. Once councillors have struck the rate and the Commissioner of Valuation has fixed revised valuations, applotment of the rate is automatic and admits of no scope for variation. The function is properly administrative and section 13 simply recognises it as such. I must emphasise, however, that the functions of adopting an estimate and striking a rate in the £ remain absolutely untouched by the present section. These continue to be powers exercisable only by elected members.
The present Bill contains no provisions affecting the future valuation of new and improved domestic property. The Tánaiste and Minister for Finance has, however, already adverted to the possibility, in the wake of domestic rates abolition, of a global rather than individual valuation of domestic property being carried out for each rating area in future. It is intended to introduce appropriate legislative proposals in the new year.
In the knowledge that it fulfils our stated manifesto undertakings for relief of rates, I commend the Bill to the House.