Oireachtas Joint and Select Committees

Thursday, 7 November 2013

Joint Oireachtas Committee on Environment, Culture and the Gaeltacht

Chambers Ireland

2:05 pm

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I welcome Mr. Ian Talbot, CEO, and Mr. Seán Murphy, deputy CEO, from Chambers Ireland. I call on Mr. Talbot to make his presentation.

Mr. Ian Talbot:

I thank the Chairman. It is a great pleasure to be here. I do not propose to read through the submission we supplied yesterday. I hope we can take it as read. I will focus on a few key topics contained in the submission.

Chambers Ireland fully supports the ongoing reform of local government. We compliment those who work in the area on the efforts they have made to change and restructure local government in recent years. There are others would could learn from what has been done in this regard. However, much remains to be done, and all too often we end up relying on businesses - as taxpayers - to cover excessive costs. We see ourselves as being particularly well placed to comment on local government issues as a result of the fact that we have a chamber of commerce in virtually every town throughout the country. This means that we receive almost constant feedback with regard to what is happening on the ground. Local chambers are typically heavily involved with their local authorities in the context of engaging in dialogue and, in most cases, trying to resolve issues.

We are of the view that more needs to be done at local authority level to achieve greater efficiency and to support the business community. At a structural level, mergers and the eradication of duplication of services must continue to be implemented and delivered. The savings achieved in this regard must result in a reduction in costs for the business community. We all know that in order to aid Ireland's recovery, all business costs must be reduced. Business has gone a long way towards reducing its own costs, but local authority charges on businesses tend to take the form of a fixed cost, regardless of their profitability or otherwise. They fall into the category of costs which need to continue to be restructured and reduced in order that Ireland can become more competitive and that we can create more jobs. We must seek to do this, of course, without any reduction in the quality of front-line services, through mechanisms such as back office consolidation, the flattening of hierarchies, the application of shared services best practice and, where appropriate, business process outsourcing.

It is clear that there are many issues which affect town centres. The retail sector is obviously very significant to the job creation market and has been extremely hard hit. The impact of rents and rates as business costs is significant, as is the effect of parking charges. The abolition of town councils and the creation of municipalities is creating concerns across our network. We need to be sure that costs will not be increased in a number of ways, not least as we integrate municipal districts into the wider county areas. There is also concern about perverse incentives, under the funding formula built into the legislation, that could lead to an increase in car parking charges. Our members would generally like to see the provision of some free car parking in town centres in order to encourage people to return to those centres.

On business supports, the local enterprise offices, LEOs, are in the process of being established. These are vital, and we continue to recommend that business representatives and chamber members should be involved in the governance of LEOs. These offices should be exclusively focused on their core remit of supporting start-ups and SMEs with up to ten staff and ensure that there is no replication of services already provided by the private sector. In addition, LEOs should be visible, accessible and functional. Anecdotal evidence to the effect that some of these expectations are not being met is beginning to emerge. LEOs are supposed to be very visible in county council offices but we are hearing stories to the effect that they are going to be hidden at the back of the second floor and will not be an accessible resource. It is early days in the context of the establishment of the LEOs, but there is a need to get on with it and deliver. The evidence to which I refer is anecdotal in nature because the LEOs are at such an early stage of their development.

Chambers Ireland advocated the introduction of a local property tax for many years. We see this tax as providing an opportunity to ensure the effective funding of local authorities in the wake of the steady reduction in the general purpose grant. However, the tax must be spent at local level in order to reduce pressure on businesses. In recent days a debate has been taking place in Cork City Council in respect of an increase in the rates for businesses. We do not think this is the right time to introduce such an increase and it would not be helpful. Such increases become a threat to competitiveness and jobs.

Another issue about which our members are concerned is the treatment of vacant premises for rates purposes. The Local Government Bill contains a provision to standardise the rates rebate to 50% on vacant premises. This could be harmful to business which are trying to downsize, lease out some of their properties or just survive. At present, there is much more flexibility in the system. A possible solution would be the introduction of a stepped process whereby a rebate of 90% would be paid in the first period for which a property is vacant. This rebate would then be paid on a decreasing basis over time in order to give owners the opportunity to re-let their premises or whatever.

Procurement is a vital area and one of great concern to small businesses in particular. Tendering for contracts from local authorities is really important for such businesses throughout the country. The State and local authorities must be responsible buyers. We fully accept the need to drive cost savings for the State from procurement, etc., but we must ensure that we also actively support local economies through procurement policies while remaining aware that the cheapest option will not necessarily be the appropriate, value-for-money option that will supply the best outcome. It is extremely important that local authorities use procurement professionals who will provide feedback in respect of the tendering process both pre- and post-decision. Local authorities must also adopt appropriate qualification criteria. In other words, the qualification criteria relating to a tender must relevant to what is being purchased. A three-year trading history and profits running into the multi-millions are not necessarily relevant when it comes to purchasing a few glasses to go on a table.

The final issue which arises - it arose again in recent days for a number of our members - is that of revaluation. I refer here to the underlying valuation of a premises and not the annual rate that is struck. There are huge concerns in this regard. In light of the problems with the Valuation Act 2001, the Valuation (Amendment) Bill 2012 was introduced. However, the latter stalled very early in the legislative process and we have not really had an opportunity to influence the debate on it. Many businesses are just as concerned about the underlying rateable valuation as they are about the annual rate that is struck. We are also of the view that there is a necessity for some key amendments in respect of the definition relating to a material change of circumstances. We are of the view that this definition should include economic viability because at present it tends to be based on, for example, the impact of a wall being built near one's premises. The latter is a material change of circumstances but we would like some economic criteria taken into account in this regard. Another matter in respect of which amendment will be required is that relating to tenants only being responsible for the payment of rates from the date of occupation. In addition, a hardship clause might be introduced.

The SME sector is extremely important to the regeneration of growth and jobs in the economy. SMEs and local authorities form a vital combination when they work together. It is very important for our members that local government will be set up in the correct way for the future.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I thank Mr. Talbot.

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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I thank Mr. Talbot and his organisation for their submission. As we stated to our previous guests, it is important that the committee obtain a cross-section of opinion on the Local Government Bill in order that members might - when they have analysed and scrutinised the legislation - amend it, where possible, on Committee Stage. My party is opposed to the Bill in principle because it does not agree with abolition of town councils to the extent proposed. We recognise that there is a need for streamlining and that the level of duplication must be addressed, but not to the extent proposed. We are of the view that what is being done is merely a cost-saving and populist exercise on the Government's part.

I am cognisant of the relevance of and the regard for the institutions of the State. That was significant in the referendum result, for example, in respect of the Seanad. That is an aside. We were afraid it might be at the expense of local democracy. That is the background of where we come from. That said, we recognise the democratic process and what is expected in the numbers in terms of legislation. We must seek to raise issues where we consider it necessary to do so, seek change where we believe it necessary, with the consent of the Government parties, and seek consensus on the legislation that will go through the House. To that end, we welcome the witnesses' detailed analysis of what is contained in the Bill and any amendments they consider may be necessary from their perspective in order to help their members throughout the country. We recognise there are up to 800,000 people in small and medium-sized enterprises who are affiliated to Chambers Ireland. We have all worked closely with various chambers throughout the country and continue to do so.

The most pressing issue in all our towns and cities these days is that of commercial viability against a background of strained realities, and costs are looked at in every sense. While commercial rent has decreased substantially, commercial rates have not. We are pursuing a complete overhaul of the commercial rates system with a view to putting in place a system that is cognisant of existing rents, turnover and ability to pay in an effort to seek to address the imbalance that has grown in respect of out-of-town and town centre viability and vibrancy. We hope to make amendments in order to address that issue.

The other point made was that municipal authorities and so forth may be just a window-dressing exercise, giving the impression that there is autonomy or power within them. From my analysis of the legislation, I do not think that is the case. The big issue, again, is that of rates and how they might be rebalanced as between county and town rates or county and city rates, and there is talk of a 10% variance up or down that has to be addressed over a ten-year period. The witnesses' comments in that regard would be welcome also.

The amalgamation within the local authorities of local development companies is a concept we welcome. However, the mechanism is another issue. We hope there is agreement by negotiation with the staff rather than imposition in order to ensure a smooth move and its success into the future. There is no doubt that many councillors would favour that move by virtue of the accountability they bring to the table in terms of how the money in the public purse is spent. I welcome that and hope the negotiations come to a speedy conclusion with a view to the move taking place in the new year.

I thank the witnesses for their submission and look forward to further submissions from them in respect of Committee Stage of the Bill.

2:15 pm

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Mr. Ian Talbot mentioned that he would like to see more business process outsourcing. Will he please explain this a little more? In regard to his submission on procurement, we learned this morning from the County and City Managers' Association that Kerry County Council is the national procurement office for the local authorities and that within each local authority a procurement officer has been appointed. As there are some significant concerns, has Mr. Talbot met the association to address that issue and perhaps make proposals on how he sees it being rolled out?

Mr. Ian Talbot:

May I reply?

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Mr. Ian Talbot:

In regard to business process outsourcing, the logic of the State putting in place a clear process for the delivery of certain routine services can be very efficient. It can be very efficient to get a private sector organisation to do that work. However, one has to get from where one is to where one needs to be before one starts to outsource. If one tries to outsource a process that is not clearly defined, understood and working, it will go wrong. The process we would like to see in place is one that has been clearly defined. Some of these things are working. For example, we learned last year that the Revenue Commissioners are using Abtran in Cork for much of their work around the collection of the local property tax. Apart from one minor glitch it has worked extremely well. That shows it can work. It was a brand new process. It was not redoing something that has already been done. Something we look at frequently is aspects of passport issuing and whether the State needs to carry out all the components of passport issuance. While that is not directly relevant to local authorities, I cite it as an example. Equally, there are plenty of examples in local authorities, such as motor taxation, where there is a much better system in place than a few years ago. Earlier in the week, Dublin City Council closed its motor tax office for a week as it could not cope with the volume of activity. That is not a good indicator that the process is working well. If a private sector organisation had to do that, great surprise would be expressed.

The key is to identify processes and tasks that could potentially be outsourced without any risk to the State. Sorting out those processes effectively, perhaps through a shared service culture, is crucial. I am aware that in local authorities many processes are being delivered through shared services. This leads on to the Deputy's second comment on the work that Kerry County Council is doing in the area of procurement. Once a process has been clearly defined and is working reasonably well, greater efficiencies can be achieved by taking certain aspects of it and outsourcing it completely to a third-party independent provider who will organise delivery hours and everything else. I hope that answers the Deputy's question about business process outsourcing and where we see it. Wholesale outsourcing is not our view of life; it is very much a steady and balanced process towards a better model. Jumping from where we are now to outsourcing will go wrong. In the past we have seen outsourcing opportunities go horribly wrong, as in the PPARS fiasco, because the proper process had not been followed. In retrospect it is clear.

On the procurement side, there is a centralisation of local authority purchasing into Kerry County Council for the past year or 18 months. A meeting has been scheduled with the organisation the Deputy asked about. We meet regularly with the CCMA and many county councils and our local chambers. Only a relatively small percentage of activity at State and local authority levels is going to central contracts, while a great deal is still being purchased locally. Individuals are being appointed as procurement managers but they need to have the right training, education, background and so on to coach them on how to actually manage a tender process properly. Our sense is that there are many good processes but the process is more important than the actual purpose, which is to buy something effectively. Much work is being put into it, and as a result it becomes far too cumbersome. I refer to the analogy I raised earlier - if one is going out to buy only a few staplers that are needed urgently, does one need a ten-page tender document? It is about an appropriate set of criteria and an appropriate process for purchasing. It is a worry. I am sure the County and City Managers' Association is concerned about what percentage of purchasing activity will ultimately have to be done through the central system in Kerry County Council versus local discretion. If 20% of purchasing was through the central office and 80% through the local office, that would be a tremendous support to, for example, SMEs in an area.

However, I am not sure how strict the guidance is or will be.

The Government must remember the cost of losing jobs, whether as a result of tweaking an extra few cent from a contract, resulting in a loss of jobs throughout the country, or of contracts going to a different jurisdiction where there is a different minimum wage and tax regime. It must look at the cost of this versus the cost in terms of social welfare and so on in jobs being lost in Ireland because too many contracts are leaving the country because of a marginal difference in price.

2:25 pm

Photo of Caít KeaneCaít Keane (Fine Gael)
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I thank Mr. Talbot for his presentation. Many of the same issues were raised in the previous one.

In his submission Mr. Talbot referred to the motor tax office and spoke about what a private company would have done. In defence of staff in the motor tax office, private companies can usually move staff around. If someone has a base in Lucan, he can switch the staff to the city centre by making a telephone call. This does not happen as much in the public sector, although it might be useful if it did. Private companies might receive more notice of an issue also. Staff in the office in Dublin city were not expecting the queue that materialised because the vehicles in question had been off the road. How were they to know it would be an issue? I would not always defend those in public offices but circumstances change. I agree, however, that flexibility is an issue that must be considered if we are to make progress. When I was involved with the local authority, I used to say that when a diktat came down from on high to the local office, the wherewithal should have come down with it.

I have noted what Mr. Talbot said about vacant premises, standardisation and having a step-down approach rather than a blanket 50% charge. It sounds like some people could bear more than others. He also mentioned tendering and that three companies could now put forward a combined tender. That is a change.

I am sure all businesses were affected recently by the water shortage and are concerned by the expense of treated water. I often mention the fact that only 1% of treated water is used for human consumption. There is an onus on businesses and everybody else to conserve water. Water harvesting would save businesses a fortune, particularly following the introduction of water rates. It would also provide a saving for local authorities and those who treat water because treating water is such an expensive business. If there was more co-operation in harvesting water, this would reduce the consumption of treated water and costs for both businesses and local authorities.

Mr. Ian Talbot:

I prefaced my comments on the motor tax office by saying the process was very good and had significantly improved on what it was ten years ago. However, seeing it shut down is a concern. The change that provoked the queues was something the local government efficiency review group of which I was a member and which reported in June 2010 recommended. It has taken the best part of four years for it to move from being a recommendation to being given effect; therefore, there was plenty of time to consider whether there would be an issue. Perhaps not everybody expected an extra 15,000 tractors to be registered. We accept that these things happen. The flexibility a private sector contract brings to the table means that we can demand more of that contract and in such cases it becomes an issue for the third party to deal with a particular situation. I accept, however, the point made by the Senator.

On the issue of water, Chambers Ireland has long been an advocate of the need for the user to pay for the services provided. In Ireland we have a funny attitude; we fully expect to pay for gas which is a natural resource but which has to be mined, piped and delivered to homes in a safe and secure manner. We are perfectly happy to pay a standing charge and user fees for it, but we do not seem to want to pay for water which falls as rain and must be harvested, treated and delivered to our houses in a secure manner. That seems different to us because it rains all the time.

In this morning's Irish Independent a former Member of the Oireachtas, Ivan Yates, spoke about his experience in Wales where people pay for water consumption and water to be taken away from their houses. The assumption is that water will be returned to the system to be dealt with. We believe, from a business and individual perspective, that users should pay for services. This would lead to these services being treated with more respect and it should improve consumption levels. From the business perspective, there needs to be a balance established between the cost of treatment and the cost of harvesting and investment in infrastructure. We support the establishment of Irish Water in order that we will have a central body to co-ordinate delivery of the service.

Mr. Seán Murphy:

On water harvesting, water still needs treatment. When water comes from the roof, it must still be processed; therefore, there is a significant charge involved in treating it.

Photo of Caít KeaneCaít Keane (Fine Gael)
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No treatment is necessary if it is just used for gardening purposes or in flushing the toilet. Treatment might be required for the purposes of consumption or other uses.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I thank Mr. Talbot and Mr. Murphy for their attendance. Their presentation and responses will help to inform us better in our consideration of Committee Stage of the Bill.

Sitting suspended at 4 p.m. and resumed at 4.10 p.m.