Niall Collins (Limerick, Fianna Fail)

This motion aims to confront severe problems with the commercial rates system and proposes alternative mechanisms to alleviate the financial burden on struggling businesses. The ultimate goal of the motion is to protect and create jobs in the heart of villages, town centres and cities throughout Ireland. There are three areas I want to address: Government inaction, the scale of the problem and the specific problems with the system and alternative solutions we can use to address it.

There is a paradox at the heart of the Fine Gael and Labour programme for Government - a contradiction between what it says and what the Government does. In stirring words it sets out a vision of economic growth and job creation by stating:

The Government will get our economy moving, restore confidence...and support the protection and creation of jobs. The success of our economic plans will lay the foundation for the rest of our agenda for change.

However, what lies behind these words is what the Government has done. It has not put forward any clear ideas for generating job creation nor has it provided a real way to protect vulnerable jobs. The programme for Government is entirely silent on the issue of commercial rates which are crippling businesses the length and breath of Ireland.

This is a silence echoed by Fine Gael and Labour in their respective 2011 election manifestos and it is a silence continued by the Minister for the Environment, Community and Local Government in his ongoing refusal to confront the issue. The legislative agenda put forward by the Government offers little hope to hard pressed ratepayers who are barely keeping their heads above the waters of recession. It only proposes an accelerated revaluation programme that will result in few effective revaluations, which will not take effect until 2013 at the earliest, by which time it will be too little too late. Bolder action is needed by the Government if we are to help small and medium-sized enterprises to protect and create jobs, and get the economy moving again.

But rather than helping business the Government is hindering it with damaging measures. At a time when businesses need support the Government is considering what amounts to a sick-leave tax on employers and a crippling 2% VAT increase that will drive shoppers North and further suppress demand. When the Government should be tackling fundamental problems such as business costs it is instead imposing fresh burdens on hard pressed employers. This is the sharp disconnect between the reality of the economy that people face on a daily basis and the rhetoric of the Government. Issues like curbing and reforming commercial rates should be at the forefront of Government efforts to generate economic activity.

The lack of action by the Government on this issue reflects the broader national failure of the Government parties at a local level to confront the problem. Since 2009 Fine Gael and Labour have dominated local authorities. Fine Gael has outright control of three of the 34 local authorities. Combined with Labour they control 22 of the 34 local authorities. They exert equal sway over town councils with rating powers - a total of 88 rating authorities. The local election manifestos of these parties rightly recognised the need to address failing businesses and the impact it has on the vitality and viability of towns and villages. Unlike their general election manifestos and programme for Government, they specifically earmarked commercial rates as being badly in need of change. However, once more, words did not translate into action.

Labour promised a breakdown of how the annual rates of businesses were spent which would be provided as a kind of receipt along with their rates bills. It also proposed a rate increment scheme to allow new businesses to pay a lower rate. Behind these words however there has been no action. The national lethargy on the issue reflects the local failure to act. Labour did not address the need to freeze or reduce rates preferring instead just to tell people on what the money was being spent in the hope that it would assure them while their businesses went to the wall.

Fine Gael promised to freeze commercial rates. The impact of the recession since then and the deepening international malaise we see in the eurozone crisis present an even graver threat than we imagined in 2009. Yet despite this, Fine Gael-dominated councils across the 88 rating authorities have overseen a measly 0.64% reduction nationally over the past two years. Like their jobs budget, which was watered down into a damp squib jobs initiative, the real impact of Fine Gael efforts on this issue have been meaningless for businesses on the ground.

Commercial rates represent 27.9% of local government finance. If we continue to inflict an inflexible system upon ratepayers, that base will be further whittled away by financial pressure. In my county of Limerick ratepayers funded local government to the tune of just under €23 million in 2009. Yet the county had to write off €2.6 million. This has no doubt increased since then owing to the impact of the international crisis and depressed consumer demand. The local government efficiency review group has earmarked €510 million in savings in the sector. It is imperative that we make the structural reforms necessary to create a streamlined local government and use these savings to reduce the burden placed on the shoulders on businesses.

While the financial strains on retailers, pubs, hotels and companies are immense, these businesses are not taking this wilful neglect lying down. The failure to address this critical issue is being met with constructive resistance by the thousands of small and medium-sized enterprises. They are pointing out the sheer scale of the problems they face, the impact of the rates system on businesses on the ground and what needs to be done to solve them.

ISME, representing some 8,500 members across the country, has bitterly criticised the inaction of the Government. It estimates that 40% of SMEs are under threat from the burden of commercial rates. Approximately 86,000 small businesses employ more than 700,000 people and generate €90 billion in annual turnover. These SMEs represent some 95% of all businesses in Ireland, with the vast majority of them micro-businesses which employ between one and ten employees. Based on these figures, in the worst case scenario if ISME's concerns are legitimate, it means that up to 172,000 jobs are at stake if we do not move swiftly in tackling commercial rates.

From a national perspective SMEs are a major contributor to the national finances, paying 37% of total income tax receipts and collecting more than 50% of gross VAT. If 40% of the businesses underpinning these vital contributions to the Exchequer fall, the repercussions for the public purse will be profound.

Chambers Ireland, representing 60 chambers of commerce covering some 13,000 business, has consistently criticised local authority charges that fall on the shoulders of businesses already struggling in the wake of the sharp international downturn. The ratepayers and local government council that drives the policies of Chambers Ireland on local government has highlighted the impact of rates on business and the heavy reliance of local authorities on businesses to finance their services.

RGDATA represents approximately 4,000 family-owned shops. The independent retail sector provides approximately 90,000 jobs in local communities. Many of these shop owners are battling for survival in the economic downturn. Stringent commercial rates are a central feature of the difficulties facing these small retailers. These local shops are hubs of activity in their areas providing jobs, goods, services and a centre point for the community. They do not simply have a commercial role in their local areas but also play a pivotal social role. The collapse of these shops tears asunder an integral part of the fabric of community life and deprives the national economy of €2.02 billion in wages and a €358 million contribution to the Exchequer.

From the other end of the retail spectrum Retail Excellence Ireland has urged swift action by the Government in addressing the local authority rates problem facing its members. This group covers 700 leading retail companies, which operate more than 9,000 stores in the Irish market. They represent a significant section of the retail industry and reflect the deep anxiety seeping into Irish businesses. The concerns these businesses have for the viability of their stores is at the heart of this motion.

Only last week, the Vintners Federation of Ireland staged a protest outside the Dáil. A prominent concern voiced by their members pertains to the status of local authority rates. Specifically, the vintners called for a clause in the forthcoming valuation Bill that would allow an appeal on rates based on a change in the economic circumstances of a business. The federation estimates that 5,000 jobs are at stake in its industry. These pubs are like the local shops and are as much social entities as they are commercial enterprises. Their pivotal role as the central hub of social life and an essential part of the fabric of the community is under threat. Apart from the devastating direct impact on those who will lose their jobs, the closure of local pubs inflicts immense damage to the social bonds that hold communities together. The Irish Hotels Federation, IHF, undertook a survey earlier in the year in which eight out of ten properties cited local authority rates as having a serious negative impact. The IHF and the Restaurants Association of Ireland represent almost 1,600 hotels, restaurants and guesthouses nationwide that employ more than 121,000 people. The IHF went as far as calling for the scrapping of the Valuation Act 2001, citing the onerous burden of funding €90 million of local authority finance. The slow rate of revaluation progress made by the Valuation Office is a major issue for hotels attempting to stay in business during this very challenging time.

It is clear from these representations by businesses which employ hundreds of thousands of people that there is a real problem with the commercial rate system. Economic growth is the key to resolving our current financial difficulties and creating a framework for businesses to develop and thrive is a central task of government. Protecting the jobs and livelihood of workers must be a top priority for the Government. It can start with a complete overhaul of the valuation process, which clearly is strangling Irish businesses. The current regime suffers from a number of fundamental deficiencies, namely, the arduous slow pace of revaluation and the failure of the process to recognise economic circumstances. The Valuation Office is moving at an excruciatingly slow pace and may take an additional ten years - an entire decade - to complete an entire overall review of rates in all authorities. Irish businesses cannot be condemned to a struggle for survival in a hostile economic environment while being saddled with a rates system that is failing them.

Even if the Government hastens this process with the amendment to the Valuation Act 2001 due next year, it may be 2013 or 2014 by the time revaluations are complete. If one considers the low ebb of consumer confidence in the country, the crisis in which the euro is mired and the austerity measures being put forward by the Government over this period, it is not too hard to predict that it will be a very difficult time for Irish business. For many struggling to survive, time is not on their side. Promises of future relief means little to those who will not be around to benefit from it. This is the reason factoring into account the ability to pay is a core part of any meaningful reform of the commercial rate system. The financial strength of innumerable businesses has diminished in light of the recession. Their capacity to pay rates has suffered as they struggle to make ends meet, pay wages, fund bills and buy stock. A system must be developed that reflects this fundamentally changed reality. Economic conditions must be at the heart of any future overhaul of the commercial rates system.

The Local Government (Rates) Act 1970 currently includes the possibility of a waiver for some or all the rates due by ratepayers. This scheme is a reserved function of local authority members and requires the consent of the Minister and therefore of the Government. The costs incurred must be met by the council. This scheme has proven to be unworkable in practice. Many businesses do not even know about it and in my meetings with employers they generally have been surprised to hear about it. The need for a council vote by local authority members, the financial repercussions and then the need for Government approval mean this scheme has had little if any impact on the burden of rate paying.

The Irish Employers for Affordable Rates, IEAR, an umbrella group representing Irish rate payers as a whole, has put forward a series of worthwhile measures to address the problem. Economic conditions and ability to pay considerations are key to its proposals. Specifically, it has requested that Dáil Eireann insert an economic conditions clause into the Valuation Act 2001. This would allow employers appeal a rates valuation due to a change in economic circumstances. The IEAR rightly argues that this amendment would alleviate the pressure.

The United Kingdom model offers an alternative way forward for the rates system. Economic conditions and the ability to pay of the business is factored into account. Councils have the power to exempt struggling businesses from paying rates and rural businesses have a 50% mandatory exemption on rates. The money collected is put into a central pot that is then distributed to councils on the basis of need. The comparative inflexibility of the current rates system here could be adapted to draw from the best elements of the United Kingdom model. This more inherently responsive system offers an opportunity to give businesses much-needed breathing space.

A survey of Ireland's current economic landscape reveals that we face immense challenges. Members are faced with the choice of standing still and hoping things turn out for the best or of taking strong decisive action to spark the economy back into life. They must look at the structural reforms they can make that will protect and generate jobs. The commercial rate system is one such example and reforming the commercial rate structure will do more for employment than will a dozen damp squib jobs initiatives. The Government was elected on the basis of promised jobs. This is an opportunity for it to take real action to live up to those promises, rather than adding them to the ever-growing mountain of confirmed broken promises and U-turns. I urge it to support this motion and take the first steps in giving Irish businesses a fighting chance in these difficult times.

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