Charlie McConalogue (Donegal North East, Fianna Fail)

I join with my colleagues in commending our spokesperson, Deputy Niall Collins, on tabling this Private Members' motion which is timely and opportune. It is of critical importance to many businesses, in particular small and medium businesses that have suffered and struggled so much in recent years and which are doing Trojan work on a day-to-day basis currently in order to stay in business.

Unfortunately, the rates system is outdated and has become completely unsuitable given the situation that has faced the country in recent years. The rates system takes no account whatsoever of a business's ability to pay. Neither does it take into account the nature of the business or its profitability. All that is taken into account is the size and value of the premises in which the business is located. One could have an unprofitable business in a certain building at one time and a business with a high turnover could move into the same premises the following week yet it would only have to pay the same rate. If one were to apply the way rates are assessed to income tax, whereby someone has to pay a set amount from their income regardless of whether they are earning €1 million a year or €30,000 a year, no one would stand for it, yet that is what we ask businesses across to country to put up with.

When I was a member of Donegal County Council I saw the difficulty presented to local authorities. In recent years the council attempted to introduce a repeated annual reduction in rates of 3%. At the same time as rate reductions were being introduced people were going out of business with resultant bad debts which meant that the one aspect of local authority income over which the council had control, namely, rates, was being squeezed from every direction and the council was then obliged to cut services in order to make it more affordable for ratepayers. Such a situation is not acceptable either as it put local authorities as well as businesses in an unenviable position.

The new Government was elected by the people at a difficult juncture in our history when the economy and businesses were facing a difficult situation. I am the first to admit that rates should have been addressed by the previous Government. The current system has been in place for too long. The previous Government had much to deal with, given that the international situation and the economic situation were deteriorating by the day. The new Government put itself forward as a panacea to many of the problems we had. It was suggested that if one could just change the people at the helm things would be a lot better all of a sudden.

There were justifiable hopes that issues such as rates would be addressed. Instead, no attention was paid to rates in the programme for Government in spite of it being one of the biggest issues facing business in the country. In place of the promise for 100,000 jobs, we got a jobs initiative which introduced a reduction of 0.5% in the lower rate of VAT. We were told that would make a massive difference. What we are seeing in the budget announced in Germany last week is a 2% increase in the rate of VAT from the same Government that told us how crucial the 0.5% reduction in VAT was which it delivered on the back of the general election a few months ago. Unfortunately, the Government does not appear to be pro-jobs or to be trying to ensure that we get back on our feet by ensuring small businesses and entrepreneurs across the country who will deliver those jobs get a fair break.

The Government must tackle rates and introduce a system that takes into account people's ability to pay. In the next three weeks the Government must revise its decision to introduce a 2% increase in VAT. Being from a Border county I know more than anyone else the impact it will have. The VAT increase will have a massive impact in Border counties but it will also have a serious impact on all other businesses around the country. I urge the Minister of State, Deputy Perry, following tonight's Private Members' motion and in view of the situation that exists across the country, to review the rates as soon as possible. I also urge him to use everything at his disposal to ask the Cabinet to reconsider the 2% increase in VAT because it will be a nail in the coffin of many businesses with which I have been in contact. I commend the motion to the House.

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