Patrick O'Donovan (Limerick, Fine Gael) | Oireachtas source

I welcome the opportunity to speak. Any occasion on which we have a chance to speak about local government funding is particularly welcome. I compliment the Deputy on his introduction of the Bill. While the Minister for the Environment, Community and Local Government, Deputy Alan Kelly, has provided reasons for the Government's refusal to accept it, I note that doing nothing on rates is not an option. Leaving the current system in place is not an option. Deputy McGuinness's Bill may very well have the flaws that the Minister, Deputy Kelly, has identified, but doing nothing is not acceptable any more. Nothing was done by the last Government and nothing has been done by this one up to now. I do not find that acceptable because, as someone who was a member of a local authority for eight years, I know that local government funding is overly reliant on a smaller and shrinking group of people, who do not know how their rates are calculated. They have no input into how their rates are calculated either. It is the last relic of the Victorian taxation system and it needs to go. The system of rates does not need to be reformed; it needs to be abolished in its entirety, and the system in place for the collection of the local property tax must be extended to commercial premises. That would achieve a number of things, which I will outline in the course of my contribution.

We have a very effective system whereby the Revenue Commissioners accept a valuation from an individual for a private dwelling house. The individual will accept the property tax based on the multiplier the local authority attaches to it. If the local authority wants to reduce it, it can. The other funding sources for local authorities are private businesses and the commercial sector, which have no input into the process. My own county, Limerick, has gone through a revaluation process recently. In a revaluation process, the entire valuation for the county must remain the same come hell or high water. It demonstrates how archaic the system is that it is designed not to change. While some valuations will go up and others will go down, the entire rate base will remain the same. If one took that approach to its natural conclusion and said the tax base would have to remain the same regardless of changes in the economy, income tax would have gone up to 85% or 90% over the last number of years. It would be done on the basis that there was no need to borrow.

One keeps piling on tax because one must generate the same revenue as in previous years. This is what occurs in local authorities. What is the outcome of this approach? Local authorities find that a large number of businesses cannot pay and are forced to close down. The flipside of rates is the local property tax. If a householder can show through an auctioneer or valuer that the value of his or her house has appreciated or depreciated, he can make a return to the Revenue Commissioners for assessment.

The only future role I envisage for the Valuation Office is one of an auditing body. It could randomly select valuations to ensure they are accurate using criteria such as location, turnover, type of business and so forth.

While the Bill introduced by Deputy McGuinness may very well have flaws, the idea of doing nothing no longer washes. We need to adopt the model of the Commission on Taxation and establish a commission on local government funding, which would have a fixed, short-term focus of producing a set of radical proposals. Deputy McConalogue is correct that they should be radical. They should not include the word "rates" because rates are paid by only a small number of people.

Deputy Stanley, who spoke strongly in favour of reform of the rates system, believes only business people should support local authorities. His opposition to the local property tax and domestic water charges is not sustainable because everyone uses local authority services.

It is legitimate for the owner of a petrol station located in rural west County Limerick to ask what services the local authority is providing his business. He may not have access to street lighting or footpaths and may not even have local authority provided running water. It is legitimate in such circumstances to ask what services the business receives in lieu of rates, given that they may be as high as those paid by a business in the centre of a city which benefits from footpaths, lighting, parks, libraries and other services. The current system is inherently unfair.

While I am aware that changes were made this week to the Valuation Bill before the Seanad, the legislation is designed to do only one thing, namely, to make the collection of rates easier. It is farcical that it does not include any measures to ease the burden of rates or make them more transparent. While it provides that businesses will be able to have valuations completed quicker, it will not result in any reduction in rates.

A revaluation process was completed recently in Limerick. It will take 20 years to revalue the entire country if the Valuation Office completes the task at the current rate. The valuation system, as a means of funding local authorities, is inefficient, archaic and long past its sell-by date.

While I do not know the rationale for the Government's decision not to allow the Bill to proceed to Committee Stage, as a backbench Government Deputy, I will support that decision. Notwithstanding this, the Government must not ignore the issue. Deputy McGuinness and other Deputies have made a number of good points, as have others, including Chambers Ireland, the Small Firms Association and the Vintners Federation of Ireland. This issue will not go away irrespective of which party is in government. The system needs to change fast.

Last week, I tabled a parliamentary question to the Minister for the Environment, Community and Local Government requesting that he provide details, in tabular form, of the amount of cash local authorities had on deposit. I do not know the reason the most recent figures available are from 2012. The Minister's reply indicated that, as at 31 December 2012, Cork County Council had €119,930,578 on deposit, Dún Laoghaire-Rathdown County Council had €155,366,717 on deposit and Sligo County Council, which has had financial difficulties recently, had €3,231,015 on deposit. While I accept that local authorities must have money in the bank for contingencies and so on, it is legitimate to ask why they have such large sums on deposit, what interest is accumulating on these monies and what is being done for businesses in counties where cash is being stashed in this manner. For what purpose are these deposits given that commercial rates are being increased and local property tax collected?

The days of doing nothing are over. Frustration is mounting among self-employed business people who are disappointed that nothing is being done about rates. I am aware of the Minister of State's background in County Waterford. I appeal to the Government, especially my Fine Gael Party colleagues, to ensure this issue is addressed. We must not leave it to another Government to take basic steps to address problems with rates. The local property tax has been introduced and is being collected. It is seen to be fair and those who pay it have an input in the process. They know exactly how it is calculated, who is recovering it and where the money is spent. In contrast, the collection of rates involves plucking an arbitrary figure from the sky. Local councillors then attach a multiplier to this figure in December of each year and this determines the rate, which must then be paid in two moieties. People do not know on what it will be spent. It could well be spent in a different part of the city or county. Businesses must also pay commercial water rates, for which responsibility has still not transferred to Irish Water. They will ask what they are getting for their rates as they do not cover refuse collection and many streets are characterised by widespread dereliction. At the same time, local authorities are holding money on deposit.

It is no longer acceptable to argue that we should continue to potter along and do nothing for small businesses and ratepayers. While the Bill will clearly be defeated in a vote, if anything is to come from this debate, I implore the Government to do, in respect of local authority rates, what it has done in respect of Irish Water in the past six weeks. This will require the establishment of a commission, made up of politicians and representatives of businesses and local authorities, to produce a system for funding local authorities that is transparent, fair, equitable and based on ability to pay and the type of business provided. Queen Victoria was knocking around when the current system was introduced. While the language may have changed, little else in this archaic and antiquated system has changed. It has not served us well and must go. In recent days, we heard people speak about their legacy, rather than the legacy of the Government. The Minister of State could leave a legacy of being the Minister in the Department who decided the valuation system had to go.

See this speech in context