Jim Daly (Cork South West, Fine Gael)
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The importance of growth in the economy to complement the success we have made since becoming a programme member is underlined every day. It is important that the Government and the Oireachtas do everything possible to encourage and stimulate that growth. No sector is better poised to assist us in that area than the small and medium enterprise, SME, sector. If all 250,000 of them had the assistance to create one new job each, our dole queues would be halved overnight. It is important we support this sector, and that is why I raise this matter.

I wish to illustrate some of the obstacles created by the current rates system A constituent who has a unit for lease has secured a new tenant. The new tenant has agreed to take on the lease of the unit which has been idle for the past six to nine months. Unfortunately, there is a rates arrears hangover attached to the unit and this transfers automatically to the new tenant, irrespective of the new tenant's history or of the new tenant's future. This anomaly causes serious obstacles to generating growth in our economy by allowing people to take up new leases. Landing a new tenant with a rates bill inherited from a previous tenant is outrageous.

Other constituents who wish to expand their business approached me during the week. They have a fabrics and soft furnishings business. They want to expand and have found an old car showroom which is suitable. They went to the local authority, because the rates on the premises are €1,700 per month, and asked the local authority to do a deal whereby they could pay 50% the first year, 75% the second year and 100% the third year, which seems reasonable in the current times. The local authority replied in writing that it has no discretion in this area. It is full rates or nothing. Unfortunately, the reality for Cork County Council is that, in this case, it will be nothing. The unit will be left empty because of the inflexibility of the rates system.

I lament a major lost opportunity in our recent jobs initiative where we should have grappled with this thorny issue because of the urgency and immediacy afforded to it. As a former county mayor, I am well aware of the importance of rates to every council. I am not criticising local authorities. In Cork County Council, for example, rates were worth €100 million a year. I also appreciate the challenges posed by the difficult and draconian legislation undermining the gathering of rates by each authority.

I earnestly request the Minister to act immediately, notwithstanding the current and planned reviews of rates, and give county and city managers discretion in the application of rates to new businesses willing to occupy vacant premises. This can be done by ministerial directive and does not require the long protracted legislative process, because time is of the essence and jobs are being lost. While headlines will always focus on the very tragic big job losses, the small loss and lost opportunities which make no headlines and appear on no record are just as much of a concern to me as a Member of the Oireachtas. I also ask the Minister to introduce emergency legislation to amend the existing Act that transfers the onus of rates, which are effectively a property tax on a building, from one errant tenant to a new prospective tenant who will create employment, generate revenue for the local economy and the rate collector - the local authority - and to speed up the current review of the rates system with a view to introducing a commercial rate that reflects the reality for SMEs in Ireland today, not the dark ages to which they belong.

Willie Penrose (Longford-Westmeath, Labour)
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I thank the Deputy for raising this important matter for debate, which I am taking on behalf of the Minister.

Rates income is a very important contribution to the cost of services provided by local authorities such as roads, water, public lighting, development control, parks and open spaces. The continued provision of these services is essential to creating and maintaining the local environment in which business can operate and prosper. Local authorities are under a statutory obligation to levy rates on any property used for commercial purposes in accordance with the details entered in the valuation lists prepared by the independent Commissioner of Valuation under the Valuation Act 2001. The levying and collection of rates are matters for each individual local authority. The annual rate on valuation which is applied to the valuation of each property, determined by the Valuation Office, to obtain the amount payable in rates is decided by the elected members of each local authority in the annual budget, and its determination is a reserved function of a local authority.

The factors that influence the decision on the annual rate on valuation include the level of services to be provided by the local authority and the income available to fund these services. Therefore, elected members adopt the annual rate on valuation they consider necessary to provide the range of services for the communities, including businesses, in their area. In this regard, all rates collected locally are spent exclusively on providing services within that area. This is local democracy in action.

The Government is acutely aware of the pressures on small and medium-sized businesses and the challenging economic environment in which many property and business owners are operating at the moment. In this context, the Government is focused on reducing the costs of doing business to support competitiveness and employment in the economy and to protect the interests of communities. Local authorities have responded positively to requests to exercise restraint in setting commercial rates. Annual rates on valuation have been reduced by an average of 0.6% in 2010 and by a similar level in 2011. The Minister for the Environment, Community and Local Governmentwill continue to keep all matters relating to rates under regular consideration. However, I have no immediate plans to reform the rating system.

That said, the Commissioner of Valuation, who has sole responsibility for all valuation matters, is conducting a programme of revaluation of all commercial and industrial properties throughout the State. This will produce more consistent and up-to-date valuations for rating purposes and will assist in making the rating system fairer and more equitable for ratepayers.

Jim Daly (Cork South West, Fine Gael)
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I thank the Minister of State for his response. It is obviously not the response I wanted, and we need to look at that. The Oireachtas has a responsibility to move with the times, and to get a blanket clarification from the Minister that there are no plans to reform the system will not send a message to the business community that we are supporting the SME sector.

Empty units throughout the country are of no use whatsoever in terms of revenue to local authorities. Revenue should do what every other sector is doing, such as the hotel sector, which is suffering inordinately owing to rates, by offering course discounts and reviews and offering to do business with people. That is how markets react and how economies thrive and survive.

I urge the Minister of State to take on board my suggestion that county and city managers be given discretion, especially when it comes to vacant premises. Ultimately, it will lead to an increase in their revenue. I am not trying to deny any local authority its revenue.

The other argument made is that if we give a break to new businesses, we are discriminating against existing businesses that are paying the full fee, but all the phone and television companies do that. Many companies provide introductory offers for the first six months or the first 12 months. The existing customers are paying the full rate, but it does not disenfranchise them. There is an onus on us to take this much more seriously.

Willie Penrose (Longford-Westmeath, Labour)
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As I stated in my introductory remarks, the Government is acutely aware of the pressures on small and medium-sized businesses at the present time. The Minister of State, Deputy Perry, is dealing with various competitiveness and cost issues that will certainly incorporate some of things raised by Deputy Daly. The Deputy's point about vacant properties is well made.

Local authorities have taken a number of initiatives to promote and support enterprise, economic development and employment generally, including in particular the establishment of business support units or equivalent arrangements in each county and city council. Local authority cost bases have been reduced and continue to be rigorously examined rigorously to maximise efficiencies which, in turn, impact positively on business. We will continue to impress upon local authorities the need to continue measures to enhance efficiency with a view to minimising rates and charges for business.

As I outlined previously, the Commissioner of Valuation is conducting a programme of revaluation of all commercial and industrial properties throughout the State. Following completion of the revaluation programme, there will be a much closer and uniform relationship between the rental values of property and their commercial rates liability. This relationship will thereafter be maintained by means of recurring revaluations provided for in the Valuation Act. This will lead to more consistent and up-to-date valuations for rating purposes and will assist in making the rating system fairer and more equitable for ratepayers.

I recognise that these are difficult economic times for many businesses. While it is not my intention to reform the commercial rates system at this time, I will continue to keep the approach to rates by local authorities under active review. I remain determined that every avenue will be pursued to optimise efficiency and curtail costs in the local government sector.