Peadar Tóibín (Meath West, Sinn Fein)
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Question 57: To ask the Minister for Jobs; Enterprise and Innovation if he will detail an assessment of the cost to our competitiveness and employment levels of the continued implementation of upward only rent agreements. [35939/11]

Richard Bruton (Dublin North Central, Fine Gael)
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Policy responsibility for upward-only rent reviews comes within the remit of the Minister for Justice and Equality, Deputy Alan Shatter. I do not have specific data on the impact of upward-only rent agreements but the National Competitiveness Council provides some data on rents generally. Rent represents an average of 2% to 7% of total costs for manufacturing businesses, and 5% to 6% of total costs for services businesses. The council reported in its Competitiveness Scorecard 2011 that Ireland experienced a fall of 22% in rental costs for prime industrial sites in 2010, with a decline of 12.3% in prime office space rental costs. Both of these were the largest annual declines experienced across the countries benchmarked and both marked a continuation of falling prices seen since the peak in 2007. Rental costs in many of Ireland's competitor economies rose in 2010. Nonetheless, upward-only rent reviews have kept rents for many businesses at an artificially high level compared to open market trends and property values. My Department does not have data on the extent of renegotiation that has occurred.

The Land Conveyancing and Law Reform Act 2009 abolished upward-only rent reviews for all new leases signed on or after 28 February 2010. However, upward-only rent review clauses continue to apply to leases which were entered into prior to that date, impacting on the competitiveness of businesses. The Minister for Justice and Equality is continuing to work on legislative proposals in this area and is receiving advice from the Attorney General.

In the meantime, I urge businesses to make use of the rent review arbitration code, which was drafted by the working group on transparency in commercial rent reviews in 2010. The aim of this code is to make the arbitration process more straightforward, particularly for those businesses who may only rarely be involved in rent reviews and arbitration proceedings. The code is intended as an addition to the Arbitration Act 2010. It cannot override the mandatory provisions of the Act but it provides a mechanism to deal with disputes on commercial rents which can help to resolve issues at a lower cost, in considerably less time, and in a less adversarial way for the parties concerned.

Additional information not given on the floor of the House

The working group on transparency in commercial rent reviews also recommended the establishment of a public database containing relevant details of letting arrangements and rent reviews in the commercial property market. The database, which will ensure transparency in the market and allow all parties to access relevant information, will be established under the Property Services (Regulation) Bill 2009, which has already passed through the Seanad, with Report and Final Stages due to be held in this House later today.

Peadar Tóibín (Meath West, Sinn Fein)
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Upward-only rents affect competitiveness and raise the costs for end-user consumers. There is also a cost in jobs for the State. Approximately 250,000 people work in the retail sector in the State and it is estimated that approximately 46,000 people have lost jobs in the retail sector in recent years. It is reckoned that approximately 50,000 jobs in the retail sector are in serious danger of being lost at the moment. This sector is a very sensitive to cost changes.

Between 2000 and 2007 there was an increase of approximately 240% in rents in the State for businesses, which was a massive increase in the base cost. The programme for Government states clearly that the issue will be dealt with but Opposition parties are hearing that the Government feels there may be a constitutional issue. Retail Excellence Ireland has stated there can be a change within the parameters of the Constitution.

It is these costs, along with the VAT increases that will be brought about by the Government in the upcoming budget, which form a line from Dublin to Galway, making businesses north of that line extremely uncompetitive compared to their counterparts in the North of Ireland. This issue does not only affect the private sector, it also affects the public sector. How much is the Government paying in upward-only rents?

Richard Bruton (Dublin North Central, Fine Gael)
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I do not have that information to hand and the question would have to be directed to the Minister of State responsible for the Office of Public Works, Deputy Brian Hayes. He is responsible for public rent. I do not intend to understate the difficulties in the retail sector, and this issue has been raised by that sector. The Government has included the matter in the programme for Government and as I noted in the reply, the Minister for Justice and Equality, Deputy Alan Shatter, is examining the options in this area and considering what legislation can be produced. The work he is undertaking is ongoing.

Peadar Tóibín (Meath West, Sinn Fein)
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I have done a little research on the Government's expenditure and my understanding is that, through the OPW, it pays approximately €98 million in rent a year. Approximately €55 million of the rent paid by the Government is paid on an upward-only basis. It is estimated that the current decrease in rent in the private sector is approximately 30% in the past three years. If the Government only benefited from half of the decrease it would save €8 million a year. I refer to the fair decrease of the upward-only rent contracts in which the Government is engaged. It is a large amount of money when cuts are expected to be made to the social welfare bill shortly. Given the state of the public finances, the economy, small businesses and the quarter of a million jobs that are dependent on them, it is incumbent on the Minister for Jobs, Enterprise and Innovation to drive the reform of upward-only rents.

Richard Bruton (Dublin North Central, Fine Gael)
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Far be it from me to tell the Deputy to whom he should address the questions but the responsibility for public rents falls to the Department of Finance. Deputy Brian Hayes has been given an explicit mandate to seek reductions in costs across a range of procurement issues. Last week the Minister for Public Expenditure and Reform, Deputy Howlin, published documentation on public service reform which outlined detailed strategies on how savings would be made through public procurement. There is a strategy in place seeking to reduce those costs.

The Minister for Justice and Equality, Deputy Shatter, is responsible for upward-only rent legislation, not my Department. I accept what the Deputy says; that this is both an issue for public costs and private employment. It is clear that we are seeking better deals in the public sector on all areas of procurement.