Wednesday, 23 November 2011
Private Members' Business
Commercial Rates: Motion (Resumed)
I wish to share time with Deputies Clare Daly, Richard Boyd Barrett and Joan Collins.
There is no doubt rates have become one of the biggest burdens on small and medium-sized businesses. God knows the domestic economy has enough problems without the unresolved problem of rates hanging over the heads of businesses. I will outline a strong example in this regard. I have an 880 sq. ft. unit in the Italian quarter which I rented at €50 per sq. ft. in 2005 resulting in an annual rent of €40,000. In 2011, the rent is €25 per sq. ft., which means the annual rent will be €20,000. Local authority rates in 2005 were €6,073 and they had increased to €6,847 by 2009. Rates went up by 13% in that period but rent has fallen by half. The rates to rent ratio is 30%, which is absolute madness. If one tries to rent a unit for €20,000 annually and the rates cost 30% on top of that, it is almost impossible to rent it.
Revaluation is ongoing but it started in 2005 and, seemingly, the officials have still not got out of Dublin. They still have not revalued Dublin city centre. The revaluation system is too slow. More staff are required and there must be a link to market rent, which means a link to reality because that is non-existent currently. If it is not linked to market rent, a percentage of independently audited turnover should be set to achieve a realistic figure for rent. The 2009 Commission on Taxation report recommended setting up a transparent nationwide valuation system. It also recommended a cost effective route of appeal and regular valuations. Unless a proper system is put in place with the necessary staff, businesses will continue to go out of existence. That will mean less revenue for the Government, job losses and loss of morale with the economy driven further into the bowels of the earth.
I support the proposal in the motion that commercial rates should factor in the profitability of firms, particularly small and medium-sized firms, as opposed to the current ridiculous system where rateable valuations derive from what a premises would fetch if it was rented. That is ludicrous. It is difficult to rent properties at the moment but rates have no link with the activities on a premises. One wonders why Fianna Fáil did not reform the system in the 14 years it was in power, particularly considering that the final three years of its rule coincided with many serious problems for small businesses and so on.
The motion refers to the revaluation exercise being carried out by the Valuation Office, which is a joke. It began almost a decade ago following the passage of the Valuation Act in 2001. At the time, at the insistence of the Government, a costly Deloitte & Touche report was done, which grossly underestimated the resources that would be required for the Valuation Office to undertake this massive exercise. We have to learn lessons from this. The staff who worked on this pointed this out but they were not properly consulted by senior management or by the consultants. They correctly anticipated and resisted the efforts to foist such a massive workload on their shoulders and they were involved in industrial action for seven months in 2002 over this issue, which resulted in the provision of some additional staff. The technical and administrative staff were correct about the debacle that was unfolding but they were not listened to.
The revaluation exercise is a joke and it should be abandoned. I come from a local authority area in which the new system is in place and it has caused chaos. There is pressure on small businesses but the key lesson to be learned is that those at the coal face know best. The Government's amendment, which I strenuously oppose, refers to outsourcing the work of the Valuation Office. This would be a disaster. We should listen to the people who know best and who told the then Government ten years ago of the problems we are now living with and for which businesses are paying the price. The current Government should not make the same mistake twice.
I will pass over the irony of the fact that this motion was tabled by Fianna Fáil, given it did nothing about the rates system during its 14 years in power. Tens of thousands of small businesses are clinging on for survival by their finger nails because of the economic disaster Fianna Fáil inflicted on us and the austerity which it and the new Government continues to inflict. This is depressing demand in the economy significantly and if that problem is not addressed, there is no hope for small and medium-sized businesses, regardless of how much hand wringing is done or how many words of support for small business we hear from any quarter in the House.
The rates system makes no sense in that it does not take into account ability to pay or the profitability of a business. A differential rates scheme should be put in place similar to that in Scotland. Another form of this scheme is in place in France where small businesses pay a different rate from big businesses. It is crazy that a bank branch could be housed in a building with a butcher next door and they both pay the same rate. The bank branch is highly profitable and linked into a much larger entity. A differential rates scheme is needed, which relates rates to profitability and ability to pay. For example, when such a scheme was introduced in Scotland a number of years ago, small businesses and shops were given a discount of between 25% and 100% on rates with a maximum rebate set at stg£4,100. As a result of the scheme, 60% of small businesses experienced a significant benefit. That is what I propose to the Government. One does not have to be a socialist or a revolutionary. This simple measure exists in Scotland and many other parts of Europe to boost small business.
I lean towards supporting the Sinn Féin amendment. While recognising the burden placed by rates on struggling small businesses, I cannot endorse a motion calling for the implementation of the local government efficiency review group recommendations. This review calls for a €500 million cut in local authority funding on top of cuts going back years which have seriously undermined local authority services. As a former member of Dublin City Council between 2004 and last February, I have first hand experience of these cuts, like other Members who are former councillors. Parks close early and many services have been cut across the board while central funding has been reduced. The motion is effectively calling for more cuts.
The commercial rates system needs radical reform to take account of profits, total incomes and so on similar to the differential rates scheme in Scotland referred to by my colleague, Deputy Boyd Barrett. This scheme is practical, useful and it keeps small businesses in the economy. It is a practical measure, which is not radical. It is ridiculous that a corner shop pays rates on the same basis as a major supermarket chain or a small business on the same basis as a company such as Google. The solution to the problem of local authority funding is to restore the rate support grant from central Government to the level promised when domestic rates were abolished in 1977. This should be funded from a progressive tax system with wealth, higher incomes and large profits taxed to provide essential public and community services.
I wish to share time with Deputies Ann Phelan, Pat Deering, Robert Dowds, John O'Mahony, Dominic Hannigan, Seán Conlan and Paul Connaughton.
I welcome the opportunity to contribute to the debate. As a member of local government for 18 years, I am conscious of the role rates play in the provision of services. I am also conscious in the present circumstances of the difficulties many small businesses experience in regard to the rateable valuation approach. In my area a viable, middle size hotel business had to close down because it could not meet the rates at the time, which was an extreme disappointment to the whole community as it was giving an excellent service.
We have called on numerous occasions for re-examination of the whole valuation area. I agree there should be a nuts and bolts approach to valuations. We have seen the anomalies, made representations about them and have then seen re-valuation that does not make sense, although we have sometimes appealed successfully. What we need in this area as well as reform is consistency in how the rateable valuation is applied. I have experienced quite an amount of inconsistency between similar businesses, which obviously creates a level of uncompetitiveness which is totally unacceptable at any time.
The rateable valuation issue has a long history. When rates were initially removed in 1977, it was a serious blow to local government. If it is a case of empowering people to make decisions about given services, they should surely be empowered to collect money to provide those services rather than have a third party of whatever type in Government to do so. The move some time back to allocate car tax to local government had some merit, but it failed in the implementation of a good idea. While anomalies would arise in that regard also, they could have been corrected.
We have had various representations in recent times on small businesses. If a business is in difficulty, there should be a system of appeals in regard to rates, with documentation required, given that we can have "opt out" clauses for many schemes in certain circumstances. These should be tightly monitored and the criteria should be very tight so there is no room for abuse or inconsistency. However, when businesses come forward who cannot afford to pay their rates, those rates should either be deferred for a period of years or a level of payment should be made that is flexible to ensure the survival of the business, because that means the survival of jobs.
There is not a small town or business anywhere in Ireland for which the whole issue of commercial rates is not the main topic at present. The business world is one of the most productive elements in our society and should not be made responsible for the upkeep and maintenance of what is left of local government. I will not spend much time giving a history lesson. I know Deputy Boyd Barrett gallantly refused to have a go at Fianna Fáil about this, although I will not follow suit. It was a Fianna Fáil Government in 1977 which landed business and enterprise in the unjust position it is in today - that is a reality we should not forget. Fianna Fáil ruined the most essential public service needed by every man, woman and child in the country. We must not allow short-term political expediency to be used here ever again.
My good friends in the party opposite were also responsible for the most recent "Alice in Wonderland" solution of part-funding local services from development levies during the housing boom. In the same way that Fianna Fáil mortgaged the whole country to foreign bankers, it also mortgaged local government. We know that ended in tears and we are all paying the price for it.
Local government was primarily set up to assist in the fair and equitable distribution of funds to fund local community needs. It was the business community that created the noble concept of local government to address its need for public roads, footpaths and lights and to provide homestead comforts. It is, therefore, ironic that the same business fraternity which set up a funded local services system in the first place is now hard done by.
We owe it to the public to underpin the preservation of essential public services by spreading the bill to those who can afford it. We have to do everything possible in our national Parliament to rescue this precious resource which has so painfully been built up over the centuries. In this Dáil, we have a clear duty to respond with courage and leadership to ensure that local government can respond when it is needed - during a natural emergency, a fire, water supply interruptions or simply respond to everyday needs that local councils provide 365 days of the year. We all remember the situation last year.
The public have to be wary of those who use the local council system as a stepping stone to becoming TDs and then, when they get into this Chamber, use it to make populist statements to chambers of commerce about a blanket reduction in commercial rates. This short-term fantasy-land politics is an insult to people's intelligence, especially to those paying the rates, and leads to a very weak local government system. Now is the time for responsible collective thinking on how we should spread the burden of paying for essential public services by a direct, fair and sustainable system of taxation. Now is the time when we can genuinely assist the business community, rather than allow it to be used as political fodder, as it is being used in this House tonight.
In all of the successful alternatives operated in other countries, there is relief or abatement to those who merit such consideration. We should be able to recognise fairness. Surely it is possible for the Valuation Office in a small country like ours to devise a fair, up-to-date valuation of commercial and industrial properties as laid down by statute. We have to ensure the Valuation Office continues to be independent of sectoral influence and, in turn, does not act for the local authority. This Private Members' motion has to be challenged because it is a cynical sham by those who continue to be afflicted by selective political amnesia.
Like previous speakers, I am glad to have the opportunity to speak on the motion. The issue of rates affects everybody. Before we move on, we must assess where the problem began. Like Deputy Ann Phelan, I was amazed yesterday to hear my constituency colleague, Deputy John McGuinness, trying to remember when the problem began - he thought it was the 1970s. To remind him, it was 1977 when the big problem began with the removal of rates from ordinary houses, and it has not been addressed since.
Amazingly, at that time we transferred the payment of rates to 20% of the ratepayers, which is a serious problem. After 14 years of Fianna Fáil Government, none of the problems have been addressed. To listen to the hypocrisy of Fianna Fáil Members speaking about rates, one would think this problem only began on 9 March 2011, not 1977.
Local authority funding is essential. Deputy Ann Phelan referred to the conditions last winter and the previous winter when we were all in serious trouble trying to get around in the ice and snow. Where was our first port of call? It was the local authority. If the local authorities are not funded properly, we will not be able to go down that road. Some 29% of local authority funding comes from ratepayers, which is a large proportion, and the rest comes from a block grant from central Government.
Deputy Niall Collins in his speech yesterday lamented the fact that Fianna Fáil had been in Government for 25 years over recent decades. The local government block grant is also important in the funding of local government which is important in a democracy. Any discussion on local rates must take place in conjunction with the reform of local government, but nothing has happened in this regard during the past 30 to 40 years.
I believe in the concept of sharing services and systems and co-operation between local authorities, which is important. County Carlow which has a population of approximately 55,000 has three local authorities, Carlow County Council, Carlow Town Council and Bagnelstown Town Council. This is ridiculous and the issue needs to be addressed shortly. I commend the Minister for his approach to try to rationalise services for the benefit of all concerned.
It is important to understand the more we reduce rates, the more bigger companies benefit, as opposed to smaller companies. For example, a 1% rate reduction in County Carlow could mean a €5,000 reduction in rates for a big company per year, whereas it might only mean a €50 reduction for a small company, which would be minuscule and of no benefit. A 1% rate reduction in County Carlow would mean a loss of revenue of €50,000 for Carlow County Council. Such a loss would equate to the salary saved by the sacking of a member of the outdoor staff in the county council, which staff provide a valuable service for the community.
The Minister is on the right road to local government reform and it is important that we continue on that road. More has happened in the past few months than in the past 25 years. I have a few ideas that may be of benefit to the Minister when he is considering matters. There could be sliding scales of rates, whereby bigger companies would pay more and smaller companies would pay less. We could introduce incentives for ratepayers, whereby a company which took on an employee would receive a rate rebate; such a measure would help to create employment.
I compliment the Minister on his reform agenda and wish him the best of luck in the future.
I am pleased to speak to the motion. As the previous two speakers demonstrated, commercial rates are only one small aspect of a debate that needs to take place on local government reform. With funds drying up from sources such as development levies which Deputy Ann Phelan mentioned, councils are more dependent on commercial rates, even though there is less money available for services. The points made by her and Deputy Deering concerning the problems that arose from the decision to abolish rates in 1977, unfortunately, are correct. Their abolition cut the legs from under local authorities, which was a great pity because the more decisions that can be made at grassroots level, the better for society. It is important, therefore, that we do our best to introduce reforms. In looking through the figures for last year I noted that 13 of the county and borough councils had managed to reduce commercial rates to some degree. While that was probably not enough, it was a start. The issue needs to be tackled on a broader basis.
Another main source of funding is the local government fund which incorporates motor taxation receipts. When Deputy Howlin was Minister for the Environment in the mid-1990s, he introduced this fund which he ring-fenced for local authorities. However, all of the money does not necessarily go to the county council which collects it. There are four county councils in the Dublin metropolitan area. South Dublin County Council, the council for the area in which I live which has a population of about 250,000, receives €24.3 million from the fund. At the other end of the scale, County Leitrim has a population of 31,000. However, its county council receives more than €14 million, despite the fact that the county has a much smaller population than the South Dublin County Council area. Although there are reasons for this, it is important that there be equity. My county council area which has almost the exact same population as the Fingal County Council areas receives, as I said, €24.3 million from the fund, while Fingal County Council receives almost €30 million. I ask the Minister to examine this issue to try to come up with a more equitable arrangement.
A €100 charge is to be introduced. It is important that the money raised go directly to the council areas in which the people who will pay it live in order that they will be able to benefit from it. It is difficult to get even small jobs done in council areas, whether it be the pruning of trees, the jetting of shores on roads which was necessary at the time of the floods in Dublin, or minor repairs to footpaths.
Overall, there is a serious point made in the motion, but it is only touching on a major issue, that is, the crying need for major reform of local government.
I am glad to add my voice to the debate on the need to address the commercial rates issue. Commercial rates are becoming an unbearable burden on small businesses, in particular, as has been stated many times. I listened to the Minister last night and welcome the efforts he is making to roll out the revaluation programme and reform local government. It is a little early for this side of the House to be accused of having failed to do many of the things previous Governments put on the long finger or failed to do for many years, but I do not want to get involved in that debate. I support the view that we need to do something quickly.
Bigger businesses and multinationals can absorb costs more easily, unlike the small corner shop or petrol station. They are the ones we listen to time and again as they employ hundreds of thousands of people. We have heard in many debates in this Chamber during recent months about how we cannot continue to spend €50 billion when we take in only €31 billion. Small business are in the same position; they are hanging on by their finger tips. In many small towns in my constituency of Mayo, including Charlestown, Kiltimagh, Swinford and Claremorris, half of the shop units in the centre closed during the past three years. It is in everybody's interest, therefore, to have a rating system that will encourage people to open businesses in these shop units. As 100% of nothing is nothing, the issue must be addressed. A few years ago there were five petrol stations in one of the towns mentioned, now there is only one. When the publicans were out marching last week, they told us that one pub per day was being closed throughout the country. Employment measures have been taken such as reducing the rate of PRSI. However, it is important to have a sense of balance. VAT rates were also reduced, as a result of which tourism has been boosted.
I agree with many speakers that there is a need for a targeted approach to suit smaller businesses which might employ a few workers because they are not in a position to bulk buy or drive down their costs as much as multinational supermarkets. These are the business units which need to be given an opportunity; they need to be supported and helped quickly. Numerous businesses have contacted me, as I am sure they have contacted every other Deputy, about the kite flown on the issue of sick pay. There are many kites in the air. The same individuals who are enduring the burden of commercial rates will suffer again by having to pay the first four weeks of sick pay if that measure is introduced.
I hope it is a kite and that it will fly away and not appear here in two weeks time.
I welcome the Government amendment to the Private Members' motion. On a number of occasions over the past six months I have raised the issue of the Valuation Office with the Minister for Public Expenditure and Reform. The slow progress being made in revaluing commercial property is a concern for rate payers throughout the country, including in my home county of Meath. I have received many phone calls and e-mails from local businesses seeking flexibility when it comes to payment of rates. They wanted to see a revaluation of the rating system
. The Valuation Office has not taken on the task with the sense of urgency necessary. Since it started the revaluation process in 2005 it has examined only Dublin businesses. The revaluation of the South Dublin County Council area was completed in December 2007, the Fingal County Council area in 2009, and the Dún Laoghaire-Rathdown County Council area last year. Work on the Dublin City Council area has begun but it is not expected to be completed until 2013 at the earliest. We can all agree this simply is not quick enough.
I have raised this issue directly with the Valuation Office and it stated it does not have the staff to carry out the work any faster. It also told me businesses in Meath would not be revalued until after 2014 at the earliest. Businesses in Dublin are getting an advantage while the rest of the country has to wait. This is not fair and it is not a balanced approach to economic development.
This is an important issue for many counties outside of Dublin, including Meath. More than 90% of businesses in Meath are small and medium enterprises employing fewer than nine people. More than half of Meath employees are employed by small businesses. Therefore, rates have a huge impact on the ability of these businesses to do business and grow.
In 2010, commercial rates for County Meath accounted for 29% of total annual local authority income. Commercial rates depend on the annual rate on valuation multiplier. While this is decreasing throughout the country, in Meath it has increased year on year since 2008. Therefore, we are keen to see a revaluation and review of the situation.
If staffing is an issue I urge the Minister to consider the possibility of redeploying staff from other Departments in the public sector to the Valuation Office. The speeding up of this process will benefit SMEs throughout the country. This will have knock-on effects as not only will it be easier for them to do business but we can also expect to see more jobs created. It would be a move in the right direction.
It is about time that Fianna Fáil woke up and saw that the issue of local authority funding is a cause for concern. It is a pity it took the party too long -until after it left government - to see the problem. It seems it is waking up only now to the damage it did to this country.
I appreciate the opportunity to speak on this issue. I welcome the Government amendment to the motion. I have been a commercial ratepayer in the past and I understand the concerns about this issue among the business community given the current economic climate. The Fianna Fáil Deputies who tabled the original motion made much of the fact that they identified no less than 16 issues, all listed in the original motion, which they wish the Government either to note or act upon. If it was that simple, they would have done it when they were in government. It is a pity they did not address the issue over the years.
As the Minister, Deputy Hogan, pointed out yesterday, the removal of domestic rates by Fianna Fáil in 1977 was a serious mistake and was done for narrow political reasons. It left the business community carrying the can for local authority funding. We need to shape a far more efficient system which, while gathering revenue for local authorities, will be fair to an already under siege business sector and which will protect and encourage job creation. The revaluation of commercial property has been comprehensively undertaken only in Dublin and I welcome the Minister's proposed legislation to amend the Valuation Act 2001 with a view to streamlining and speeding up the Valuation Office. I also welcome the Minister's intention to allow the Commissioner for Valuation to pilot the introduction of a new self-assessment valuations process and to outsource valuation work.
Higher rates on new start-ups stifle badly needed new business development and do nothing to tackle the issue of vacant commercial premises throughout the country. A special rate exemption should be introduced to give new businesses every chance of survival in the early stages.
As a Deputy for the Border constituency of Cavan-Monaghan it would be remiss of me not to refer to the particular problems facing ratepayers in Border areas. They must contend with the ravages of the current recession and cross-Border competition. Currency and VAT fluctuations are an annual and weekly problem and have a profound impact on business stability in Border areas. This is an issue the Government should address once and for all. I call on the Government to consider providing a rate rebate programme that would benefit businesses which trade domestically in the six Border counties. This programme could be administered by the county managers and funding could be drawn from a central Exchequer fund to make up for local shortfalls. Any such measure would do much to bring stability to businesses in Border areas and at the same time inject confidence in a community under considerable strain. Will the Minister strongly consider piloting the proposed self-assessment rate programme in the Border counties?
I am glad to have an opportunity to speak on this issue. This matter is raised on a yearly if not a weekly basis, when considering the issues faced by small businesses throughout the country. No matter what has happened in the past, it is time to look to the future and see how we will fix this problem and give small businesses the best opportunity to do what they do best, which is to provide employment in local towns.
There is unbelievable pressure on businesses at present through increases in costs such as electricity and water. However, commercial rates continue to pop up as the reason they struggle. A major issue is with regard to the Valuation Office. It came before the Committee of Public Accounts several weeks ago and it is unacceptable to have a situation whereby it could take ten years to complete the revaluation process in some parts of the country, given that business changes on a weekly basis. Many business people are holding on to the idea that the revaluation will be of some assistance to them and might lower their rates. Unfortunately this may not be the case. We must encourage a new way of doing this because waiting for the Valuation Office to reach all parts of the country is not acceptable. It does not have the staff or funding to do it.
We have tied the rates businesses pay to local authorities and we do not want to starve local authorities of funding. Roads are badly underfunded at present, as we can see in all parts of the country, and the Leas-Cheann Comhairle and I are very aware of this through some of the issues we have in our area. People have been waiting for many years for group water schemes to be upgraded. They are ready to go, but owing to a reduction in funding to local authorities, they may not see the light of day for a while yet.
We must come up at a system that is fair and based on the size of the business involved. The one-size-fits-all solution is not working at present. Larger businesses pay the same as smaller businesses and this is completely unfair because on an annual basis local authorities are lobbied to reduce the commercial rate, but all this does is reward larger businesses because they get more out of it. If we are to continue funding local authorities from commercial rates we must do so on a fair basis. While small businesses must fund local authorities, this cannot be at the expense of their existence. At a time when we are trying to create jobs, if every small businesses had the ability to take on one or two more people, we would start to see a drop in unemployment figures.
I welcome what has happened so far in the reform of local government but much more needs to be done. If we want to see small businesses continue to operate in local towns where they provide employment, we must come up with a more fair and balanced system.
I welcome this opportunity to speak on this very important motion. I compliment my colleague on bringing it before the House. It is an extremely important and relevant topic as all local authorities throughout the country are setting their annual commercial rates. It is one of the biggest issues facing many businesses. The Government needs to sit up and do something about it very quickly.
Just a few months ago the Government hailed the VAT reduction as part of a stimulus to the economy. However, this week it is stating a 2% increase will not affect our domestic economy. We are also speaking about small businesses having to cover the sick pay of employees for up to four weeks. This is on top of the huge burden of commercial rates. Commercial rates account for almost 28% of all local government finance. ISME estimates that two out of every five small businesses are in danger of closing due to the burden of commercial rates. The businesses represented by ISME make up 95% of all businesses in Ireland and employ from one to ten people. This group estimates that 172,000 jobs could potentially be at risk mainly through commercial rates.
In recent months, I have met with numerous small businesses in my constituency of Longford-Westmeath which are seriously struggling to pay their rates. They have told me that this excessive burden would be the principal reason they may have to downsize or close in the near future. If it remains unchanged, our present draconian system means that more people will end up on the live register, more families will be struggling and more towns will be decimated.
In the current climate we are all agreed that job creation is a priority, but our present system of rates works directly against this goal. Under the current system, if a business ceases to trade it does not have to pay any of its rates bill. This has the effect of reducing the number of ratepayers, thus crippling a smaller group of remaining ratepayers.
There is also an anomaly in that if somebody wanted to set up a business they would have to clear the unpaid rates on the property in addition to then paying their own rate bills. Surely the Minister can see that this acts as a direct barrier to new businesses moving into a vacant premises. I will cite an example where Longford County Council initiated a positive initiative recently whereby it is giving grant assistance to new businesses opening in certain locations in order to incentivise businesses into particular areas of the town where there are many vacant properties.
The present system makes no allowances for an inability to pay or a change in economic circumstances. Given our current economic situation, this seems completely ridiculous. How long must struggling businesses wait for the Valuations Office to complete its review on the valuation of properties? Numerous groups representing businesses have requested that a simple "economic conditions" clause should be inserted into the Valuation Act 2001. This can easily be done and would afford the Government an opportunity to view alternatives. It would receive support from across the House. I raised this issue in an Adjournment debate in July. At the time, the Minister of State, Deputy McGinley, said the commission for valuations was actively reviewing options which would facilitate the delivery of the revaluation programme within a shorter timeframe. The timeframe we are talking about is ten years.
Notwithstanding the snail's pace of the review, it is necessary to point out that it is still based on the 2005 rental value of the property. We all know that rental values have altered drastically since then and even after the review a business struggling to pay its rates bill could still be forced to close. Last year, the Government's efficiency review identified potential savings of €511 million, which could be used to alleviate pressure on ratepayers. If even half these measures were implemented the commercial rate bill could fall by 19%.
I compliment the many local authorities who are acting on these reviews. The county manager and his team on my local authority are pursuing an efficiency agenda that is lowering the cost of running that council.
I am asking the Minister of State, Deputy Perry, to do something quickly, which would have the support of the House, that is, to install the "economic circumstances" appeal clause in the Valuations Act 2001. That would give an opportunity for us to examine alternatives. Perhaps we can also examine a self-assessment system and a percentage of turnover. Under the UK model, a council has powers to exempt struggling businesses and can offer a 50% mandatory exemption for rural businesses.
I welcome the opportunity to contribute to this debate. This House is often accused of being behind in discussing important issues, but we are right on the money on this occasion in that we are dealing with a matter of hugely significant importance. Given his personal business experience, the Minister of State is well aware of the impact the current financial crisis is having on so many small businesses throughout the country. I am talking on behalf of the small enterprise sector whose members are not there just to make a profit but to create and sustain jobs. The biggest crisis bedevilling this country is the lack of employment, the number of people being let go and the number of small businesses going out of operation every day. That has a consequent impact on employment levels. At the heart of that problem is a level of bureaucratic red tape and cost for small and micro-enterprises. I am not talking about SMEs as the European Commission would define them, but those that employ fewer than ten people. They are absolutely on their knees, as the Minister of State is aware. He knows the kind of difficulties they are encountering and the impact they are having on owners and their staff.
Much noise is regularly made through the media and in this House if some multinational decides to turn its back on this State and leave, or even if a medium-sized employer lets 40, 50 or 60 people go. However, literally thousands of people are losing their jobs on a daily basis in small and micro-enterprises, but those events never make it into the national media. Those lost jobs are in shops, pubs, furniture stores and so many other sectors of the domestic economy. We must do something to protect those jobs and ensure there is a viable domestic economy. It is not just about giving some kind of holiday from paying such rates; nor is it about forcing Fine Gael and the Labour Party, whose members are in control of many councils, to provide a sizeable rate reduction. It must be much more fundamental than that.
It does not seem fair that a furniture shop, which requires a large amount of space due to the bulky goods it sells, should pay rates on the same square-footage basis as a chip shop, a fast-food joint or some kind of mobile telephony store that is delivering a high-value return on a relatively small floor space. There must be some correlation between the economic activity of a business and the rates it pays. Until such time as we deal with that issue, we will never find a solution to this problem.
The Minister of State has indicated that there is a different capacity to establish rates and that it would be rolled out if the staff were there. We hear the usual type of excuses but they are not good enough. There is no point in saying "You didn't address it when you were in power". I know the Minister of State will not say that, but others have sought to do so on his behalf. It is a new situation now. We are haemorrhaging jobs on a daily basis and will continue to do so unless we can find an appropriate methodology for the collection of rates.
I now wish to discuss how rates are spent. A more aggressive approach is needed to the value-for-money delivery of services by local authorities. We must have a fundamental review of what local authorities do. The State does so in terms of the services it delivers, so it is also incumbent on local authorities to do it. If necessary, they should strip back to the core services that are required. One cannot expect small businesses to continue to pay for a service delivery that has many components that are nice to have in better times.
I thank my colleague Deputy Niall Collins for giving us the opportunity to address this unequal system of taxation. Everybody in the House agrees the current rates model is exactly that. The business community, in particular the small and medium enterprise sector, is paying the burden of local government while many of those who benefit from its services are not currently making any contribution. As the local government fund is cut year after year, that burden is getting bigger. As the service demand on local government increases, it is a burden that will continue to increase unless we act collectively to reform it.
I had great hopes when the Minister of State, Deputy Perry, was appointed with responsibility for small business. He has an interest and a commitment to giving small businesses a break. However, the headlines and progress to date make a bit of a joke of the Government amendment, which praises its record in promoting and protecting small businesses. We have a 2% increase in VAT coming up, while we are making business pay for social welfare reform by cutting redundancy rebates from 60% to 30%. In addition, we are making them responsible for sick pay. The pension levy has forced many businesses to pay extra contributions for their employees. It seems the commitment given by Fine Gael and Labour in opposition about upward-only rent reviews has gone the same way as so many other promises, i.e. south. We need this Government to take small business seriously and not to continue to attack and undermine it, making it pay for the bills of other parts of government. Every speaker, including the Minister of State, knows the small and medium enterprise sector, particularly the retail sector, is haemorrhaging. The next four to five weeks will make or break thousands of jobs in this country for hundreds of retailers. What they do over the coming weeks will decide if they will continue to open their doors, pay taxes and employ people in the second or third week in January.
We will see on Tuesday week that the sector is suffering attack after attack on the bottom line, and it is not in a position to pass this to the consumer. We need reform of the rates system in order to encourage employment and we need new businesses to get a break for the first year. New ventures should not have to pay the rates until they get up and running and if they maintain or grow employment in the second year, there should still be a reduction on what would normally be paid. If businesses employ people, those employees will pay taxes and pay their way in society. Some of those taxes will fund services.
We need an "inability to pay" mechanism. If footfall and retail expenditure is down and banks do not give businesses working capital, they cannot pay a rates bill. We must define what the rates are for, as many businesses pay rates and money towards waste collection, water charges and other taxes. What are they getting in return for the rates? Most local authorities will not even provide a list of the services being paid for but what other bill does a business pay when it gets nothing - not even information - in return?
In this House we have struggled for years with the issue. When we were in Government we kept giving the excuse we now keep getting that the revaluation process is under way. It has been indicated that it will take many years for this to be finished but small businesses do not have many years. They have weeks to get the cash to allow them trade into next year. It is time we gave them a break and took them seriously. Even if the Minister of State provided reforms in this sector he would have performed a great service for his colleagues in the small and medium enterprise community.
I compliment Deputy Niall Collins on bringing this motion before the House and giving us an opportunity to contribute to the debate on rates, as well as the hardship being imposed on business people now. Irish Employers for Affordable Rates, an umbrella group, has been arguing for the inclusion of an economic circumstances clause in the Valuation Act 2001. This organisation was set up in my own county of Wexford and has since expanded across the country. It has managed to fill halls and hotel function rooms with significant numbers of business people. These people are not turning out for the sake of it; they are finding it difficult to make ends meet. They would rather be doing the business they are meant to be doing but, unfortunately, because of the high rates being charged on premises, they are not in a position to meet repayments to local authorities around the country. For that reason the businesses have come together to put pressure on the Government and other politicians to do something for them.
My clinics and those of every Deputy throughout the country are for the first time being visited by business people who in the past have always met their rate repayments but who, because of the downturn in the economy, are no longer in the position to do so. As a result, many businesses are closing and letting people go, with some workers on three day weeks. Some businesses have closed completely. It is the same scenario in towns where footfall and spending is low and business people, shopkeepers and retailers are finding it difficult to survive.
Such people are arguing with me and every politician that we must take action. The revaluation process is ongoing in Dublin and sometimes I wonder why it started in Dublin and will take ten years to get out of the city. What about the rest of the country? There are problems for business people in other parts of the country and it is important to speed up the valuation process. Extra staff should be taken on board and decisions should be made quickly.
We know the local government efficiency review group has earmarked €510 million in savings for the sector. I have long held the view that local government is not performing the way it should. With the estimates process every year, a county manager will come in acting like a dictator and presenting the estimates for the councillors to go along with. That will usually happen in two hours or so. When I was on a county council - I am sure it was the same for the Minister of State - it took the best part of a week or ten days to go through the estimates and make savings and efficiencies. Whatever the county manager says now is usually agreed by councillors. It baffles me when a Government must implement an efficiency policy in local authorities. If efficiencies are to be made, the county manager is being paid a fat salary to make them and they should be done quickly and efficiently. The savings should be passed on to ratepayers. My own local authority has been reasonably flexible with business people and allows them to pay over months or a year. Nevertheless, it is still looking for full payment, which is not acceptable to business people.
The time has come for action in the process, which should be speeded up. The Government must live up to its commitments in the programme for Government and initiate a new rates policy for the betterment of the people. Deputies have mentioned furniture stores and I visited one recently which has four floors. The owner expanded the business during the good times, made some good money and paid significant rates. When he applied for planning permission, the rates evaluation office was notified upon granting of the permission and a lady increased his rates tenfold. There is currently only one floor of the four floors on the premises operating, and there is no business or employment on the other three floors. He must pay the full rates on the four floors. That sums up the problem and we need a rates system based on income rather than the current valuation system.
As a business person who has operated for many years, and as somebody who probably understands the position of business people far better than those of us who are not in business, I ask the Minister of State to take on board the suggestions tonight. He should make some changes to allow business people to remain in business.
Like others I appreciate the opportunity to speak to the motion. As a member of Offaly County Council for 18 years I am acutely aware of the value of rates to a local authority. I am also acutely aware that a county like Offaly has a low rate of large bulk industries and a depends on State agencies such as Bord na Móna, the ESB, Coillte etc., which may be diminished if the Government has its way and puts them into private ownership. I am sure they will be scaled down greatly from what they are today. That will leave a diminishing rate base and increase the burden on small businesses and family owned retailers. They must take the burden of increased local authority expenditure, with lower Government grants in the central local government fund. The new regime for car tax will also have diminished local authority income.
With the property tax being introduced, what system will allow for the reimbursement of funds collected by local authorities? Will that be confined to counties where the money is collected or will there be a more fair and equitable system to top up the local government fund?
As many speakers have noted, the downturn has had a disastrous impact on business and jobs as a result. We want the Government to commit to an urgent review of local authority rates, with a view to introducing a much fairer and more reasonable system for local businesses. In recent months we have seen the drop in retail figures, and businesses throughout the country are struggling to cope with inflated costs. They are under serious pressure to meet such costs. For many businesses, one of the largest financial burdens is the rates bill. The valuation lists used for commercial properties hardly resemble current property prices or valuations, which is contributing to the inflated rates. The system needs a complete overhaul if we are serious about supporting local businesses and allowing them to retain and grow jobs.
We call on the Government to look at new systems such as self-assessment based, for example, on turnover. A new system should take into account the ability of each business to pay and the fact that many businesses are seasonal. Based on earlier contributions, I am concerned by the extent to which some members of the Government appear to shrug off the issue at a time when so many businesses in my county and many others throughout the country need as much support as possible from the State.
Recently, we heard of a 2% increase in VAT and that employers would pay sick leave in future. The Minister for the Environment, Community and Local Government indicated there might be no change to commercial rates. If small business owners go bust and are forced to close there are no social welfare entitlements for them. If they have a few children the Government will cut the income from child benefit as well. That is a huge vote of confidence from a Government that promised jobs budgets, jobs initiatives and 100,000 jobs from NewERA. Give us a break lads.
It is crucial that we give small businesses as much breathing space as we can in order to secure their future and encourage growth and job creation. This Fianna Fáil proposal only asks for what is fair and seeks to modernise what has become an outdated system that is full of anomalies.
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.
I am delighted to contribute to the debate on behalf of the Minister for the Environment, Community and Local Government, Deputy Hogan. Deputy Niall Collins and his colleagues have raised important points. However, the Government is conscious of the 200,000 companies which employ 655,000 that generate €90 billion in the economy. It is important to recognise that many issues affect business and rates is one of the difficulties. It is a bottom line issue.
The debate has afforded the Government an important opportunity to highlight the steps being taken to assist businesses and to enhance local government in these uncertain economic times. It is clear that employer and employee confidence is of great importance. As my colleague, the Minister for the Environment, Community and Local Government, Deputy Hogan, stated last night, the Government is acutely aware of the pressures on many businesses currently and the challenging economic environment in which many property and business owners are operating. In the context of retail, we have 13,000 sq. ft. of retail area per head of population compared to 1,000 sq. ft. in the UK. That expansion occurred during the property boom and has increased the pressure on all those involved in retail currently.
The Government is focused on reducing the costs of doing business. Today, I launched a 12-point plan for small companies, on which I will not elaborate at the moment, but it is a good concept for what we plan to do for small companies. As it states in the motion, it is important to support competitiveness and employment in the economy in order to promote job creation and the retention of the jobs that currently exist in small companies. It is also critically important to protect the interests of communities. The issue relates to confidence and credit. Rates are one aspect. We are dealing with the availability of bank funding to small businesses. The confidence of consumers to spend is also important. It is the job of Government to ensure that government costs on businesses are reduced.
Income from rates is a vital contribution to the cost of services provided by local authorities, with 29% of local authority income being raised locally from commercial rates. The Government is fully committed to assisting local authorities maintain a stable base for funding, while supporting businesses in the uncertain economic environment in which we all operate.
Local authority cost bases have been reduced and continue to be rigorously examined to maximise efficiencies which, in turn, impact positively on business. The value for money audit within local authorities is also important. We will continue to impress upon local authorities the need for intensive measures to enhance efficiency with a view to minimising rates and charges for business, and a rigorous efficiency drive is being pursued in this context. I know the Minister, Deputy Hogan, is pushing this aspect.
I will outline again some of the key measures taken to date. Annual rates on valuation have been reduced by an average of 0.6% in 2010 and by a similar level in 2011, involving real reductions in local authority income from rates. The Commissioner of Valuation is conducting a programme of revaluation of all commercial and industrial properties throughout the State which will assist in providing a more equitable distribution of rates across those liable to pay rates. The timescale of this review is of concern and should be shortened. A significant amount of work has already been undertaken on a Bill amending the Valuation Act, which the Minister for Public Expenditure and Reform hopes to bring to Government shortly. General purpose grants of €790 million have been allocated to local authorities in 2011, which have assisted in reducing the overall burden that would have otherwise been placed on commercial ratepayers. The burden of commercial rates falls on a very narrow group of people. An implementation group with an independent chair and business expertise has been established to drive and oversee implementation of the recommendations of the report of the local government efficiency review group. Business support units in each county and city council are providing a focal point for businesses. We intend to develop and centralise business supports in every county. There will be an announcement on that shortly. The support groups will engage with the local government system and smooth their path in setting up and managing their businesses.
My colleague, the Minister for the Environment, Community and Local Government will continue to keep all matters relating to rates, local government funding and reform under regular consideration. Inadequately funded local services are not in the interest of business nor do they support those who would look to invest in Ireland. The Government wishes to ensure that local authorities continue to provide the required economic planning and development, and underpin the provision of goods and services, as well as community infrastructure to serve their communities. The Government is committed to making our economy more competitive and remains fully focused on job creation and maintaining the existing 655,000 jobs in small companies.
The local government sector has an important role to play in this regard. Local services are vital. I understand what Deputies are saying about the stacked up costs of establishing and running a business. We are determined that every avenue will be pursued to support business and to optimise efficiency and curtail costs in the local government sector.
This is an important motion and this is an emotive issue for every business here. This is one of the many difficulties experienced by small businesses at present. The Government is seriously looking at this issue.
I welcome the motion and congratulate Deputy Niall Collins on bringing it forward.
Rates bills are contributing to the closure of businesses throughout the country, leading to job losses. I have met various lobby groups recently who have given their perspective on these issues. The Licensed Vintners Association asked when a new Valuation Bill would come before the Dáil and would it include a measure to allow for an immediate appeal of rateable valuation based on a change of economic circumstances. At present, a premises can be re-rated only if there is a physical change in the premises. They gave the example of a public house, 80% of whose business is food, being by-passed by a new road and losing 80% of its business. This is not a material change in circumstances under current valuation law and the premises' rates will stay unchanged even though the business has been decimated.
The Restaurants Association of Ireland feel the present rating system is unfair and is contributing to job losses and business closures. Restaurateurs want permission to lodge an appeal on the basis of changed economic circumstances and inability to pay. They also want a comprehensive review of the present rates system with the aim of funding local government on a more equitable and sustainable basis. This is likely to involve the setting up of a representative review group to examine the rates system in detail, consult with all interested parties and recommend the best alternative. They mentioned the local government efficiency review group, which has identified savings of €511 million to be achieved. This is mentioned in our motion. If even half of the €511 million suggested by the group were passed back to business the total commercial rates bill could fall by almost 19%.
These lobby groups made clear and serious points. Commercial rates provide almost 30% of local government finance. This is being realised from a small and hard-pressed base. That base will be further reduced if we continue with this system. In County Galway, for example, €2.7 million of rates was written off in 2009 and in Galway city €2.4 million was written off in the same year. These figures have, no doubt, increased since then and will continue to do so.
What is true for publicans and restaurateurs is true for all businesses, particularly small and medium size enterprises. Members of the Irish Small and Medium Enterprises Association, ISME, with which the Minister of State was associated, say that 40% of small and medium size enterprises are under threat from the burden of commercial rates and ISME members are making a major contribution to the national finances. Chambers Ireland and RGDATA have consistently criticised local authority charges which hit businesses that are already struggling in the wake of the international downturn. The Irish Hotels Federation has been lobbying on the negative impact of rates on its industry. The federation called for the scrapping of the 2001 Valuation Act and made the point that rates fund 90% of local authority finances.
Those issues, plus the slow rate of revaluation by the Valuation Office, are major issues for the people. The fact that an overall review of rates in all local authorities might take ten years is very worrying. We cannot have Irish businesses struggling for survival in these very difficult economic circumstances with the rates regime on top of them. As many business owners have said, rents are falling but rates are increasing. At a briefing session today, the Drinks Industry Group of Ireland said turnover had dropped 28% in four years while rates are still increasing.
I ask the Minister to look at the situation in the United Kingdom, for example, where economic conditions and ability to pay are taken into account when rateable valuations are assessed. Councils there have the power to give exemptions from paying rates and money collected is put into a central pot and distributed to councils on the basis of need. I ask the Minister of State to support the motion and to take this opportunity to take real action to help small businesses which are in very serious difficulties.
I am glad to have this opportunity to utter a few brief sentences on this matter. I commend my party colleague, Deputy Niall Collins, for bringing forward this motion, which is timely and important.
In recent weeks and months Members of this House have been talking about the relative buoyancy of the export sector in Ireland and the flatness in the domestic economy. That is what this debate is about. It is about the businesses whose statistics the Minister of State quoted a moment ago. Those figures graphically illustrated the employment potential in the domestic economy where the businesses which are paying commercial rates to the various local authorities play such a vital role. The reality is that high business costs equate with reduced employment opportunities or a combination of premium loading on business products. We need to establish a planned and systematic approach to revitalising the sector. An examination of commercial rates will be an integral part of that process. If the Government is willing to establish a clear policy position, there will be opportunities for job creation. Given that nearly 500,000 people are unemployed, addressing this issue is urgent.
In recent weeks, the suggestion that the rate of VAT will increase by 2% has sent a shudder through the business sector of my constituency of Louth. One can only imagine the increase's impact on the range of businesses in County Louth and the north east as a whole. I remember the vision of cars streaming northwards in tailbacks lasting miles and waiting to get into supermarkets in Newry and further afield in the North. Not for a moment am I denigrating those who travelled North, but the trading equilibrium will clearly be affected if the suggested provision is implemented. Combined with this is our position on rates, whereby the valuation system is inflexible and does not take account of the challenges that face businesses from time to time. We need to consider the UK model, in which economic circumstances can be factored into the calculation and businesses can be tided over during difficult economic periods.
I am happy to have had an opportunity to contribute to this debate and I hope the Minister of State, Deputy Perry, who knows much about the business sector, will take account of the valid and constructive points made by the Opposition and convey them to the Minister and the Department with direct responsibility for this matter.
I dtosach báire, ba mhaith liom labhairt faoi cheist na n-oileán. Ar ndóigh, tá costas maireachtála i bhfad níos airde ar na hoileáin ná mar atá ar an mórthír. Ní hé an costas iompair amháin atá i gceist. Bíonn daoine ag caint faoin gcostas iompair, ach go minic ar oileán séard a chaitheas duine a dhéanamh ná an t-ábhar a thabhairt chomh fada leis an gcéibh, íoc as an iompar agus duine eile a íoc as an rud a thabhairt ón gcéibh chuig an teach. Cuireann sin go mór le costais gnó a reachtáil ar na hoileáin. Fadhb eile ar na hoileáin ná go mbíonn séasúr gearr orthu. Séard atá muid ag moladh ná go mbeadh leath ráta le n-íoc ar na hoileáin. Ó thaobh an Stáit de agus ó thaobh na gcomhairlí contae atá i gceist, ní costas ar bith a bheadh ann, mar níl ach 3,000 duine ag cónaí ar na hoileáin agus tá teorann le líon na gnóthaí atá ar na hoileáin. Cuirfeadh seo borradh faoi na hoileáin.
Is cuimhin liom nuair a d'fhoilsigh mé polasaí i 1997 do na hoileáin go ndúirt Pól Ó Foighil, ball d'Fhine Gael ag an am, dá gcuirfinn leath den pholasaí sin i gcrích go gcuirfinn athrú an-mhór ar na hoileáin. Caithfidh mé a rá gur admhaigh Pól Ó Foighil i bhfad ina dhiaidh sin go ndearna mé i bhfad níos mó ná leath den pholasaí sin a chur i gcrích. Tá deis ag Fine Gael anois, i gcuimhne ar Phól Ó Foighil más maith leo, rud éigin fiúntach a dhéanamh do na hoileáin. Mar a deirim, an moladh a bheadh agamsa ná go ndéanfar cinnte ar na hoileáin go mbeadh leath de na rátaí le n-íoc agus go dtabharfar faoiseamh dóibh ar an leath eile. Céard a dhéanfadh sin ach daoine a choinneáil ar na hoileáin agus na hoileáin a choinneáil ag maireachtáil. Níl aon rud a chosnaíonn níos mó ar an Stát ná áit atá ag fáil bháis, áit go gcaithfear na bun seirbhíseanna a choinneáil ag imeacht ach nach bhfuil aon phobal ann.
Mar sin, táim ag impí ar an Aire breathnú ar an gcéim an-bheag seo a bhféadfaí a thógáil agus nach gcuirfeadh as do thada agus a dhéanfadh cinnte de go mairfeadh agus go bhfásfadh gnóthaí ar na hoileáin.
The Government came in on a promise of jobs. That the jobs budget became a jobs initiative was a fiasco. We are now being threatened with a 2% increase in the rate of VAT and told that every employer will need to pay the first four weeks of employees' sick leave. Regrettably, the Minister for the Environment, Community and Local Government does not seem to understand the urgency attached to the matter under debate.
Rates are a small issue for several large payers of rates, namely, the large manufacturers and utilities that, in some cases, account for 80% of the rates base. The rate is a fraction of a percentage of their cost base and is not a serious issue for them. The reduction in rates for such businesses would not make a significant difference to their viability.
The problem arises for small businesses, for example, retailers and those in the hospitality industry, in respect of which the rates are proportionately a greater percentage of their overheads. In many cases, such businesses do not represent a large portion of a council's rates revenue. Through a nuanced approach that targeted these industries, including town centre businesses that are closing down, one could do a great deal for little money. If we want to regrow the economy, there must be win-win situations and cutbacks should not be the only show in town. If we stimulate ratepayers, we can increase business while preventing local authorities from losing revenue.
The solutions offered in the Government's amendment are a long way down the line and will take a long time to implement. In the seanfhocal, the Government is telling small businesses and the hospitality sector, "Mair, a chapaill, agus gheobhaidh tú féar", that is, "Live, horse, and you will get grass". In many cases, the horse will be dead by the time the grass grows. We need an incisive, targeted approach that focuses on those broad types of businesses for which rates constitute significant overheads.
We need to treat this issue as a matter of urgency. The last thing we need is procrastination. We need action and a vision so that we might give businesses a start. We cannot add to the inhibitions that prevent businesses from growing. The Minister for the Environment, Community and Local Government and his officials should agree to engage with the all-party committee that deals with this issue. We should not say after tonight that, simply because we have put our point and the Government has answered, it is the end of the job as if the problem will not continue for people who wake up tomorrow morning and find that they cannot pay their rates. The committee should examine a targeted method through which to assist those for whom rates are an impossible burden. We should do this in the spirit of reform to which the Government referred, given its comments on the relevancy of the Oireachtas. Every Deputy is equal, in that we have all been elected by the people. Is the Government willing to invest the hours and effort, to listen to every idea and to act to resolve the issue? Regrettably, this does not appear to be the way the Dáil is working and the Government seems to be issuing diktats. Maybe my plea will not fall on deaf ears and the Government will listen and work with every Deputy to find a solution to this urgent and pressing problem.