Dáil debates

Tuesday, 1 December 2015

Topical Issue Debate

Living City Initiative

6:30 pm

Photo of John DeasyJohn Deasy (Waterford, Fine Gael)
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There is a growing realisation that the take-up of the Living City initiative has not been good so far. The Minister for Finance described it recently as "miniscule".

From what I have read, there seems to be a movement in the direction of extending this to towns in some way. I want to put forward another suggestion, which is to extend the initiative specifically to the counties of Waterford and Limerick. This is for a number of reasons, one being that they were the two locations picked when the Living City initiative was devised and that choice was based on levels of deprivation in both cities.

We should not give up on this scheme. I believe it will be successful if it is varied in some manner. Much effort has been put into it and I believe it will contribute to heritage-led renewal and economic recovery. My guess is that the massive success of the home renovation scheme has affected the take-up of the Living City initiative in some respects. Where I see a difficulty with extending this scheme to towns, as the Heritage Council has proposed, is due to the incredibly lengthy process with the European Commission the Department has dealt with during the years. As the Minister will know, it took almost three years to get the Commission to sign off on the scheme. If there is to be an extension, it should be as simple as possible in a regulatory sense. That is why I suggest extending it to the counties of Waterford and Limerick, even for a certain period of time. My understanding is that to do this, it may not be necessary to have new legislation underpinning variants of the scheme and it might be possible with a commencement order identifying the area in question and by utilisation of the Taxes Consolidation Acts.

My concern is that if we go down the road of identifying architectural conservation areas in various towns around the country, as proposed by the Heritage Council, we will probably have to deal with the European Commission again, and it could take another three years or longer. I believe the county version is simpler and more workable and it should be considered. When the Department of Finance thought up this proposal on the first day, a figure was assessed as to how much foregone revenue would be involved over a number of years. However, we will not come close to that in terms of take-up, based on the numbers I have seen so far. I believe we should vary the initiative but do so in a manner that capitalises on what is a very good scheme and, at the same time, waste as little time as possible. To focus on the two locations this initiative was constructed for at the outset would seem to make most sense.

6:40 pm

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for raising the issue. The Living City initiative was enacted in the Finance Act 2013 and commenced on 5 May 2015, following discussions with the European Commission to ensure that the initiative was in compliance with state aid rules. It is worth pointing out, therefore, that the initiative has been operational for just six months.

The initial intention of the Living City initiative was to provide tax relief on the refurbishment of inner city Georgian buildings in Limerick and Waterford, both those used for commercial purposes and those that are residential homes. These types of buildings are traditionally more expensive to refurbish and inner city areas had been suffering neglect due to the relocation of homes and businesses to the suburbs.

A comprehensive independent ex antecost-benefit analysis was carried out by Indecon International Economic Consultants, which recommended, among other elements, extending the initiative to rundown areas of other cities in Ireland. Correspondingly, four more cities were included in the initiative, namely, Dublin, Cork, Kilkenny and Galway. As I have said all along, the initiative is targeting particular areas of these six cities which are most in need of regeneration and it was never intended as a widespread initiative.

The Heritage Council recently recommended in its report on policy proposals for Ireland's towns that the Living City initiative should be extended to include the historic core areas of all Irish towns where these are protected as architectural conservation areas and that the specific fiscal measures be tailored more directly to attract people to live and do business in towns. I considered potential extensions of the Living City initiative in the run-up to budget 2016 but decided not to bring forward changes at this time as this would provide uncertainty about the operation of the initiative and could encourage further demands for extensions.

I also considered proposals to provide incentives to target rural areas or towns. As has been seen elsewhere, tax breaks alone will not encourage people to live in an area where there is no work or sustainable lifestyle for them. A more integrated solution for revitalising rural areas is needed, rather than just tax reliefs. I believe direct expenditure is a more appropriate way to target support to rural areas for their regeneration.

It is also important to note that a tax relief only works if there is sufficient taxable income to obtain the benefit. A grant system, by comparison, can be fairer as it applies to those who pay low rates of tax, those who pay no tax and also higher income earners. Tax reliefs, for example, are generally not of interest to those in social housing, those who are pensioners and those who pay low rates of tax.

The Living City initiative is a targeted property incentive aimed at a specific goal: older buildings in urban areas which were neglected and deprived. Since the initiative has launched, I have received requests to extend the initiative to newer buildings, to other areas and to areas which are not as deprived within those cities. I do not think a one-size-fits-all approach can be taken when considering tax reliefs. Just because a tax relief exists, that does not mean it can or should be extended to cover other areas. I also am very conscious to take care that we do not see a repeat of the days of property-based incentives extended beyond their original target.

My officials and I are willing to consider suggestions for tax reliefs. However, I remind the Deputy of both the tax expenditure guidelines and the Department's commitment to evidence-based policy-making. Any tax incentive needs to carefully considered and used in limited circumstances where there are demonstrable market failures and where a tax-based incentive is more efficient than a direct expenditure intervention.

Photo of John DeasyJohn Deasy (Waterford, Fine Gael)
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The Heritage Council policy document came about when the Heritage Council launched its January 2014 report entitled, Assessment of Possible Fiscal Incentives in Relation to the Built Heritage in Ireland's Towns. At the launch, the Minister's former Secretary General, Mr. John Moran, challenged the Heritage Council to identify the role of the small town with heritage attributes in Irish economic recovery. That is how it came about. This is the document the Heritage Council came up with. While it is a very good document, I am not sure the council has a clear understanding of how problematic it was to get clearance from the European Commission on certain matters involving the Living City initiative.

My main purpose is to put into the heads of Department of Finance officials and the Minister, going into next year, that singling out a county or counties on a certain timeline would make more sense. I know there have been other proposals to extend the Living City initiative and they have been rejected. However, I believe the simpler the parameters of this, the better. I am from Waterford and the Minister is from Limerick, but this is not some selfish political proposal. The scheme was constructed with these two locations in mind and it makes sense to stick with them, if any variance takes place. I also know that the Department of Finance is working on a tax relief scheme for older private houses, as that has been publicised today, and believe this matter should be considered in conjunction with that scheme.

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Living City initiative is only seven months in operation after getting the clearance from the European Union to which the Deputy refers. There are seven applications in Dublin, one in Cork, none in Limerick, six in Waterford, two in Kilkenny and two in Galway.

I presume when various tax advisers and professional groups in these cities learn more about the scheme, the take-up will be even more significant, because it has been in place such a short time - since last May.

On the issue of extending the scheme, I thought about doing that before the budget. However, there are many reasons for the decline of rural towns and we need a package of measures to revitalise them. Tax-breaks alone will not revitalise them. Unless a town has an economic base, a tax-break will not drive people into it, unless perhaps we go back to the type of tax-breaks that allow an investor to develop a building in a town and apply the tax-break deriving from that development to rental income from investments elsewhere. That crossover was one of the seeds of the Celtic tiger. In that situation a developer could build houses on the upper Shannon and not occupy them but could write off the cost of construction against rental income in Dublin city, for example. He or she could also then sell his or her tax credits to another developer if he or she had not enough tax to cover them. That created a kind of market.

I agree on the particular problem identified by the Deputy and, God willing and if we are all back here after the general election, I would like to work with him to see whether we could come up with a more broad-based solution. There is a problem, but there are few policy initiatives targeted to remediate it.