Mary White (Carlow-Kilkenny, Green Party)

I thank the Senator for raising this important matter, which I am taking on behalf of the Minister for the Environment, Heritage and Local Government. Rates income makes an important contribution to funding the cost of services provided by local authorities such as roads, housing, public lighting, development control, parks and open spaces. 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 local authority. The annual rate on valuation, ARV, which is applied to the valuation of each property to obtain the amount payable in rates, is decided by the elected members of each local authority in the annual budget.

Under section 10 of the Local Government (Financial Provisions) Act 1978, the Minister may, with the consent of the Minister for Finance, issue a direction in writing to a local authority to limit the ARV. Such a direction must be issued before the adoption by the authority of an estimate of expenses relating to the local financial year specified in the direction. In the period 1999 to 2002, the then Minister for the Environment and Local Government directed local authorities to limit increases to a percentage of the previous year's ARV. Rates were increasing during this period and it was intended at the time that the cap would help ensure the right balance was struck between meeting the financial needs of local authorities and providing that the rates demand on the business sector was not excessive. In subsequent years it was left to local authorities to determine the appropriate ARV, having regard to their individual circumstances.

Local authorities appreciate these are difficult economic times for many businesses. They have taken a number of initiatives to promote and support enterprise and economic development generally, including the establishment of business support units or equivalent arrangements in each county and city council. Costs continue to be rigorously examined to maximise efficiencies which, in turn, impact positively on business. Since taking office the Minister has consistently urged local authorities to exercise restraint in setting rates to support competitiveness in the economy, nationally and locally, and protect the interests of communities. A significant number of local authorities decreased their ARV for 2010 while the majority kept the same rate as 2009. The Minister expects to see continued restraint by the sector in 2011.

Some 29% of local authority income is raised locally from commercial rates. Being heavily dependent on this and other locally raised charges, it is to the credit of local authorities that they have continued to minimise the impact on the business sector in terms of increased rates and local charges at a time when Exchequer funding is decreasing. A decrease of 50% in rates income would be very significant for all local authorities. It would result in locally provided services which many of us take for granted being severely curtailed or the shortfall in income having to be made up by increased charges elsewhere. A reduction of this nature is simply not feasible if we expect our local authorities to continue to provide the necessary local services such as water, waste, road maintenance and public lighting. These services are essential in aiding economic renewal and the proper functioning of local communities.

While it would not be practicable therefore, to issue a direction along the lines suggested, the Minister will continue to impress upon local authorities the need to intensify measures to enhance efficiency with a view to minimising charges for business. It is the intention that as further local sources of income are realised, local authorities will be required to rebalance the impact of commercial rates on the business sector in line with increasing revenues from other sources.

I sympathise very much as somebody who has been in the retail sector and has been the victim — I used that word advisedly — of very heavy rate hikes. It is important that we get the balance right. I will bring the Senator's comments to the Minister and perhaps this can be raised again under another format.