James Bannon (Fine Gael)
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The upper Shannon rural renewal tax incentive has been a very beneficial incentive for County Longford. Since its introduction, it has brought about major increases in business, tourism and building development. All of this work has been undertaken by many people within Longford. Some of these projects have been completed, while others have yet to be completed or are at the planning stage.

One of the main reasons I have raised this matter is the need to allow communities who may have missed out due to delays in other local government programmes, such as water services and small sewerage schemes, to gain some benefits from this rural renewal incentive. With some schemes either just developed or close to construction stage, the advantage to be gained from joined-up Government policy will be lost if tax incentives are withdrawn. These incentives have been withdrawn since 31 December 2004. Time rang out on the scheme as development applications were flooding into Longford County Council. I ask the Minister to extend the programme for another two years until December 2006 for receipt of planning applications and December 2008 for the completion of works.

The large number of locally based applications at the latter stage of the rural renewal scheme highlights the positive economic effect of the initiative and, according to Michael Killeen, Longford county manager, the trend will continue if the deadlines are extended. The scheme has had a significant and positive impact on the social and economic wellbeing of the area covered in the upper Shannon renewal tax incentive, the original designation of which was based on poor economic performance and weak population structure. It could be argued that the areas covered did not have the capacity to develop in the early stages of the scheme because they were so poorly positioned in terms of economic performance. Longford is still the cheapest county in which to buy a house and is the county that pays the lowest level of tax, evidence that the scheme is still needed.

The Minister can appreciate the huge benefits that were provided by this scheme. As the initiative has progressed, it has had a positive impact on the economic strength of the region and greater numbers are in a position to take advantage of all the scheme has to offer. To remove the benefits of the scheme at this juncture would be counterproductive and have a regressive effect on the communities involved. The county managers of the five counties affected by the withdrawal of the scheme — Longford, Roscommon, Cavan, Sligo and Leitrim — have taken the unprecedented step of coming together to request the extension of the scheme and have strongly petitioned the Minister to continue to fund this very important initiative. I also have the backing of the 21 members of Longford County Council, the nine members of Longford Town Council and the nine members of Granard Town Council to push for the continuance of the scheme. The chambers of commerce in Longford, Granard, Edgeworthstown, Ballymahon and Lanesboro also all back the continuance of the scheme. I join them in impressing on the Minister the importance to Longford and the other counties that come under the umbrella of the upper Shannon rural renewal tax incentive scheme of the continuance of funding to extend and expand the benefits to them.

The Minister is aware that we are in the BMW region and there is a huge underspend of funding in that region, as was highlighted in the mid-term report. There are many clear reasons this scheme should be continued. The area it covers is small and the most underdeveloped in the country. We would greatly appreciate if the Minister could give due consideration to the continuance of the scheme.

Séamus Brennan (Dublin South, Fianna Fail)
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The rural renewal scheme was introduced in the Finance Act 1998 to address some of the problems facing the upper Shannon area. It was at that stage becoming apparent that this area, with its history of persistent high emigration, poor land and fragmented holdings, was not sharing in the economic turnabout experienced from the mid-1990s in other parts of the State. The 1996 census, for example, showed that the populations of both counties Longford and Leitrim had declined while every other county in the State had shown moderate or significant increases. In contrast, since the mid-1980s a succession of urban renewal schemes had succeeded in rejuvenating many inner city areas.

In light of the success of the urban renewal schemes, the then Minister for Finance, Charlie McCreevy, decided that the concept of tax incentives for the rejuvenation of urban areas could be successfully applied to the upper Shannon area on a pilot basis and consequently he introduced the scheme in the Finance Act 1998. The areas designated for relief under the scheme included all of counties Longford and Leitrim and parts of the adjoining counties Cavan, Roscommon and Sligo. The objectives for the scheme were to reverse the pattern of continuing population decline and to promote private sector investment in the area.

The package of incentives available under the scheme is broadly similar to the reliefs contained in the other area-based incentive schemes such as the urban renewal scheme and the town renewal scheme, that is, 100% accelerated capital allowances for the construction or refurbishment of certain commercial and industrial buildings and tax relief for the construction and refurbishment of owner occupied and rented residential properties.

The rural renewal scheme is the most extensive and wide-ranging area based tax relief scheme in the State. In the other area based schemes, only certain sub-areas and sites qualify for tax relief and in most cases each of the qualifying sub-areas or sites qualify for a limited range of reliefs. In comparison, all of the qualifying areas in the rural renewal scheme are eligible for the full range of reliefs available under the scheme. This was deliberative policy aimed at rejuvenating the area.

The Senator's request follows on from those of all my parliamentary colleagues from the areas concerned who made a request to have the deadline extended in discussions with the Minister for Finance before the budget. The Minister for Finance could not accede to this request, bearing in my mind that the scheme was originally due to terminate on 31 December 2001 and has already been extended on a number of occasions since then. In the Finance Act 2000, this original December 2001 deadline was extended by an additional year until December 2002 and in the Finance Act 2002, the deadline was extended by a further two years until December 2004.

In the case of this two-year extension to December 2004, there were no qualifying conditions attached to the extended time period, as is the case for other schemes such as the urban renewal scheme, the relief for multi-storey car parks and the reliefs for hotels and holiday cottages. In effect, the scheme benefited from a straight two-year extension and was one of the few area based tax incentive schemes to do so.

In the Finance Act 2004, the deadline for incurring qualifying expenditure was again extended until 31 July 2006 where a full and valid planning application is received by the relevant planning authority on or before 31 December 2004. This latest extension to the deadline, along with a similar extension of other reliefs, was introduced to provide for an orderly winding down of the schemes and to cater for pipeline projects subject to unforeseen delays. As announced in budget 2005, the Department of Finance and the Revenue Commissioners will undertake a thorough evaluation of the effect of the various tax incentive reliefs, including the rural renewal scheme.

In this context, the Minister for Finance also confirmed to the House that the termination dates for the various schemes laid down in the Finance Act 2004 will remain unchanged. The review will evaluate their impact and operation, including their economic and social benefits for the different locations and sectors involved and for the wider community. The review will examine the degree to which these schemes allow high-income individuals to reduce their tax liabilities. As part of this review, the Minister for Finance wrote to the five relevant county managers and advised them that there will be an opportunity for their local authorities to contribute to the evaluation of the scheme as part of the process. The scheme has been a tremendous boost for the areas concerned during its long operation and I am proud that it was a Fianna Fáil Minister for Finance who introduced it.

James Bannon (Fine Gael)
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It is a Fianna Fáil Minister for Finance who is ending the scheme. I ask that this decision be reconsidered and that the scheme be extended for two years. There was a large deficit in funding for water and sewerage schemes in the area and development could not take place for the first two or three years as a result. Further investigation is warranted in this regard.