Tuesday, 18 January 2011
Local Authority Charges
I apologise for being late. I was at a meeting which was going on. I apologise to the Minister of State and to the Leas-Chathaoirleach.
My matter relates to an issue concerning many businesses in my constituency and in the Border county of Donegal, the high cost of commercial rates, coupled with the cost of commercial water rates. I wish to focus on the issue of commercial rates in the business sector in my constituency. I am sure the issue is replicated in other constituencies.
I am aware of the difficulties faced by businesses in my constituency on a daily basis. Reductions in consumer spending are coupled with the inclination among many shoppers to travel a few miles across the Border to the larger multiples in places like Derry, Belfast and Enniskillen. That issue has abated to some extent with the change in the sterling exchange rate and the increase in VAT in the North.
The business community in County Donegal and along the Border is facing a challenge in making ends meet, holding on to employees and paying large Revenue, ESB and heating bills as well as commercial rates. The law of diminishing returns applies in this area. I have brought many business people in my constituency to meet the finance officials in Donegal County Council. The officials have advised that while they would like to be able to write off a certain proportion of rates, they cannot do so. I brought the managing director of a business which employs 35 people in my constituency to meet the head of finance in the council and liaised with the county manager on the case. The company has been put in jeopardy from a large outstanding rates bill that it simply cannot afford to meet, largely because it is still owed money by other businesses. It would be in a position to pay a reduced amount but it cannot meet the entire bill. This is having a negative impact on its balance sheet and the charges are being carried forward at the end of each year. If rates could be reduced, businesses would make the additional effort to pay them. All the businesses with which I have dealt have stated clearly that they want to be able to pay rates but simply cannot afford to do so. The alternative is to close the business but, to be fair to Donegal County Council, it does not want to see this happen.
This issue needs to be addressed at a national level. Perhaps a forum could be established to consider solutions but it would have to report in a matter of weeks if we were to prevent more businesses from going to the wall. I urge the Government and the Department of the Environment, Heritage and Local Government to assist businesses because local authorities are not able to deal with the issue in isolation.
The members of Donegal County Council responsibly decided to reduce commercial rates by 3.5% for 2011, but we need to introduce reductions of at least 50% over a period of 15 months to two years if businesses are to be able to get through these difficult times by paying what they can afford. When a business closes, the local authority and the Exchequer lose out, as do those who lose their jobs. I ask that a direction be given to local authorities either to reduce rate demands or work with businesses to allow them to survive during the difficult years. I raise this issue to bring it to the attention of the Minister for the Environment, Heritage and Local Government, and I hope he will respond favourably for the sake of people who pay taxes and create jobs. It is incumbent on the Government to protect jobs.
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.