Denis O'Donovan (Fianna Fail)
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I welcome the Minister of State, Deputy Perry, to the House.

Paul Bradford (Fine Gael)
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I welcome the Minister of State, Deputy Perry, to the House. While my motion requires a response from the Department of the Environment, Community and Local Government, in a sense it is appropriate that the Minister of State is present because he has responsibility for small business and my motion is directed at giving some degree of flexibility to local authorities and their officials to ease the financial plight of small businesses.

Cork County Council has approved a motion and has been in contact with the Department of the Environment, Community and Local Government proposing that changes be made to the Valuation Acts to allow a degree of flexibility in the levying of rates. I am advised that under the current Valuation Acts once the valuation level is set, the rate in the pound, as it was called in former days, must be applied on a uniform basis to every commercially rateable property in a particular local authority area. The members of Cork County Council are unanimous in requesting of the Department of the Environment, Community and Local Government that an appropriate amendment be made to the Valuation Acts giving the manager and the councillors discretion to reduce the rates being charged on certain small businesses under certain circumstances.

Members of Cork County Council, along with local authority members throughout the country, are very much aware that small businesses are under very severe financial pressure at present and even a small reduction in the rates being charged would be of great benefit to small hotels and shops, and other small businesses. Apparently the present regulations do not allow for any flexibility. The request addressed by Cork County Council to the Department made it clear that if through a change in the Valuation Acts the councillors were allowed this degree of discretion it would ensure it would be enacted on a cost-neutral basis. There is an acceptance by the councillors that the present rateable valuation system and the rates being levied provide a huge degree of funding for the county. Unfortunately we are not yet in position to provide alternative funding so a deduction of rates for certain businesses and the savings for those businesses must be compensated for in other ways, and this is accepted. This is why Cork County Council requests that the Valuation Acts be changed in circumstances where the reduction in rates would be on a cost-neutral basis.

I believe the request has been made in writing and is being examined by the Department of the Environment, Community and Local Government. As the Minister of State is present wearing his Department of Jobs, Enterprise and Innovation hat and has responsibility for small businesses, I ask him to take a keen interest in this idea from Cork County Council and to liaise with the Minister, Deputy Hogan, to examine whether a degree of assistance and financial relief can be brought to the small business sector which is such a huge employer and is so important to the economic fabric of every community throughout the country.

John Perry (Sligo-North Leitrim, Fine Gael)
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I thank Senator Bradford for raising this very important issue which does have an impact on small companies. I apologise on behalf of the Minister for the Environment, Community and Local Government, Deputy Hogan, who cannot be present.

Commercial rates income is a very important contribution to the cost of local services provided by local authorities such as roads, public lighting, development control, parks and open spaces. All commercial rates collected in a local authority area are spent exclusively on providing services in that area. The Valuation Act 2001, which sets out the categories of properties that are rateable and not rateable, comes under the remit of my colleague, the Minister for Finance, Deputy Michael Noonan.

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 individual local authority and the setting of the annual rate on valuation, ARV, is a decision taken locally by elected members. Rating law provides for the making of a single ARV and there is no provision for a different ARV to be applied to different premises.

It should be borne in mind that while varying the ARV for certain businesses might be a boost for those businesses, it is likely to have a negative impact on other ratepayers who would be faced with higher rates bills to make up the shortfall in the local authority's rates income. This would be an unfair approach at a time when many businesses are faced with challenging circumstances. Local authority financing from all sources, including rates, motor tax income, Exchequer funding and local charges, is under pressure at present and it is highly unlikely that a local authority would be able to absorb any shortfall in rates income arising from the introduction of such a proposal. It is also the case that it could be problematic on a general level and could have implications for both state aid and EU competition rules.

The Government is focussed on reducing the costs of doing business to support competitiveness and employment in the economy and to protect the interests of communities. This year and in recent years, the Department of the Environment, Community and Local Government has requested local authorities to exercise restraint in setting commercial rates to support competitiveness in the economy and to protect the interests of communities. Local authorities have responded positively to these requests. Across the 88 local authorities, annual rates on valuation declined by an average of 0.64% from 2010 to 2011.

We are acutely awareof the pressures on small and medium-sized businesses and the challenging economic environment in which many business owners are operating at the present time. While the Minister, Deputy Hogan, has no immediate plans to conduct a review of the rating system generally, he is determined that every avenue will be pursued to optimise efficiency and certain costs in the local government sector. The Minister is also considering proposals in the area of local government rates, charges and supports to enterprise generally to assist small and medium-sized enterprises.

I thank the Senator for raising this very important matter. It is the issue of local charges that impact on the viability of small companies and the Minister is very conscious of this. I assure the Senator that this will be a huge consideration in the review of the efficiencies of local government.