Thursday, 28 January 2016
Commercial Rates Impact
I welcome the Minister of State, Deputy English, to the House. This morning he seems to be Minister of State for all trades.
I have tabled a motion on commercial rates on child care. It is not the first time that I have raised this matter and it was one of the first issues I raised when I became a Senator. The climate has changed since then because educational preschool services have been put to the forefront by this Government. I hope I will get a better response to my query this time. There has been a good response to the Seanad's motion to exempt community child care facilities from rates. Today, I am referring to the impact rates have on educational establishments.
Preschool education is an educational and social facility that is now available to all children in Ireland and the Minister for Children and Youth Affairs has announced the introduction of a second year of free preschool education. This is the first year that the Department of Education and Skills has become involved in the inspection of preschools as, heretofore, such work was done by the HSE and Tusla. That shows how much we value preschool education and it is now available to every child for two years. Preschool education has been deemed more important than all of the other stages of education because 80% of a child's intelligence develops between the ages of zero and three years. Why is preschool education looked on as a commercial entity and used as an opportunity to charge rates? If commercial rates for such places were fairly treated throughout the country it would be something but, unfortunately, rates differ from county to county. Let us discuss the type of space that attracts rates. Ms Teresa Heeney, from Early Childhood Ireland, has conducted a very good survey of its members on the subject of commercial rates. Early Childhood Ireland has a lot of members but not every provider of preschool education is a member. There was a very good response to the survey. It shows that 40% of participants stated that rates are applied to the amount of space inside but rates are also charged on outside space. As much as 37% of rates charged includes all space; 5% rate the classroom size only; and 7% rate other things as well. Some counties impose rates on storage space, cupboards or whatever. The survey shows that there is no standard approach to commercial rates.
The survey also shows the number of crèches, which now must all be registered with the HSE, versus the number of places that pay rates. Some counties are very good and County Carlow is the best as 62% of its HSE registered crèches pay rates. What is different about County Carlow? It has a very low base rate as the average charged is €1,900. In County Leitrim only 11% of its crèches are registered with the HSE. Obviously a lot of them may be community crèches or there may not be as many commercial crèches or whatever. We simply do not know. Let us take two parents who earn exactly the same salary and say one lives in County Leitrim while the other lives in County Carlow. In that case totally different rules and regulations apply to the rates that must be paid. County Longford is very good as 71% of its HSE registered crèches pay rates. I think that county has as many community crèches as other counties or at least it deserves to have as many community crèches which would not be rated.
I will outline the reasons I tabled my Commencement matter. First, preschool educational establishments should not be charged commercial rates. Second, on foot of the survey conducted by Early Childhood Ireland, I wish to point out that the way commercial rates are charged around the country is unfair. For example, only 15% of HSE registered crèches in Sligo pay rates. I am not saying that more of them should pay rates. Indeed, that 15% of enterprises should not pay rates at all.
The survey also shows that most of the rates are generated in the County Dublin area. A sum of €14 million has been collected in total. As much as €11 million of that sum has come from Dublin and the rest of the money comes from the rest of the country. Even though the rates of pay in Dublin are generally higher there is something radically wrong with the system and it must be corrected. It is impossible to ensure financial sustainability. Some schools have huge arrears which they cannot afford to pay. I acknowledge what has been done for community child care but I want the same done for crèches, which are educational establishments.
On behalf of the Minister for Justice and Equality, Deputy Frances Fitzgerald, I thank the Senator for raising this important issue. I should point out that the ministerial responsibility for the Valuation Office has been transferred to the Minister for Justice and Equality, with effect from 1 January 2016. I might also explain that the issue of local authority commercial rates comes within the remit of the Minister for Public Expenditure and Reform, who has responsibility for fiscal policy, and the Minister for the Environment, Community and Local Government, who has responsibility for the local government system.
The Valuation Office, which now comes under the remit of the Minister for Justice and Equality, is responsible for the implementation and interpretation of the Valuation Act 2001, as amended, under which commercial rates are levied by the local authorities. The Valuation Office prepares valuation lists of commercial properties, as required by the Valuation Act, and local authorities are obliged to collect rates on properties which are listed. The Commissioner of Valuation is independent in the exercise of his functions under the Valuation Act 2001 and the making of valuations for rating purposes is his sole prerogative. The statute does not accord the Minister any function in this regard.
The Valuation Act 2001, as amended by the Valuation (Amendment) Act 2015, provides that all buildings used or developed for any purpose are rateable unless expressly exempted under Schedule 4 of the Act. Such exempt buildings would principally include those used for public worship, education and healthcare provided on a not-for-profit basis and charitable purposes. In general, the Act maintains the long-standing position that all commercial properties, including all commercial child care facilities such as playschools, preschools, crèchesand Montessori schools, are liable for rates.Inconsistency in the approach to the exemption from rates for child care and educational facilities and calls to exempt all such providers were among the issues raised at a number of stages during the passage of the Valuation (Amendment) Act 2015. As a result, the Government approved a Seanad Report Stage amendment to the Bill to insert into Schedule 4 to the Valuation Act 2001 an exemption from rates for properties occupied by parties that provided early childhood care and education on a not-for-profit basis. This is for community purposes, a matter to which the Senator referred. The amendment was proposed and passed on Report Stage in the Seanad on 20 November 2014. This extension of the child care and education exemption removed an anomaly by which facilities that provided child care and education on a charitable basis were exempt, while those that did so on a not-for-profit basis were not. Since the legislation was commenced on 8 June 2015, the Valuation Office has been updating the valuation list to give effect to this provision and the vast majority of such occupiers will qualify for this relief from 2016 onwards.
I thank the Senator for raising this important issue. The decision taken by the Government to extend the rates exemption to early childhood care and education provided on a not-for-profit basis was taken having considered the views of stakeholders in the sector and Members of this House. In addition to the exemption of those that provide child care and early education on a not-for-profit basis, the Valuation Office's interpretation of paragraph 10 of Schedule 4 to the Valuation Act 2001 means that those that provide only the early childhood care and education scheme are also exempt from rates.
The Minister of State could have left out three pages of his reply because I know exactly what it means: it is the system as it is, as everybody who works in early childhood care and education sector knows. One of the Minister of State's final statements was: "Since the legislation was commenced on 8 June 2015, the Valuation Office has been updating the valuation list to give effect to this provision and the vast majority of such occupiers will qualify for this relief from 2016 onwards." Is he telling me that the vast majority of early childhood care and education premises, those which provide the two-year child care preschool programme, will qualify for relief? If that is what he is saying, that indicates a change, as it would include for-profit as well as not-for-profit bodies. The Government is providing for free preschool education as long as providers can supply the setting for two years. That is a preschool without a child care service. That is what the Government is providing and nothing else. Will early childhood care and education providers qualify for a rates exemption as education service providers?
I will go through it again. In addition to the exemption of those that provide child care and early education on a not-for-profit basis, the Valuation Office's interpretation of paragraph 10 of Schedule 4 to the Valuation Act 2001 means that those that only provide the early childhood care and education scheme are also exempt from rates. The vast majority of occupiers will qualify for the updated relief from 2016 onwards.