Dispute over funding of €250m rates waiver

October budget will continue waiver of commercial rates, Minister Darragh O'Brien promises 
Dispute over funding of €250m rates waiver
Housing and Local Government Minister Darragh O’Brien has promised that the waiver of rates will be continued in October's budget. Picture: Sam Boal/RollingNews.ie

A major 'dispute' over the funding of the €250m waiver of commercial rates has emerged between two Government departments regarding how to pay for it.

Housing Minister Darragh O’Brien, in an interview with the Irish Examiner, has promised that the waiver of rates until the end of September “will absolutely” be continued in October’s budget.

However, new briefing documents from his own department highlight a clash with the Department of Public Expenditure and Reform over how the original three-month waiver between March and May was to be funded.

The note says that the cost of the full waiver of rates was announced on May 2,  for a three-month period, for businesses forced to close due to public health requirements from March 27.

“The County and City Management Association has estimated the Covid-19 impact on commercial rates income to be in the region of €86m per month or €260m over the three-month period, which is to be met by the Exchequer. The amount involved is disputed by DPER, who consider €95.5m as appropriate, and this issue remains to be resolved,” the note states.

"The Government decided on 2 May, 2020, to waive commercial rates for all businesses that have been forced to close business due to public health requirements from 27 March for a three-month period at a cost of €260m, to be met by the Exchequer.

“Since then, differences have emerged between the department and DPER regarding the approach to be taken to the implementation of this decision, in light of the wording of the Government decision,” the note adds.

DPER has expressed the view that the Government decision covers businesses that were forced to close and cease operations completely and has suggested that this approach would cost in the region of €95.5m.

“However, this cost is based on estimated average impact and a proposed banding approach to the waiver; it does not factor in all businesses that were forced to close fully, as it was based on banded averages. Even using narrow eligibility criteria, it will be extremely challenging to implement the waiver as announced within €95.5m,” the department told Mr O’Brien on taking office.

The department has analysed the cost of a three-month waiver for businesses that were forced to close and cease operation by the regulations and were estimated by the LG sector to be 100% impacted by the closure, and the estimated cost of this approach is €105.5m.

Separately, the local government sector has estimated that other income losses, for example from a collapse in parking-charge revenue, amount to €91m across the 31 local authorities.

In his interview, Mr O’Brien said he will 'absolutely' be seeking a further concession on commercial rates for small business on budget day, on top of the €600m already committed to by the Government.

“We pushed very hard here on the rates waiver and worked very well with Minister Michael McGrath on it," he said.

"No rates have been paid since March and no rates will be paid between now and the budget. And absolutely we'll be looking again at it in the budget,” he said.

 Political sources have said that the issue of introducing the waiver was cleared at Government level and the disagreement came when officials in the Department of Public Expenditure, led by Robert Watt, refused to sanction more than the €90m, despite the waiver costing €260m.

The payment of commercial rates is a key revenue stream for local authorities around the country.

 

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