The Business Committee has agreed to allow up to one hour and 30 minutes for this debate. The proposer of the motion will have 10 minutes to propose and 10 minutes for the winding-up speech. All other Members who wish to speak will have five minutes.

Two amendments have been received and published on the Marshalled List. The proposer of each amendment will have 10 minutes in which to do so and five minutes for the winding-up speech.

I beg to move

That this Assembly notes the introduction of unfair changes to the rating system, and calls upon the Department of Finance and Personnel to conduct a full review of the new system, including in particular, consideration of further income-related reliefs and a full income-based system.

I congratulate you on your appointment, Mr Deputy Speaker.

Since the recent rates revaluation, I have been approached by a number of my constituents whose rates have increased dramatically, in some cases by more than £1,000. For some, their rates would have doubled had it not been for transitional rate relief. Most of those constituents live in an old family home and exist on a modest pension. The rates increase will cause extreme hardship in most cases, and in extreme cases it will result in people having to sell the family home. It is unacceptable that elderly people who have worked all their lives and have saved for their retirement are now being hammered by those excessive rate demands.

The Executive must revisit the options for funding local government services. The present system, which is based on the regional rate, increasingly puts the burden on the elderly and those on a fixed income. It also hits low-income families. That cannot be acceptable in a civilised society. Rates are a regressive tax, and they bear little relation to a person’s ability to pay. They not only create hardship for those on fixed incomes but have a disproportionate impact on the low-paid. The Department of Finance and Personnel’s own figures, which are based on the 1999-2000 household survey, show that a house with a weekly income of £100 would pay 11·6% of that in rates, yet one with a weekly income of more than £400 would pay only 2·5% of that figure.

The new valuations, which are based on capital values, that were introduced in April 2007 highlight the rating system’s unfairness. Any system, however, that is based on property values is inherently unfair, as it totally disregards a person’s ability to pay. The problems raised by that revaluation are not new, but they are fundamental to any system that is based on property values.

For years, I have highlighted the plight of many elderly constituents who live on small pensions and who must pay more than 10% of their income on rates. The current proposals have emphasised and exacerbated their hardship. It is time for something to be done to reduce their burden.

Rates are a regressive tax, and they bear no relationship to one’s ability to pay. How can one justify an old-age pensioner’s having to pay the same as a family of three wage earners, simply because they live in a similar house? Moreover, payment of rates does not relate to the use of facilities. Can it be argued that a pensioner makes more use of an ice rink or squash courts, creates more rubbish, or uses more water than a family of four? Is it right that a person who lives on a pension should pay full rates while a young person who earns a substantial wage and lives in the family home should contribute nothing to the cost of local services?

Rates should be replaced by a tax that is based on ability to pay. The recent change from a rates system that is based on rental values to one that is based on capital values is merely tinkering with an unacceptable system that needs fundamental reform.

I have long argued that rates are inherently unfair because they take no account of ability to pay. In 1982, I raised that issue with the then Secretary of State, Jim Prior, when we met him to propose the abolition of the regional rate. The problem has worsened significantly in recent years as successive Finance Ministers — both Executive and direct rule — have raised the regional rate disproportionately to pay for the upgrading of our economic infrastructure. Few people would dispute that we must raise additional revenue to upgrade that infrastructure, but that should not be done through an unfair rating system that places the burden heavily on the most vulnerable sections of our community. I therefore call on the Minister to carry out a full review of the means of funding local services.

I recognise that, in 2000, the Executive set up a review of rating policy and began an extensive consultation process. However, the terms of reference for that review were extremely restrictive and the consultation was unable to consider options other than those that were based on property values. My submission, which proposed a local income tax, was dismissed as going beyond the terms of reference.

Much has happened since then. The regional rate has almost doubled, and both the Lyons Inquiry and the Burt Review of local government, in England and Scotland respectively, have suggested changes to local government finance.

There were more than 100 responses to the consultation in Northern Ireland, but the input from some political parties was limited by the terms of reference and, in other cases, was non-existent. I was the only elected representative to oppose the principle of the charges and to call for the replacement of rates by a tax that is based on ability to pay, such as a local income tax.

Three of the political parties that were then represented in the Assembly did not submit any evidence, and the comments of the other four queried the details of the new system, rather than the principles behind it, which are fundamental to the achievement of a just system. Over the five-year consultation period, there was very little interest from most politicians until last year, when the new valuations were announced. Politicians then demanded that the proposals be withdrawn.

The motion calls for a review of all the options, particularly income-based alternatives such as a local income tax. That would clearly be fair, as it would be based on one’s ability to pay; it would tax non-householders who do not pay at present, and it would not act as a disincentive to improve property. Other options include a local sales tax; a services tax; green taxes, which would help the environment as well as raising revenue, based on the principle that the polluter pays; and a land-value tax.

The Green Party in the Scottish Parliament has proposed a land-value tax, which is being considered by the Scottish Parliament and Executive. The Assembly should examine that option, because such a tax would benefit people on low income and would encourage the development of derelict land. When land is derelict, no one pays tax on it, and no income comes from it. A land-value tax would stop speculators from building up land banks on which they pay no tax, but from which they benefit from almost daily rises in land prices. Many developers, particularly in the greater Belfast area, have land banks where affordable homes could be built.

The values of those land banks have increased dramatically in recent years. It is wrong that developers rather than the public should benefit from the appreciation in land prices. We should examine all those options, and the Assembly should seek to acquire tax-raising powers so that all increases in public expenditure are not met solely from the property tax paid by the ratepayer but from a basket of taxes.

I accept that such a review will take time; however, a great injustice could be resolved immediately. We should end the discrimination against single householders in Northern Ireland. Since 1993, single householders in the rest of the UK have benefited from a 25% rebate. That takes into account the fact that they make less use of public services than larger households. That rebate has helped millions of householders in Great Britain, the majority of whom are pensioners.

In 1992, I wrote to the then Finance Minister, Michael Mates, to ask that he introduce a similar discount in Northern Ireland. He rejected my request, pointing out that local-government finance is different in Northern Ireland. I wrote to all subsequent Finance Ministers and have a file of their replies, which were pretty awful. Those Ministers did not understand the issue — for example, Paul Murphy pointed out that the Exchequer funding for Northern Ireland is much higher than in the rest of the UK. Mark Durkan replied that the issue would be considered in the course of the review of rating policy. The matter has been put off, year after year, since 1992. Why should Mrs Jones from Bangor in north Wales get a 25% discount, while Mrs Jones from Bangor in County Down does not? Such discrimination cannot be justified, particularly as the regional-rate burden has increased significantly in recent years. In North Down alone, 5,600 single pensioners would benefit from such a rebate. We call on the Minister of Finance and Personnel to introduce the 25% rates discount for the single householder and to end this discrimination.

In conclusion, I ask the Minister to set up a review of the funding of local services and to consider moving from a property-based tax to a mainly income-based tax. That review should also examine all other options, such as a local sales tax, service tax, land-value tax and green taxes. If necessary, the legislation must be changed to give the Assembly tax-raising powers, which it should have anyway. It is essential that the burden of taxation be spread more evenly and does not continue to fall most heavily on the elderly and those on fixed incomes. In the meantime, I ask the Minister to introduce the 25% discount available in the rest of the UK, thereby reducing the hardship and concern experienced by tens of thousands of pensioners in Northern Ireland.

I beg to move amendment No 1: Leave out all after “notes” and insert

“the widespread public concern at the changes to the rating system and calls upon the Department of Finance and Personnel to conduct a full review of the new rating system, including consideration of a generous, non-means tested, rates relief scheme for pensioner households.”

I tabled the amendment in the interests of avoiding the complex, highly expensive and bureaucratic system that would emerge. For “income-related reliefs” in the text of the motion, we should read “means-tested reliefs”. With regard to take-up of means-tested relief, a 2006 report from the Office for National Statistics (ONS) indicated that benefit take-up was in the range of 62% to 68% by caseload and 65% to 71% by expenditure for 2004-05. In other words, a third of people entitled to those reliefs did not claim them, so any such scheme will miss one third of the most vulnerable.

Pensioners’ groups have also examined the issue. Help the Aged found, similarly, that 37% of pensioners did not take up their benefit entitlement. We should not be surprised at that figure.

In a 2006 policy statement, Help the Aged indicated that means testing much of this help has created a complex and bureaucratic system, resulting in the failure of millions of the poorest pensioners to benefit from the changes. Pensioner interest groups have expressed concern; therefore, my amendment includes the words “non-means tested”. Any form of relief should be universal; everyone should be free to apply for it or to receive it automatically.

Help the Aged commented that:

“Universal benefits tend to have the best rates of take-up as they are simple to understand, usually have clear eligibility criteria, and are not associated with any kind of stigma.”

Many elderly people do not take up their entitlement because they believe that they must reveal all of their personal circumstances. It is an invasive process, and it is important that we realise that. Stigma, therefore, is a big issue to consider when determining how any new system should operate.

The motion mentioned income-based systems. That means income tax, and I am pleased that the proposer of the motion mentioned that in his speech. However, he did not mention it in the motion itself, because he wants additional income tax for Northern Ireland. Will that help the economy or detract from it? We must encourage as many people as possible to return to employment and assist them to contribute to the economy. The fear that an increase in income tax effectively means an additional tax, a poll tax, for working families contributes to the problems.

There is a choice. There can be a full income tax system for everything; for example, what was raised by property rates could be raised by income tax. However, that would remove any choice from local government. Each area would simply be handed a budget with central control over what could be done with it.

That is a complex system to administer. We must remember that, apart from income tax and the Inland Revenue, there may be issues concerning national insurance, child tax credit, pensioner tax credit and working families tax credit. How would all of those things work together in a system? There is no doubt that any effect on someone’s income will impinge on other benefits. It is therefore foolish to introduce an income tax unless it is introduced in the whole of the UK. Instead of a huge administrative burden, it could be done more efficiently and should be considered only at a national level.

To follow that route in replacing the rates system would create a complex system. I surmise that the 250 staff employed by Crystal Alliance to administer water charges is only a small number compared to the number of civil servants required to administer any new income tax system that is not fully integrated into the Inland Revenue. It is likely that we would have to pay many civil servants to run yet another bureaucratic system, thereby damaging the economy and without reaching the people we want to reach.

The proposer of the motion referred to another choice involving an income tax-based system, and that is to raise the regional rate element from income tax and the remainder from property tax. Two systems would, therefore, have to be administered. Money that we want to spend on services in the community would be wasted.

Those new Members who have yet to come into contact with issues involving the complex system will, I fear, do so before long. I refer in particular to the tax credit system. Some of the poorest families tried to take advantage of benefits to which they believed they were entitled, only to discover that, following an assessment by the Inland Revenue at the year end, and owing to administrative errors and miscommunication, they had to pay back several thousands of pounds.

That exacerbates the situation. Therefore a move towards income tax would be done at our peril; it will be worthy of our consideration only when it is co-ordinated at the national, UK level.

It is important that any new rates system should be universal so that everyone who is entitled to benefit from it will take it up. In particular, vulnerable pensioners should be able to make use of it without stigma. Incentives and entitlements should remain in such a system so that everyone can save and be prudent as they prepare for their later years. It is important not to create unreasonable administrative burdens.

The Member who moved the motion talked about other taxes that he wishes to employ. Let us be careful with our economy; we should avoid administrative burdens, complex systems and layers of tax that create difficulties for small businesses and discourage people from becoming workers or employers. We must allow the economy to grow. I am aware that the current system must be reviewed for fairness and so that it can deal with additional reliefs, but that must be done carefully. I suggest that the grief that Members get currently from constituents about property tax is minimal compared to the complaints that we would receive if we were to consider introducing further income tax burdens on the working community. Remember that for “income tax”, I read “working family taxes”. Let us encourage everyone back into employment and to save, and let us be cautious as we administer tax burdens on our community.

Some Members:

Hear, hear.

I beg to move amendment No 2: Leave out all after the second “system” and insert

“which fundamentally fails the essential test of ability to pay; and further calls for this review to give particular consideration to fair and transparent income-based protections, and suitable reliefs for pensioners and all disabled persons.”

The SDLP supports the need for a review of the new rates system. This amendment is necessary to emphasise that the central task that faces the Minister of Finance and Personnel is the understanding that the current system significantly generates rate demands that are not in line with ability to pay.

A property tax creates basic tensions about ability to pay. Houses do not pay the rates; occupants pay. Houses do not have incomes; occupants do. Houses do not have outgoings and varied circumstances; occupants do. Therefore the Minister faces quite a task in creating a property tax that truly reflects ability to pay. However, that should not be regarded as an argument for a local income tax; it is not that simple.

Let me be clear that the SDLP is not calling into review — and I doubt that any other party will, either — the central change in the new system, which was the replacement of a rental-based valuation of property by a capital-based one. All the evidence is that the old, rental-based approach was regressive and placed a disproportionate burden on those with lower incomes. A property tax is better based on capital, rather than rental, values.

It is proper that those who are in the political system recognise good administration, so, in passing, let me pay tribute to the staff in the Department of Finance and Personnel (DFP) and the Rate Collection Agency (RCA) who administered a complex changeover. Taken as a whole, they did it well.

A capital-based system, however, brings its own problems. There may be some broad correlation between the value of a house and the ability of the occupant to pay. However, there are many exceptions and anomalies that the Minister must address.

The SDLP wants income-based protection proposals for both water charges and rates, to include a guaranteed maximum payment as a percentage of a person’s income.

There are particular problems for pensioners. In some cases they have valuable homes but low incomes. That happens frequently after people have been widowed. There are places along the north coast, for example, where even modest homes have been priced astronomically for some time. Pensioners who live in such situations are carrying an unfair burden and need relief. The Government’s well-established concept of a minimum income guarantee under the social security system is significant in this debate. Failure to allow proper relief for pensioners under the present rating system undermines and contradicts that guarantee.

If Draft Planning Policy Statement 14 is not removed, many people will fear the next property revaluation exercise. Small cottages on rural sites are now worth fortunes, and would be rated accordingly.

The SDLP amendment mentions “disabled persons”. There is 25% rates relief for disabled people whose property has been modified; the SDLP wants that relief to be extended to every person with a disability. Why should a person with mobility difficulties who lives in a bungalow that does not need modification be treated differently from other people with disabilities?

The SDLP proposes that there should be a revenue regulator — an independent watchdog for all Government revenue proposals. The regulator would assess, comment on and have powers to regulate such proposals, including their cumulative effect. My party commends that proposal to other parties for consideration.

There must be more transparency in the rating system. Members have seen the people’s anger during the argument over the water element in the regional rate. People want to know what they are paying for.

Finally, the SDLP has no objection to a local income tax being studied, but there are many problems involved. The Assembly has no tax-raising powers; the Scottish Parliament has such powers but has never used them, and there must be good reasons for that. HM Revenue and Customs would have difficulty in building in such a scheme. If it were achieved, revenue would be collected across Northern Ireland uniformly, but local council revenue demands vary enormously, so there is no simple answer. There will be a property-based charge in Northern Ireland for the foreseeable future. The current system contains significant defects, which the Minister must rectify.

Go raibh maith agat, a LeasCheann Comhairle. Congratulations on your appointment, Mr Deputy Speaker. I missed the opportunity to congratulate you yesterday.

I support the motion, and I have no difficulties with the amendments, which extrapolate the issues that would have to be considered during a review. Sinn Féin’s preferred option is the removal of the rates and their replacement with a system of progressive direct taxation. However, that is work in progress, and a considerable amount of work needs to be done. Sinn Féin intends to pursue the matter with the Exchequer.

Sinn Féin believes that equality and ability to pay must be at the heart of any rating system, and that such a system must be transparent and fair. There should be a clear relationship between rates revenue, value for money and the quality of services provided. Mr O’Loan referred to a prime example, which is the widespread public view that people are being asked to pay twice for the same service when it comes to water charges.

Consequently, Sinn Féin believes that the rating system in the Six Counties is in urgent need of a radical overhaul, in the context of a review of the Barnett formula, and the negotiations, which we hope will be concluded successfully, on a meaningful peace dividend.

I call on the other parties in the Assembly to consider and support Sinn Féin’s call for tax-varying powers for the Assembly. That would be a key element in bringing forward policies and measures that reflect local issues, expertise and accountability.

The current rating system, which was introduced by a direct rule Minister, does not distribute the rates burden fairly and has achieved little or no buy-in from stakeholders in our community. Every party addressed the issue in the recent election. In particular, current rating policy does not address the fact that, in many cases, house values bear no relationship to income. Therefore, many people are in the unenviable position of being asset rich but income poor and are experiencing exceptional hardship because of this unfair system.

In the absence of a progressive tax-gathering power to replace the present system, Sinn Féin argues that rates should be assessed through an income-related system, which is based on the ability to pay, and with specific exemptions for economically vulnerable groups such as older people, those with disabilities and other low-income households. Sinn Féin continues to raise public finance issues including tax-varying powers, the Barnett formula, and the legacy costs of many years of neglect and underinvestment by successive direct rule Ministers. Sinn Féin is raising those issues to give the new team of Executive Ministers the tools and the opportunity to deliver on an agreed Programme for Government.

It is incumbent on MLAs, parties and party groupings to continue to provide support for that call and to continue to address those issues with the British and the Irish Governments. Sinn Féin supports the motion and the amendments.

Go raibh maith agat.

The DUP has been consistent in its concerns about the proposed system. The party has highlighted its concerns from the start, and has raised them consistently with Ministers. Taking the capital value of houses on 1 January 2005 is not a reliable basis for determining rates. Therefore today’s debate is welcomed.

People who fall just outside the benefits system and whose net income does not reflect their level of wealth will suffer most as a result of the review of rating policy.

The DUP has pressed on a number of issues and it will continue to press for a financial package to alleviate the situation. Unlike other parties in the House, the DUP has not thrown in the towel on that issue. At St Andrews, the DUP stressed that any system that left Northern Ireland ratepayers without a cap on rates was inherently unfair. It was unacceptable to have a situation in which people in Northern Ireland were, potentially, paying a lot more than the Duke of Westminster. I am glad to say that the DUP achieved a cap on rates. However, the level of the rates cap is too high, and that needs to be taken into account in any review of rating policy.

There should be a greater focus on the need for more generous relief for pensioners, and I welcome references to that matter in both amendments. Pensioners are the most vulnerable group who may be suffering because of changes to the rating system.

A fundamental mistake was made during the reinvestment and reform initiative (RRI), when rates rises were linked to council tax in England and Wales. The result was that many of us who served in local government saw a massive increase of 19% in the regional rate, which meant that no matter how prudent local councils were, ratepayers were given an unacceptable burden. The DUP believes that the link between council tax levels in Great Britain and Northern Ireland should be broken.

The DUP is content with both amendments as they focus on the key issues; rates relief, and the protection of vulnerable groups. The DUP will support the amendments because they improve the motion. Having listened to the proposer of the motion, I have a number of concerns with the issues he has raised. His solutions seem to be twofold — first, he proposes some kind of agrarian revolution in this country in which landowners are taxed.

The landowners will not pick up the bill for that: when land is used for development it will simply become an additional tax passed on to property owners. We do not need further inflation of house prices in this country. However, the United Community group — and the Alliance Party, for whom I assume the proposer speaks also — has become the party that believes in taxation to the hilt, because that is what has been proposed.

The other imaginative solution put forward by the group is that of a local income tax. Again, the effect of that would be to tax people to the hilt. When we are given an opportunity to vary income tax, the Treasury will inevitably look at our expenditure — whatever the block grant is in Northern Ireland — and advise that if we are looking for more money we should simply increase our taxation to the maximum level possible before they can consider any additional finance.

The flawed thinking offered by Mr Wilson and others would not soak the rich, but rather drown the working man and women in a tidal wave of extra taxation.

The DUP welcomes the opportunity to debate the subject and believes that there must be a fundamental review and examination of the rating system. However, a review must focus on what will benefit people and must not be counterproductive to the people and the economy of Northern Ireland.

Members would do well to ask why this debate is necessary. It is because of the failed political arrangements of the past, under both direct rule and the failed arrangements of the Belfast Agreement. However, we are in a new dispensation, and that dispensation has placed on us a responsibility to ensure that we get it right —

The Belfast Agreement mark II.

— unlike the hon Members who are now reduced to a small number in the corner of the House, who cannot bring forward any proposals that command respect in the community, and whose election results were a clear indication of that.

There are few recently elected Members who have not come to realise the importance of the rating system in Northern Ireland. They will also have realised how important it is for the Assembly to take real action to ensure that the current situation imposed by direct rule administrators is reviewed and a new system implemented that does not unfairly penalise Northern Ireland homeowners. In that I include homeowners on Rathlin Island, the most remote part of my constituency, some of whom I am delighted to welcome as guests in the visitors Gallery this morning.

The DUP laid out its position clearly on the rating issue in the run-up to the election, and it does not believe that the capital value of someone’s home on 1 January 2005 is a sufficiently reliable indicator of a person’s ability to pay to be used as a sole basis for determining rates. It is therefore clear that a different system must be employed. The motion calls for consideration of a “full income-based system”. While I doubt strongly that an income-based system is the way forward, I welcome the call for a review to lay out all the different possibilities, so that the House —

I thank the hon Member for giving way. He is touching on an important point. The amendments, along with the motion, concentrate on exemptions, and that is right and proper for people on a low income. However, should we not also look at increasing disposable income across society so that the take is not reduced because of the exemptions that must be introduced?

The hon Member for East Londonderry has made a good point. There is no doubt that we should look in detail at the level of relief given to vulnerable groups in our society. The DUP has already called for a 25% rate reduction for single pensioners living alone. Most often it is the older people, living in family homes for a long time, who find themselves in financial difficulty when faced with rate bills that continue to rise.

This issue should not be looked at in isolation, as my hon Friend and colleague has said. The ongoing negotiations with the Chancellor can make a significant impact. The reinvestment and reform initiative, a hallmark of devolution under the Belfast Agreement, shackled householders to huge rates hikes simply to allow the then Northern Ireland Executive to access borrowing. That situation cannot and should not be allowed to continue. It will be a significant step forward if we can break the link between local tax levels in England and the regional rate in Northern Ireland.

There is little point in claiming that there is going to be a simple solution to the problems of rating. However, it is an issue that this party has taken to the electorate, and we have clearly received an overwhelming mandate to take the issue seriously. That was demon­strated by our taking the Finance and Personnel portfolio as our first choice in Government. I have every confidence that the Minister who has been appointed to that position will ensure that delivery is a hallmark of the policies that we have set out. I look forward to working with the Minister and the Committee and hope that we will be able to bring to the House a review on terms that are acceptable and able to be implemented.

Northern Ireland does not have unlimited resources. It is vital that the best efforts be made to make sure that those resources are distributed to the benefit of all in our community. I hope that a review of rating will be combined with a cutting back of much of the waste that has been a hallmark of devolution in the past.

Time, please.

It has been some time since we have had full-blown debates in the Chamber, but the convention has been that Members do not refer to the Public Gallery. We have been getting back into the habit very quickly.

Go raibh maith agat, a LeasCheann Comhairle. I commend the two Members who have brought this motion. The introduction of the new rating system was universally criticised across the North of Ireland. The issue has been to the forefront of people’s concerns since the changes were announced last year against the wishes of the vast majority of the population, who see them as a way for the Government to force more money out of those who, in many cases, do not have the ability to pay.

(Mr Deputy Speaker [Mr Dallat] in the Chair)

We were told that the rates were being brought into line with payments in England and that we had had it easy for many years and were not paying our way. However, that does not take into consideration the facts that people here pay higher prices for fuel, both domestic and commercial, that food is more expensive in general, and that the cost of living is comparatively high here. Add in our low earnings and high unemploy­ment and an altogether different picture is painted.

Those in power — and their advisers — chose to ignore those very relevant issues. Why did they not leave the old system in place so that an incoming Assembly could deal with it? They chose to do that with other matters, but they knew that while local politicians may not agree on every element of what would be required, once at the helm the Assembly would at least have looked at the matter sympathetically. In fact, the last Executive commissioned a review of the rating system, but were unable to complete the job before the Assembly collapsed.

Direct rule Ministers argued that the present system was fair and would benefit those most in need. Such nonsense! If it is that good, why did they not push to have it introduced in their own constituencies? Many of those responsible for its introduction here are the same people who came out strongly against the poll tax.

Sinn Féin has consistently called for a radical review of the rating system. We would prefer to scrap the rates altogether and introduce a system of progressive direct taxation. Consequently, we believe that the rating system in the Six Counties needs a radical overhaul, in the context of a complete review of the Barnett formula. We also need a meaningful peace dividend and the granting of tax-varying powers to the Assembly and the Executive.

In the meantime, equality and ability to pay must be at the heart of any continued rating system. Also, the system must be made transparent. It must be fair, with a clear relationship between rates, income, value for money and the quality of service provided.

The current system does not distribute the rates burden fairly. In particular, the failure to address the correlation between house values and income means that many people will be in the unacceptable position of being asset rich but income poor, and will pay higher rates than they can afford.

Rates relief should be addressed through an income-related system, which is based on ability to pay and has specific exemptions for economically vulnerable groups such as older people, those with disabilities and other low-income householders.

Some people with disabilities are forced to adapt their homes to enable them to live with dignity — their circumstances should be taken into account in any rating system. The rating system must address disadvantaged and low-income groups in a meaningful way. The British Government’s scheme, in its present form, does not address those core issues, which are essential criteria and which must be at the heart of any review.

Go raibh maith agat.

I take the opportunity to welcome you on your first occasion in the Chair, Mr Deputy Speaker.

There is no doubt that a review of rating policy is required. Many objections to the capital value system have been well aired this morning. I will dwell on the concerns about local income tax that were overlooked, perhaps understandably, by the proposer. Having listened to him, one might be forgiven for thinking that local income tax is a panacea for all of our taxation ills.

There is some popular support for an income-based system. Recently, the Lyons Inquiry, which examined local government finance in England, found that half of its respondents were in favour of some, or all, local taxation being raised through an income-based tax. However, four-in-ten people did not express a view, which suggests that there is a lack of knowledge about the implications of such a system.

A local income-based tax system would result in significant rebalancing — from retired householders to the working-age population — and this is where a judgement is required. Do Members want retired householders to pay less, on average, than younger, working householders?

It is often said during discussions about local income tax — and was repeated by the proposer — that any system should be based on ability to pay. However, Members must consider which definition of the phrase “ability to pay” should be applied. There are some attractions about a scheme that is purely based on income. However, should retired householders with modest incomes, but significant savings, or equity, pay less than a young family with a slightly larger income but no assets?

Income-based tax has been a hot topic in the recent Scottish election. Professor David Bell of Stirling University has illustrated the “classic case” of a household comprising a fireman, a nurse and their young family. He found that that household would be £73 worse off under a Liberal Democrat plan for a local income-based tax system — a plan that has had some support from the Alliance Party Members.

Are there implications for a local government that is financed through local income tax? Would resources rise and fall because income yields would create uncertainty for councils in bad times, with the risk, and temptation, of over-extension in good times?

The ease with which such a scheme would be implemented should also be examined. Any new tax inevitably creates complex and often unforeseen problems. I am sure that Members agree that we want a simpler and fairer tax system. Taking that tax at source would inevitably lead to more stress for businesses, which are already burdened by bureaucracy.

David Watt of the Scottish Institute of Directors has said that a local income-based tax would be an anti-business measure that could impact on competitiveness and add to the tax collection burden for businesses. My impression is that Members want to increase competitiveness in Northern Ireland, and that no one wants to see businesses burdened by more bureaucracy and red tape.

A local income-based tax system is attractive on paper, especially because of the general view that ability to pay translates into fairness, but it is easy to overlook that such a system has serious limitations.

There would be a substantial increase in tax for the working population, potentially less stable funding for local government than current streams, and an undoubted effect on business. Any change to any tax system will result in winners and losers, and a local income tax would simply create different winners and different losers.

Mr Deputy Speaker, I wish you well in your appointment as Deputy Speaker of this House. I will speak today on the amendment proposed by my hon Friend Roy Beggs.

The changes introduced to the rating system by direct rule Ministers were one of the most distasteful aspects of the direct rule regime. They occasioned widespread public outcry and a deep sense of public unease at their unfairness. They became the cause of major public protest. It would be fair to say that outrage over the rates was a major factor in determining the public mood that ultimately led to the restoration of this Assembly. It was not just a matter of the substance of the rates proposals, but of the way the direct rule Ministers handled the public outcry — their attitude bordered on dismissiveness, if not actual contempt.

At the very heart of my concern about the rates issue is the disproportionate impact it will have on many senior-citizen households. The ability to pay a tax has to be a major factor in how publicly acceptable that tax is. That is why a review of the ability of many senior-citizen households to pay the tax must be undertaken and why rates bills must include a significant rebate for older people living on fixed incomes. Many elderly people live on fixed incomes and pensions and are in no position to meet massively increased rates demands. They cannot increase their incomes and cannot reasonably be expected to sell their homes, their major asset, to pay their rates bills.

Those homes are not just houses, but family homes. In many cases, older people have lived all their lives and brought up their families in those homes. There is something deeply personal about a home — especially as a person gets older. Those homes are filled with memories and have a real sense of place for their occupants.

The distress caused by this issue cannot be overstated. Older people could not have predicted the massive boom in house prices recently. Could any of us have predicted that 10 years ago? Therefore they were in no position to plan for such an eventuality throughout their lives. Thus, significant rebate must be built into the system for older ratepayers on fixed incomes and that issue must become a basic focus of any review of the rating system that Ministers set up.

The fact that older people’s homes are now worth a lot more makes no material difference to them. They will never see the value of their homes unless they sell them, which is unthinkable for many. They may be asset rich, but their income stream may be incapable of absorbing new rates bills and water charges.

Societies change and older people often get left behind. There are 200,000 more people living here than there were decades ago, and large numbers of people are returning to Northern Ireland now that civil strife has ended and the political landscape has changed. Furthermore, people are living longer.

It is small wonder, therefore, that house prices have risen with the pressure of demand. It is also true that they have risen because of planning restrictions. Both factors have impacted disproportionately on first-time buyers and older people.

In the light of these arguments, I ask the House to advocate a review of the rating system that will give special consideration to generous rebates for older people living on fixed incomes.

The eyes of the people are on us, and we must not fail them.

Mr Deputy Speaker, I congratulate you on your appointment as one of the Assembly’s Deputy Speakers and join other Members in welcoming you to the first sitting over which you have presided.

Few issues are more important to householders in Northern Ireland than the level of local taxes that they have to pay. I congratulate the two Members from North Down on securing this debate at such an early opportunity and thank all the Members who have contributed. The return of devolution can make a real and meaningful difference on this issue. I welcome the opportunity to put my views on record and to set out how I intend to proceed.

Although it will not be for the Minister of Finance and Personnel alone to determine the future arrangements for rating in Northern Ireland, I will ensure that any proposals that are brought to the Assembly and the Executive represent a fair deal for householders.

As someone who fought for election on a manifesto commitment to review the present rating arrangements, I am glad that the motion and, indeed, the amendments are broadly consistent with that outlook. Today’s debate has helped to focus on many of the failings of the present arrangements. That is the easy bit; the real challenge is to devise arrangements that can command widespread support and be seen to be fair.

Let me make it clear that I am committed to reviewing the arrangements for domestic rates in Northern Ireland. I intend, in the next few weeks, to bring a paper before the Executive setting out the steps that I propose to take. I agree with the Chairperson of the Finance and Personnel Committee that it is important that rating reform be viewed in the context of how the Executive intend to address the funding of water in Northern Ireland.

In the past five years in Northern Ireland, extensive research and consultation has been conducted on the rating issue. In Great Britain, Sir Michael Lyons has recently conducted a lengthy review of local government finance. What is needed now in Northern Ireland is not a lengthy analysis but a short-term review that can deliver changes by next April and consider what further long-term steps should be taken.

We must not only achieve as fair a rating system as possible; we must also ensure that the system does not place too great an overall burden on householders as a whole. Recent years have seen some unprecedented increases in the level of the regional rate, with an increase of 19% in 2006-07. Such increases are neither sustainable nor acceptable.

In this financial year, the domestic regional rate is forecast to contribute £240 million to public spending in Northern Ireland. Put another way, that represents about 2·5% of planned departmental expenditure. Each 1% increase in the domestic regional rate provides a little over £2 million in additional spending power. Therefore, increases in the regional rate can have a big impact on householders but a limited impact on public spending.

Will the Minister give way?

I will give way on this occasion. However, if I am to respond to the remarks made by each Member who spoke, I cannot give way again.

Will the Minister confirm that if, as a result of his review of the rating system, domestic rates are revalued, the process will be carried out on a revenue-neutral basis and will not lead to an increase in the regional rate?

The mechanism for determining the regional rate is that the Executive determine what the Budget requires from the regional rate, which amount is then divided based on the valuation of all eligible properties. Therefore, the only distinction in a revaluation is the extent to which one person’s property is out of kilter with the other valuations. The overall intake is the same, and, therefore, the process is revenue neutral.

As I was saying, a 1% increase in the domestic regional rate provides a little over £2 million in additional spending power. By comparison, the proposed efficiency targets of 3% per annum for each Department over the comprehensive spending review (CSR) period will free up £790 million of additional spending power by 2010-11. A modest increase in the current efficiency target to 3·5% a year would raise an extra £120 million.

As well as mapping out the long-term options for raising revenue in the Province, it is essential that short-term measures be considered in any review. As I said, I intend to carry out an early review of the domestic rating system. As part of that review, the effectiveness of the new relief packages, which are already on offer, will be examined. There are better ways of delivering relief to those who are most deserving, and we need to examine the options for doing so.

We also need to look at ways of encouraging the most vulnerable, particularly elderly people, to take up the reliefs that they are entitled to. I will be urgently seeking ways of making improvements in this area. Enhanced assistance for pensioners has recently been put in place; it provides additional relief for pensioners on lower incomes. I want to ensure that all those entitled to this relief are aware of it and take advantage of it.

The motion includes a proposal that would require new legislation, which could not be completed in time for the next rate bills, even if the proposal were considered sound and approved by the Executive and Assembly. There are issues, then, that could only form part of a long-term review. Whatever the possibilities for change in the longer term, we must be able to make changes that can be in place for next April.

There is scope for change within the existing legislation to deliver alternative or supplementary income-based reliefs. Options such as circuit-breakers, which would ensure that no household paid more than a certain percentage of its income on rates, must be examined as part of any review. Although there are many administrative difficulties with this approach, it could offer significant benefits, providing we can deliver it easily, which means within the scope of the existing legislation.

Other changes that could be made quickly and without the need for new primary legislation include the introduction of a minimum payment or a change to the level of the cap. In addition, we have the power to introduce the rating of vacant homes or to bring in a deferment scheme for pensioners. Although I am uneasy about a number of these options, it is important that any review examine all of them.

There are no easy answers. Difficult choices will have to be made. Rating is distinct from other forms of taxation because the amount of money to be raised is decided first each year as part of the Budget process of the Assembly and the district councils, and the individual bills are worked out accordingly. Therefore, providing more reliefs will either add to everyone else’s bills or lead to money being foregone.

This will inevitably lead to difficult choices for the Executive to make, and, at a time when increases in public spending are at their lowest for a decade, there are significant spending pressures. People will not tolerate spiralling local taxes when they believe that there are significant inefficiencies in the public sector. That places a huge responsibility on the Executive to ensure that every pound of public expenditure is well spent.

A complete overhaul of the system is within the power and reach of the Assembly. However, more significant change, such as bringing in a purely income-based system, would take longer to achieve, if it were thought to be appropriate. As an incoming Executive, we have an obligation to ensure that a fairer system is in place for next year’s rate bills. In the coming months, I will look at the evidence carefully and bring back proposals to my ministerial colleagues, the Finance and Personnel Committee and the Assembly.

Members raised a number of points during the debate and, in the short time available, I want to respond to as many of them as possible. I have no doubt that, in the months ahead, we will return to this subject. Certainly we will do so before conclusions are reached.

The option of a local income tax has been suggested as an alternative to a property tax. Although this cannot represent a short-term solution, it should be considered, if only to be rejected, as part of any review. I agree with the Member for Strangford Mr Hamilton that this option is not a panacea to the problem, as many have suggested it is. It could only be done with the agreement of Parliament and would require an amendment to the Northern Ireland Act 1998. Evidence suggests that a local income tax system would be expensive to introduce, difficult to administer and open to fraud.

Research has demonstrated that people expect to benefit from a local income tax to a greater degree than would, in fact, be the case. It is estimated that to entirely replace the current regional rate in Northern Ireland, about 7p would have to be added to the basic rate of income tax. Despite that, I shall not rule out the option, but we must be realistic about the timescales and the likely costs, as well as other factors. All of those matters must be carefully considered. Nevertheless, without prejudice to the outcome of such an analysis, the existing system can be made more income sensitive.

The Member for North Down Mr Brian Wilson mentioned the position of single pensioners. I understand that the assistance available through the enhanced relief scheme goes further than that provided for single pensioners in Great Britain. As Members consider the amendment that was tabled by the Member for East Antrim Mr Beggs, it should be noted that enhanced assistance has been recently introduced, which provides additional relief for pensioners on lower incomes. I want to ensure that all those who are entitled take advantage of that scheme. One way of doing that is to examine the case for applying a non-means-tested relief for pensioners, which can be provided automatically.

I listened to those Members who spoke about non-means-tested reliefs; I will take their views seriously and consider them carefully as part of the early review. However, such an option would require new legislation, which could not be completed in time for the next set of rates bills, even if the proposal were approved.

Mr O’Loan mentioned the mammoth task that was carried out by the staff and officials of the Department of Finance and Personnel. I welcome Mr O’Loan’s acknowledgement of the difficulty of valuing more than 700,000 properties. If those who criticised the Department had put their complaints in the context of the task confronted by those officials and staff, they would have reached the same conclusion as Mr O’Loan, and I welcome his remarks on that matter.

The Chairman of the Committee for Finance and Personnel, Mr McLaughlin, said that the motion and all the amendments related to it were acceptable to him. Likewise, I do not have a problem with them. Although they laid a different emphasis on various aspects of any review, they all ask for a review. To that extent, the motion and the amendments are acceptable.

The Member for North Down Mr Weir mentioned the RRI and the link with tax levels in Great Britain. He knows — and gave me the opportunity to say — that we were successful in our discussions with the Chancellor of the Exchequer in breaking the link between the RRI and local taxation, which was one of the causes of the massive rate rise in 2006.

This debate has provided an early opportunity for the Assembly to consider this important matter. In the months to come, the way in which the Assembly addresses this issue will be regarded by many as a litmus test for the success of devolution. I am determined to ensure that we can make a difference in this crucial matter.

I appreciate the openness of the Minister of Finance and Personnel’s response and the various expressions of genuine concern about achieving a fairer system — albeit from different angles — during the debate on the motion and the amendments.

Given our new situation, I hope that we can be reasonably confident that the Assembly will not be subject to suspension. We are now best placed to set up a review of the current unfair and unworkable rating system, which was introduced by direct rule Minister David Hanson MP. I support the introduction of further income-related reliefs, although I was somewhat puzzled by the phrase “a full income-based system”.

All parties requested, or demanded, a rates review. A short time later, the Assembly was suspended. Now that we are back, it makes sense that we take control of the issue. It is a telling fact that the Assembly voted to replace the former system of basing rates on rental values, which was acknowledged to be outdated, unfair and discriminatory against those on lower incomes.

Since 2002, the SDLP has been entirely consistent in calling for a system based on ability to pay. We opted for the capital valuation model, with caveats, purely because we considered it to be the least unfair of the options available. However, the effects of that model would still need to be mitigated by the introduction of a comprehensive relief package to take account of householders’ ability to pay: single householders; pensioners; those with disabilities; and, indeed, those just above the benefits threshold — the new poor. The criterion of ability to pay must be the cornerstone of rating policy.

Soaring house values have had a distorting effect on house prices. The fair rates campaign must be mentioned. Whether we like it or not, the fair rates campaign maintained focus on the rating issue through the election period. The campaign’s website contains many well reasoned arguments.

The fact is that Mr Hanson used Northern Ireland as a testing ground for rating policy, when the Govern­ment did not appear to have the courage to introduce the same system in Great Britain. Many people have felt that the rating issue was a north Down or south Belfast problem. However, the cold reality is that sharply increasing house prices throughout Northern Ireland, coupled with the introduction of Draft PPS 14, has led to rating policy becoming an issue in rural areas also.

Many people will be in for a nasty shock in coming years unless there is serious rates reform. It is a debate for another day, but the issue of more social and affordable housing and the release of public land to that end, which could help burst the bubble, will have to be addressed.

Many people who bought their houses for modest prices decades ago have seen the value of those houses go sky-high, often as a result of development and the building of apartments and town houses. Through no fault of their own, those people are now being penalised and face the threat of being forced from their homes by an inability to pay their rates bills. Those people do not want to move from their homes, but they cannot really take a few bricks out of the walls to pay their rates bills in Chichester Street.

Itemised rates bills are required, because there is no clarity at present. The issue of itemised billing has come up time and time again. People want, and need, to know exactly what they are paying for. As well as considering the many options that have been mentioned, whether it is a pre-determined percentage of income, non-means-tested reliefs or the introduction of an independent rates regulator, we must get to grips with the issue and emerge from the review with a fairer system.

I want to mention the full income-based system, which I now know to be a reference to a local Northern Ireland tax, and which is the preferred option of the Alliance Party. That is one option that is up for review but, as has been said, the fact that the Scottish Parliament has tax-raising powers —

Will the Member draw her remarks to a close?

I shall finish now, Mr Deputy Speaker. I look forward to the review. Any rating system must be fair, equitable and based on ability to pay.

Order. The Member’s time is up. There can be no latitude.

First, Mr Deputy Speaker, I offer you my congratulations. Only yesterday, when making my maiden speech, did I understand the importance of your role and the protection that you can offer Members who are making speeches. I offer my sincere congratulations on that.

It is my privilege to make the winding-up speech on the amendment tabled by my colleague from East Antrim Mr Roy Beggs. In doing so, I will try to pick up on points that have been made. I was pleased that Mr Peter Weir, a Member for North Down, has clarified that his party has not thrown in the towel. No doubt he will be making a press statement, because his comment will be news to some people. I was a little disappointed in the comments of the Member for North Antrim Mr Storey, who has suggested that people such as me do not have a contribution to make on subjects such as the rates.

Some people fundamentally misunderstand the relationship between capital and revenue, and the issue of being asset rich but cash poor lies at the heart of that. A very unfortunate situation can arise for pensioners, and it is no fault of their own. They can be living in a house with a high capital value but — as was pointed out earlier — they cannot remove bricks and take them down to the bank as payment. As an interim measure, we may have to find a way of giving such people substantial, non-means-tested support. I am grateful that the Minister of Finance and Personnel has stated that he will consider that issue.

The time when a person can realise a capital valuation is when he sells the house, and that is a perfectly valid option. However, we have to consider a disgraceful situation that can arise —when people have to sell their house to pay for their healthcare. A person might have lived all his life making extra mortgage payments, extra rates payments and so on, but might then — just when he needs it most — have to sell his big asset. We will have to consider that in a review.

It is especially important that we consider a rates cap. I can think of nothing more outrageous than the fact that some pensioners in south Belfast appear to have to pay more in rates than either David Beckham or the previous Prime Minister. It is fundamentally important that taxation should be fair, should be related to ability to pay and should offer value for money.

There is another issue that we have to consider in our discussion of my hon Friend’s amendment, and it is one on which I fundamentally disagree with the position of the Alliance Party. It has to do with the difference between rates and income tax. Rates are supposed to be tied to local consumption; they are not a tax on income, which is a fundamentally different matter. Rates are for services such as collecting waste from the bins, putting in flowerbeds and regenerating local areas. Those services should be locally based, and people should buy into them. The fundamental problem that can arise is one of fairness, transparency and ease of administration.

We talked earlier about whether we should be a low-tax or a high-tax environment. I believe that we should have a lower tax where possible and that that tax should be collected in a way that the people of this Province support. I support the first amendment to the motion.

I now call on Dr Stephen Farry to wind up the debate on the substantive motion.

Thank you, Mr Deputy Speaker — and I too congratulate you on your new post.

In essence, the motion is a call for a review of the new rating system that was introduced on 1 April 2007, a process that was begun by the previous devolved Executive before it was suspended. Although its result may not have been precisely what that Executive had in mind, the review was far too limited in scope. That point has been reflected in the Chamber today. Specifically, the review did not include consideration of sufficient income-based reliefs or of a full income-based system — as was pointed out by the Alliance Party at the time.

It is notable that the Lyons Review into local government finance in England and Wales, and the Burt Review in Scotland, considered that option, as Brian Wilson pointed out.

The minor tweaking of the creation of a £500,000 cap on bills is not sufficient to address the range of concerns with the current system. If anything, it introduces further unfairness. Politicians from all parties in the Assembly have pointed to dissatisfaction with the new system. That dissatisfaction needs to be followed up by supporting a full review that considers all of the options. The motion does not ask Members to endorse any particular reform, but rather to ensure that all options remain on the table.

I am grateful to the Members who contributed to the debate, particularly the Minister. I am very pleased that he is prepared to launch a full review into the system, the terms of which we await with great interest. I am also pleased that he has, at least, accepted that the issue of a local income tax can be kept on the table. Although he may not feel that such a tax is appropriate, if it is on the agenda, we are prepared to argue the case. We shall await with interest the response from people of Northern Ireland.

The difficulty with the amendment tabled by Roy Beggs from the Ulster Unionist Party is that it focuses solely on pensioners. Mr Beggs called for a non-means-tested review, whereas Mr Gardiner suggested that it should be means tested. Addressing the needs of pensioners alone will pass more of a burden back onto families — whom Mr Beggs was so keen to protect in his initial remarks. The amendment from the Ulster Unionists essentially rules out a local system.

The SDLP has made great play of the issue of ability to pay, yet, once again, the idea of a local income tax or local income-based system was dismissed. The SDLP seems to think that we can edge towards such a system by introducing more reliefs. In effect, that would create more bureaucracy, whereas a full income-based system is much cleaner. If, in using the term “ability to pay”, the SDLP means taking into account someone’s assets, it is worth remembering that many pensioners deliberately put their savings aside to finance themselves for 20 or 30 years beyond retirement. In the absence of free personal care, paying for one’s old age is something that many people have to bear in mind.

The problems with the rates system have been well aired. A property-based system is inherently unfair; the value of property is a very blunt measure of ability to pay. The system struggles to adequately reflect personal or household circumstances, with those on fixed incomes, such as pensioners, most affected. Ultimately, those who are asset rich but income poor face the greatest problems. Many people find them­selves in the situation where the family home, in which they have lived for many years, has shot up in value due to a booming housing market while their income has not kept pace.

Single people are also particularly affected in comparison to those in larger households who live in properties of similar value but inevitably place a greater strain on a range of services. Mr Basil McCrea made the point that rates are based on the services that people use. That is false: people living in the same street in similar-sized houses pay the same rates, irrespective of whether the council empties their bin or whether they use the entire range of council services, from leisure centres downwards.

The regional rate is the only means through which the Northern Ireland Administration can raise additional funds and balance the books. Previously, the purpose of the regional rate was to reflect the services charged by councils to ratepayers in Great Britain. In Northern Ireland, however, those services were provided by central Government. Since 1999, the regional rate has been used to fund general services, particularly the reinvestment and reform initiative, which the Minister mentioned. Therefore, Northern Ireland is the only part of the UK where a property tax is used to fund central Government services.

Over the past few years, the people of Northern Ireland have suffered considerable hikes in their rates; Mr Weir and Mr Robinson mentioned a figure of 19%. If the Executive continue to use that system, such unfairness will be magnified. The move from rental values to capital values essentially only tinkered with an already unfair system. Much more fundamental change is required.

Simply capping the rates is not the solution. The Alliance Party is wary of caps, which are blunt instruments, and the impact of which tends to be regressive. It is worth noting that the Lyons Report suggests that council-tax capping be removed in England and Wales. The current £500,000 cap may help some people who are experiencing difficulties, but it provides no comfort for others. That cap also allows millionaires to escape paying their fair share of moneys. The cost of lost revenue from a cap will have to be found elsewhere in the system; that entails spreading the cost around other ratepayers. Simply lowering the cap to £300,000 will increase the system’s unfairness rather than dealing with the problems. Members have mentioned other relief schemes, which the Alliance Party is happy to consider.

The idea of an income-based rating system has caused much controversy, but it could replace either the regional rate or both the regional and district rates. Both of those options are available. That may require legislation from Westminster. However, if the Assembly agrees that that is the way forward, it can approach Westminster for that measure.

The claim that an income-based system inevitably means tax increases is a huge red herring. An income-based system would simply replace the property-based system. It would be a different, and fairer, way of redistributing the same tax burden; it is revenue neutral. The point is made that some people could be paying hundreds of additional pounds in income tax each year. It must be borne in mind that an income-based system would replace the hundreds or thousands of pounds that people currently pay in their rates bills.

The decision on how much money to raise from the system would lie in politicians’ hands, and that is the case with the rates system today. The SDLP’s proposition for the appointment of a revenue regulator is interesting. That party would appear to suggest that the Assembly cannot be trusted to take decisions on taxation and expenditure, which is what Members were elected to do. It seems to be an admission that some parties in the Assembly are incapable of taking balanced decisions about money.

In any redistribution of the tax burden, there will inevitably be winners and losers. Some people claim that families will be particularly hard hit. However, the income-tax system already takes account of family situations and whether people have children.

An income-based system would pose new administrative challenges, but I doubt that a new system would be much more complex than the management of the current rates system. The introduction of an income-based system into Northern Ireland may even carry some opportunities. All citizens share the same BT postcode, and all taxpayers’ home addresses are available from Her Majesty’s Revenue and Customs. For Mr Beggs’s information, Her Majesty’s Revenue and Customs is the new name for the Inland Revenue; he was not aware of that fact in his earlier comments.

Thank you for that.

I am glad to keep Members up to date with developments. Tax codes can be modified geographically.

The Lyons Report holds open the door for the intro­duction of a local income-based system in England and Wales. If that can be done in England and Wales, consideration should be given to it being done in Northern Ireland. As Mr Hamilton mentioned, the report found that there was strong support for that option.

The Minister of Finance and Personnel said that the issue of how revenue is raised cannot be considered in isolation from public expenditure in Northern Ireland. I cannot stress how important those comments are. Northern Ireland depends hugely on the UK Treasury. That situation will not be allowed to be sustained in the long run, notwithstanding any financial package that the Assembly may receive in the short term.

If the Assembly is to avoid passing further unsustainable burdens on to the people of Northern Ireland, it must promote economic growth and expand the local tax base. It must also address the inefficiencies and costs in the system. The Minister referred to the 3% efficiencies in the 2007 comprehensive spending review.

The Alliance Party has also pointed to an annual cost of some £1 billion that is spent on trying to manage a divided society. That sum dwarfs the amount of money that is raised by the rates. The Office of the First Minister and the Deputy First Minister has commissioned a report from Deloitte, which will be published shortly. That report will set out the issues in detail.

The Alliance Party believes that our motion reflects the wide range of available options. Both amendments are unnecessary and, if anything, contradict each other. Our motion represents the best way forward and keeps all the options on the table. I urge the Assembly to support the motion.

I remind Members that if amendment No 1 is made, I will still put the Question on amendment No 2.

Question put, That amendment No 1 be made.

The Assembly divided: Ayes 63; Noes 7.

Ayes

Martina Anderson, Billy Armstrong, Roy Beggs, Cathal Boylan, Mickey Brady, Allan Bresland, Francie Brolly, Lord Browne, Thomas Buchanan, Paul Butler, Gregory Campbell, Trevor Clarke, Willie Clarke, Fred Cobain, Rev Dr Robert Coulter, Jonathan Craig, Leslie Cree, Nigel Dodds, Jeffrey Donaldson, Alex Easton, Sir Reg Empey, Arlene Foster, Samuel Gardiner, Simon Hamilton, David Hilditch, William Irwin, Danny Kennedy, Fra McCann, Jennifer McCann, Raymond McCartney, David McClarty, Basil McCrea, Ian McCrea, Dr William McCrea, Alan McFarland, Claire McGill, Michael McGimpsey, Gerry McHugh, Michelle McIlveen, Daithí McKay, Mitchel McLaughlin, David McNarry, Adrian McQuillan, Stephen Moutray, Robin Newton, Carál Ní Chuilín, John O’Dowd, Michelle O’Neill, Rev Dr Ian Paisley, Ian Paisley Jnr, Edwin Poots, Sue Ramsey, George Robinson, Iris Robinson, Caitríona Ruane, George Savage, Jim Shannon, David Simpson, Jimmy Spratt, Mervyn Storey, Peter Weir, Jim Wells, Sammy Wilson.

Tellers for the Ayes: Leslie Cree and George Savage.

Noes

Dr Kieran Deeny, Dr Stephen Farry, Anna Lo, Naomi Long, Kieran McCarthy, Sean Neeson, Brian Wilson.

Tellers for the Noes: Naomi Long and Kieran McCarthy.

Question accordingly agreed to.

The Question is that amendment No 2 standing on the Marshalled List be made. All those in favour say “Aye”.

On a point of order, Mr Deputy Speaker. If the second amendment —

You must wait until the vote is over, Mr McNarry.

I will address the issue then. Thank you.

Question, That amendment No 2 be made, put and agreed to.

Main Question, as amended, put and agreed to.

Resolved:

That this Assembly notes the widespread public concern at the changes to the rating system and calls upon the Department of Finance and Personnel to conduct a full review of the new rating system, which fundamentally fails the essential test of ability to pay; and further calls for this review to give particular consideration to fair and transparent income-based protections, and suitable reliefs for pensioners and all disabled persons.

As Members know, the Business Committee has arranged to meet at lunchtime today. I propose therefore, by leave of the Assembly, to suspend the sitting until 2.00 pm.

The sitting was suspended at 12.17 pm.

On resuming (Mr Deputy Speaker [Mr Molloy] in the Chair) —