Rates (Owners Allowances) Order (Northern Ireland) 2015

Part of Executive Committee Business – in the Northern Ireland Assembly at 1:00 pm on 2nd March 2015.

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Photo of Simon Hamilton Simon Hamilton DUP 1:00 pm, 2nd March 2015

I beg to move

That the Rates (Owners Allowances) Order (Northern Ireland) 2015 be affirmed.

The final order today is the Rates (Owners Allowances) Order (Northern Ireland) 2015. Before turning to the order itself, I think that it is important to provide Members with some brief context to the statutory rule.

The first point that I make is that the rating system that has served us and previous Administrations for over 160 years is founded on the principle that the occupier pays. That works pretty well, given that rates are a charge for regional and local services. However, there are practical difficulties in strictly adhering to the principle when it comes to rented domestic property, because of the problems associated with recovering unpaid rates from tenants, who tend to move about more in lower- and average-value houses. That is not a new phenomenon, which is why landlord allowances are a long-standing feature of the domestic rating system here. Various discounts are given to landlords in return for collecting rates from tenants and passing them on to Land and Property Services (LPS). It helps revenue collection. At the moment, the allowances vary, depending on whether they relate to compulsory or voluntary landlord liability, and there are differences between the private rented sector and the social rented sector.

Members may well jump to the conclusion of asking why we should give landlords anything by way of discount. I can understand why Members might think that, but I reiterate that, in essence, rates are an occupier-based charge. Even if the landlord is liable to hand over payment to LPS, the tenant still pays the rates through the rent, and the landlord is effectively acting as a collection agent.

There is another key point to make — one that sometimes gets drowned out — which is that landlords' representatives have consistently told us that they do not want anything to do with rate collection. Their preference is to have no liability at all for the payment of rates to the Department, as is the case in the rest of the UK with council tax. Therefore, to impose a duty on a landlord to collect rates, as part of the rent, from the person who lives in the house and not make an allowance for it would represent a major shift in policy. It is not something that we can contemplate without undertaking a lot more research and consultation. For that reason, I wish to initiate a fundamental review of the whole policy area later this year, and I have asked my Department to factor that into its plans.

The order that we are debating today has the effect of creating a unified rate of compensatory allowance across all sectors and categories of liability. It will not affect the level of rates paid by tenants as part of their rent. Under the Rates (Northern Ireland) Order 1977, there are two types of landlord liability for domestic property. The first falls under the compulsory liability provisions in article 20 of the 1977 Order. Landlords who fall within that provision must pay the rates on the property. The second falls under article 21 of the 1977 Order. That provision allows landlords to volunteer to pay rates on their property through a formal agreement with Land and Property Services. The landlord allowance is currently 7·5% for compulsory liability landlords. A 12·5% allowance is provided for voluntary liability landlords in the private rented sector, while in the social rented sector it is 10%. The changes that I am taking forward in this order have been informed and supported by a public consultation and are aimed at simplifying the system.

It is appropriate at this point to acknowledge the key role that the Finance Committee played during 2013 and 2014 in a detailed discussion of the issues surrounding the rating of the rental sector. Some of the small but important changes arising from the outcomes of that consultation process were implemented through the Financial Provisions Act (NI) 2014. The provisions in today’s order see the final outcome from that consultation being implemented.

I turn now to the detail of the order. Article 1 sets out the title of the order and gives the operational date as 1 April 2015. Article 2 increases from 7·5% to 10% any allowance given to a property owner who is rated under the compulsory liability provisions in article 20 of the 1977 order. Article 2 also provides that the increase in allowance will not apply to a rate made for a year ending before 1 April 2015. Article 3 then serves to reduce from 12·5% to 10% the maximum allowance that can be given to a property owner who, under article 21 of the 1977 Order, agrees to pay the rates chargeable for a property whether it is occupied or not and who pays those rates on or before the date or dates specified in the agreement.

Article 4 substitutes 10% for any allowance in an existing agreement made under article 21 of the 1977 Order between the Department and a person or body other than a housing association or the Northern Ireland Housing Executive, as housing associations and the Housing Executive already receive a 10% allowance. Article 5 serves to revoke the Rates (Payments by Owners by Agreement) (Amendment) Order (Northern Ireland) 2011.

I look forward to hearing Members' comments, and I commend the order to the House.