I very much welcome the opportunity to open the debate on the Bill, which introduces an urgent and critical measure required to stabilise central and local government tax bases between now and the implementation of Reval2023. This short Bill performs one important technical function: it mitigates the risk of appeal to rateable valuations within the non-domestic valuation list brought on COVID-19 grounds. The Bill also contains a power to allow the Executive and Assembly to respond to any change in the naming conventions surrounding coronavirus or any new pandemic that may arise in the future. The exercise of that power will be subject to Assembly agreement.
In layman's terms, the Bill primarily serves to mitigate an unintended consequence of the Executive's emergency public health measures that were implemented in March last year. Following Executive agreement, the Health Protection (Coronavirus, Restrictions) Regulations (Northern Ireland) 2020 came into effect at 11.00 pm on Saturday 28 March 2020, specifying businesses here that were either required to close or were restricted in their operation. That once-in-a-generation public health intervention occurred just three days ahead of the publication of the new valuation list. If the health regulations had been introduced on 1 April or later, this Bill would not have been necessary. The Bill is necessary because of a technicality.
Members will acknowledge that those emergency health steps had to take priority at the time, but Members will also appreciate that they were not intended to erode the tax base of a rating system that delivers critical revenue for Executive Departments and typically funds up to 75% of council expenditure.
This important Bill mitigates that unintended impact of the Executive's public health measures on the rating system. It prevents the pandemic restrictions from being used as a means of reducing valuations for business rate purposes, when the Executive were already taking forward separate policy measures to support those businesses that have been adversely affected by the pandemic.
I will briefly illustrate the need for the Bill by making reference to a previous operation of the statute as intended. The rating and valuation system, as framed, is intended to deal with matters affecting property on an individual or local level. The Bill does not change that long-standing feature. To give an example, the Primark fire created a set of circumstances in which the statutory provision worked as intended. That localised event took place in 2018, after the valuation date and prior to a new list, and had a specific impact on a number of properties. The effects of that localised event were properly taken into account in an adjustment of the net annual values (NAVs) for those properties.
What was not envisaged under long-standing rating legislation either here or in England, Scotland and Wales was an event that would impact on almost every business property within the jurisdiction. However, the coronavirus pandemic — or, more specifically, the nature and timing of the measures that were put in place to control it — led to such an event. This short Bill is necessary to deal with the unintended consequences of that set of circumstances.
Neither the traditional kinds of challenge received by my Department nor the ability to appeal valuations is removed by the Bill. All the traditional reasons for and forms of valuation challenge, such as structural alterations and roadworks, are unaffected by the Bill. The Bill is solely concerned with the challenges that could lead to a double benefit from this system, namely a reduction in rates bills due to valuation reduction based on pandemic restrictions when rate relief has already been provided to compensate for those same restrictions.
There are some other issues that I am sure Members will be keen to comment on and that I want to address. One of those is the retrospective nature of the Bill. As with the interventions taken in England, Scotland and Wales, the Bill has effect from the start of the pandemic. At the Committee briefing with my officials, there was discussion about the retrospective effect. It is critical to note that, in our case, that is not only justified but necessary, because any change to a valuation following an appeal is backdated to 1 April 2020. For the Bill to have the necessary effect of protecting the rate revenues, therefore, it must be retrospective to the same date. In this case, that is the date of impact on the valuation list.
(Mr Deputy Speaker [Mr Beggs] in the Chair)
I also note that, in most cases, the retrospective effect is only notional. As many have not had rates bills since the start of the pandemic, no backdated rates bills will arise from the Bill. If anything, it does the opposite, acting retrospectively to prevent the misguided scenario of backdated reductions being processed and awarded to ratepayers who, thanks to Executive support, have had no rates liability at all for the last few years. I would find that situation inappropriate at a time when public finances are so squeezed and we need funding for services such as health and education, which have been at the front line during the pandemic. That is why the Bill steps in to act in the public fiscal interest.
There are two other issues that I want to put to bed around timing and consultation: issues that were also of note in the accelerated passage debate. On timing, this is an extremely complex policy issue arising at the end of the mandate. While the Bill is still moving through Westminster, Members will note that our Bill has to be tailored to our local needs and local rating legislation. Extensive legal advice from experienced counsel underpinned the thinking behind the Bill. For the Bill to be precise in its effect, that process could not be rushed. Despite that, Members will note that the complexity was navigated successfully in only a matter of months, bringing the Bill forward in a devolved context to allow time for passage before the end of the mandate. Neither my Department nor the Executive could plan around the timing of the pandemic or the time required to address the complexities arising from it. The alternative, which would be to have no Bill or a delayed Bill, would only make the issues that face us collectively even more difficult.
On consultation, there are certain fiscal matters that do not lend themselves to public consultation because they are brought forward as financial matters that are pursued in the public interest. Consultation must be meaningful. Following Executive agreement of the Bill, however, my Department undertook significant engagement to raise key stakeholders' awareness of the Bill and its objectives.
Having noted some of the contextual issues, I will turn to the detail of the legislation. The Bill consists of just one substantive clause in relation to the rating system. Clause 1 provides that matters that are attributable to coronavirus should not be taken into account in the net annual value of a hereditament in a non-domestic rating list. In other words, rateable values are not affected by coronavirus. Clause 1(1) makes retrospective provision for the matters affecting the net annual values, as referred to in article 39A(1A) of the Rates (Northern Ireland) Order 1977:
"to be treated as not including, and as never having included, any matter directly or indirectly attributable to coronavirus."
Clause 1(2) gives examples of what is to be included in matters that are directly or indirectly attributable to coronavirus. Clause 1(3) provides an enabling power to allow the Department of Finance to make consequential retrospective changes to the clause in the event of any future change to the naming conventions surrounding the coronavirus or pandemic outbreak, such as if the virus mutates and is renamed "COVID-20" etc. Clause 1(4) makes use of the enabling power in clause 1(3), subject to draft affirmative control in the Northern Ireland Assembly. That gives the Assembly the highest level of control over the exercise of that power. Finally, clause 1(5) provides the definition of the terms "coronavirus", "net annual value list", "Rates Order" and "statutory provision" in the Bill.
To underscore the importance of some of my opening comments today, I highlight the financial implications that are associated with the Bill. Although no direct cost implications are associated with the implementation of the Bill, the failure to implement the Bill presented to the Assembly has an upper revenue loss estimate of £255 million. Notwithstanding what some have tried to suggest, that is a realistic estimate. That is money that the Executive and local government cannot afford to lose in the context of funding front-line services. Failure to pass the Bill is, therefore, likely to result in either the cutting of public services at local and central government level or consequential increases in the rate poundage. I do not think that Members could support the hiking of rates to confer a valuation reduction on businesses that have already had a two-year rates holiday. The Bill represents a reasonable solution in comparison with the chaos of unwarranted refunds, rate hikes and systemic tax-based losses, not to mention clogging up the courts with appeals for years to come, which would add more uncertainty to revenue streams.
The Executive have already provided compensatory and mitigating rate relief to the business ratepayers who were affected by the health restrictions through the separate provision of more than £515 million in COVID-related business rate relief for the 2020-21 and 2021-22 rating years. We all wish that the pandemic had not occurred and that the public health measures that were taken by the Executive in March 2020 had not been necessary. That, in turn, would have rendered today's Bill unnecessary. What the Executive did not intend to do with those public health measures was to destabilise our only devolved tax or to create a massive risk to the tax base and local government income. The Executive share my view that, as has already been decided in England, Scotland and Wales, the COVID rates holiday, and the supplementary rate relief funding that will be provided on passage of the Bill at Westminster, is the correct means of dealing with the effects of the pandemic. Damaging wholesale valuation reductions are not. The Bill secures that objective and preserves the rating system as we know it. I therefore commend the Bill to the Assembly.
I thank the Minister for his opening remarks on the Non-domestic Rates Valuations (Coronavirus) Bill. I also record the Committee's thanks for the oral and written briefings on the Bill that were provided by his Department.
The Bill is designed to deal with the unexpected situation relating to non-domestic rates following the imposition of coronavirus restrictions. As we all recall, in response to the pandemic, restrictions on businesses had to be applied. We had all hoped, of course, that that was all very much in the past tense and that future restrictions would be avoided through the good offices of our health workers, the continued roll-out of the excellent vaccination programme, and the application of sensible precautions. I will leave further discussion of the current state of the pandemic to another time. For now, I will talk about 2020 and the start of the pandemic. Then, the restrictions were followed with support packages, including business support grant schemes and business rates holidays. Several billion pounds was provided by our Government, and many millions of pounds found their way through those measures to our hard-pressed businesses. By and large, those schemes appear to have been successful and seem to have kept many, but, unfortunately, not all, of our important home-grown businesses afloat.
Non-domestic rates provide a vital income — I do not think that anyone could disagree — for local government and the Executive. The rates holiday scheme protected those sources of income and gave everybody a breathing space. As things began to return to something that looked like normality, the collection of business rates resumed. As the Minister pointed out, under normal circumstances, businesses would be able to appeal their rates valuation under article 39A of the Rates (Northern Ireland) Order 1977.
The basis for appeal appears to be quite broad, and it is designed to be a catch-all for the use, occupation, state of businesses or other:
"matters affecting the ... physical enjoyment of the hereditament".
The pandemic has clearly affected the above. All of us, in our constituencies, our market towns and our city centres, can see the impact of the pandemic, from the missing and much-missed anchor tenants, to the small traders who did not survive, the reduced, on occasion, Monday morning traffic flows and the diminished weekday footfall. However, we can also see a different side of things. Thankfully, there appears to be an increase in weekend shopping, and we can see the growing Christmas high street spending around us. There is clearly a mixed picture, with a few business sectors having experienced consistently strong turnover during the pandemic and others being very much in recovery mode. Nonetheless, consumer and business confidence in the fundamentals of our local economy will grow and confidence will return as the pandemic wanes.
Given the changing situation, it is difficult to apply the usual approach to business rates valuations and the associated appeals process. Other parts of our nation are in the process of simply doing away with the impact of the pandemic as the basis for appeal. That approach, which is replicated in the Bill, gives us all, as Members, a degree of concern. First, it seems a little unfair to entirely take away an element of the appeals process. The Department argues that if that does not happen, there will be a deluge of appeals and a loss of income of some £255 million may follow. I wonder if there may be some middle way that might, in exceptional circumstances, allow the avenue of appeal whilst limiting the financial exposure for local government. Perhaps the Minister will comment on that in his winding-up speech.
Further to the finances of the Bill, the Minister advised us of a £50 million Barnett consequential that he wants a future Executive to ring-fence, particularly for businesses. I do not doubt the Minister's sincere wish to ring-fence that money, but as it refers to a future Executive, it is just that — a wish. We have not seen any of the detail. If I have that wrong, I hope the Minister will correct me. The Committee would love to see any correspondence from the Treasury that confirms that the £50 million will be coming in our direction. Perhaps in their contributions, Members from other parties will also indicate whether, if their party finds itself with the relevant portfolio in the next mandate, they will grant the Minister's wish and pay that money to our hard-pressed businesses, because it is a wish. It is not a guarantee.
The Bill also applies the constraint on rates valuation appeals retrospectively. I am not aware of there being much legislation passed by the House that applies measures retrospectively. At its heart, that seems unfair. At present, if a business buys a premises, it takes on the rates burden with a particular understanding of its right to appeal the relevant valuation. Not only is the Department now seeking to change that but it is seeking to backdate the change. The Committee can understand why that is proposed, and members do not have an alternative yet. That said, it is reasonable to say that all members are concerned about that and the precedent that it might set. More retrospective legislation may be on its way to correct for localised restrictions support scheme (LRSS) payments, which were made ultra vires.
As indicated in the previous debate, the Bill has materialised after almost no prior consultation with key businesses or local government stakeholders. The majority of Committee members view that as a bad precedent. As the Bill progresses to its amending stages, the Committee will endeavour to use the concluding weeks of the mandate to correct that and to seek the views of key stakeholders in order to inform the later stages of the Bill. Minister, as I said in the previous debate on accelerated passage, the Committee will work closely with you and your Department to achieve that.
The Committee has not formally agreed a position on the Bill. The Bill may well pass its Second Stage, and members of the Committee will set out their differing views with their usual eloquence and alacrity.
Ar dtús, ba mhaith liom buíochas a ghabháil leis an Aire as a ráitis. I thank the Minister for his statement. This is, indeed, a complex and technical policy area. It is clear, however, that there will be huge financial implications for our councils in particular if we do not proceed expediently with the Bill.
The Finance Committee was glad to receive evidence on the Bill from Land and Property Services (LPS); its presentation was clear about why the Bill is needed. The Bill intends to deal with the unintended consequences of COVID-19 restrictions on the rating system. Currently, business owners may appeal their rates if they think that their net annual value is unfair. They must show, however, that an event has had a direct or indirect impact on their business or on other businesses in the local area that has had an effect on the overall value of their property.
The Department sought extensive legal advice, from which it is clear that COVID-19 constitutes such an event. The problem is that COVID-19 affected almost every business to some degree. We are therefore in a situation in which almost every business will have grounds to appeal their current NAV, which came into effect last April. The result will be that LPS will be required to refund a portion of the rates paid by thousands of businesses, which could add up to a total of £250 million over a three-year period.
Although businesses would, of course, welcome any outcome that would reduce their rates burden, we must ask ourselves whether that is the best way in which to support businesses. Over the past 18 months, over £550 million has been spent in providing rates relief to businesses. That came in the form of a four-month rates holiday last year for all businesses and a two-year rates holiday for those sectors most affected by the pandemic, such as retail and hospitality. In addition, thousands of businesses benefited from LRSS and support grants during the lockdown.
We know that the pandemic is still with us. While many businesses have bounced back strongly, others have struggled and still require support. The British Government have pledged another £50 million to provide relief to those who need it. If the Bill does not pass, businesses will appeal their NAVs, and up to £250 million will have to be found from our already stretched block grant or from an increase in rates for businesses and families. As I said, councils will be very hard hit by that. Some 75% of all revenue available to them is provided by rates, so, clearly, they will not be able to provide anywhere near the same level of services without a huge increase in business rates. The rates that we pay also provide public services such as health and education. Given the consensus in the House that health needs to be the priority, are we prepared to slash the health budget in order to pay for this?
The Department of Finance has already started the next revaluation, which will take effect from 2023. The revaluation will take into account the economic impact of the pandemic, and the businesses that suffered worst can expect their new NAV to reflect that. We therefore have a clear choice. We can allow the Bill to pass and prevent £250 million being lost to councils and our public services while providing further rates relief and implementing Reval2023, which will support our businesses after the impact of the pandemic. Alternatively, we can do nothing and bring on ourselves a situation where we will inevitably see cuts to our councils and other public services. There is only one feasible option before us. That is why we must support the Bill.
I am thankful for the opportunity to add my comments to the Second Stage of the Non-domestic Rates Valuations (Coronavirus) Bill. As we know, the pandemic changed almost everything overnight. What was considered normal is now considered to be the past, and the unimaginable is becoming normal. Schools were shut, hospitals were under more pressure, and businesses were forced to close. Restrictions and closures quietened the cities, the open markets and the towns.
At that time, the restrictions were followed by financial support schemes. The UK Government provided several billion pounds. That support was distributed by many Departments. Under the Department of Finance, Land and Property Services did an excellent job and implemented business support grant schemes and business rates holidays. Vital support also came through the furlough scheme provided by the United Kingdom Government. Those schemes have been successful and have spared or saved almost all our locally run businesses and jobs. Unfortunately, some businesses were unable to make it through those hard times, and many still struggle. Recent proposed controls will put additional pressure on those businesses. As we start to reopen our economy, those businesses are evaluating their position in the market. The support from the high street voucher scheme will give a massive boost to local high street businesses. The new year, which, for some, means the end of the rates holiday, will see additional pressure placed on them. As pointed out by the Chair, while non-domestic rates provide vital income for councils and the Executive, they are a strain for struggling businesses.
The new antecedent valuation date (AVD) is 1 October 2021, with a new valuation date list due in April 2023. The previous valuation list was published on 1 April 2020, with an AVD of 1 April 2018. The issue, as I understand it, relates to the date on which the health regulations were implemented. Had they been implemented three days later, the AVD, which was October past, would have taken into account the effects of the current pandemic.
Under article 39A of the Rates (Northern Ireland) Order 1977, the normal appeal process is that businesses appeal on the basis of their net annual value, and they do so after the valuation list is produced. The appeals can be general and based on a range of issues. The issue in question relates to businesses that appeal using coronavirus as the main or attributing factor. The Bill would remove the ability of businesses appealing their net annual value to cite coronavirus as a factor.
I understand that the Minister has also indicated that £50 million in Barnett consequentials would come from the United Kingdom Government. Maybe the Minister can confirm in his closing remarks whether he has received confirmation that that will be received regardless of the Bill's passing. If that is the case, can it be ring-fenced for rates support in this mandate and/or the next mandate? If so, that would go some way to easing the impact on the hotels, B&Bs, pubs, shops etc that are affected.
The retrospective aspect of the Bill applies the constraint on appeals to appeals made before April 2020 that relate to coronavirus. I am not aware of the House having passed any similar legislation. Earlier, one Member referred to his short time in the House — he has been here for 27 years — and he is not aware of any. I am not aware of it happening in the short time that I have been here, and it seems unfair to those appealing.
The most frustrating part of the Bill is the fact that the Department has been aware of the issue since early spring 2020. It has known about the issues arising from COVID-19 and has not acted until now. I appreciate the earlier comments about the excellent work that LPS has done and is doing during the pandemic. However, our next election date was always going to be in May, at the latest, so it was always coming.
Until very recently, the Department had chosen not to consult business stakeholders and local government. A letter was issued at the beginning of November 2021 setting out the intent of the Bill and offering an opportunity to raise concerns with LPS. Today, the Bill is at Second Stage.
As raised in the previous debate, the Committee has had very little time to fully and thoroughly consult on the Bill or understand what its implementation would mean. We have been unable to connect with local businesses and stakeholders or review the pros and cons of the Bill. That could set a bad precedent. I support the Bill passing Second Stage, which will allow it to go to the Committee for further scrutiny. Taking on board previous comments from the Chair and, no doubt, with support from other Committee members, we will do all that we can to deal with the Bill as speedily as possible.
In the previous debate on accelerated passage, to which, I am pleased to say, the Assembly did not agree, it was mentioned that there were significant questions to answer about the process and timeline around the Bill. That is the case. The Minister is correct that we have had some of that information. He said that more had been sent to the Committee, and I look forward to scrutinising it. I am glad that we will now have a proper legislative process, even if it has to be done in a hurry.
The Bill is unique legislation. In a sense, there are three connected issues that cause concern and therefore require scrutiny. The first is the question of compressed scrutiny. That has been dealt with via the Assembly's rejection of accelerated passage.
The second is the question of process. Not to sound too "Watergate" about it, but who knew what when, and were proper procedures followed? I have an open mind on that. Given some of the concerns that have been expressed to me, including via an anonymous letter and other reporting, it is important that we understand exactly when, for example, the Department was first fully abreast of the potential fiscal risk from the anomaly and, if it was aware and, indeed, had received legal opinion on it earlier in the process, why that information was not brought either to the Assembly as a whole or to the Finance Committee.
It may well be the case that LPS was busy handling the payments that it made. I have acknowledged, and will do so again, that LPS did an extraordinary job of turning itself into a grant-paying agency, handling, at times, I am sure, an overwhelming number of requests from elected representatives and businesses very well. That, however, does not exempt it, or, indeed, the Department of Finance, from being asked robust questions about how it handled that information and about when legal opinion was first sought around the applicability of the 2020 revaluations. It is therefore important that we get clarity on those dates. When exactly was the Department first aware of the potential fiscal risk, and what exactly did it do about it then? It is important that we ask those questions.
The third question is on the substance of the Bill itself. The Minister mentioned that LPS has worked hard, in unique circumstances, to turn itself into a grant-paying agency. I completely acknowledge that. He said that that is why its officials had less time to work on the Bill. The Minister also said, however, that it is a short Bill, which it is. That is not to say that it is not substantial, but the Bill is effectively one short, sweeping clause that retrospectively entirely removes coronavirus as a potential ground for appealing the valuation of a property.
As I said, my party will go into the scrutiny stage with an open mind. It is important that we acknowledge that we cannot be flippant about the potential fiscal risk. If a quarter of a billion pounds of our limited resources is at risk, we cannot be flippant about the Bill, even if business groups have specific concerns about its sweeping nature. As legislators and as people who want money to be spent on public services, we must be cognisant of the fact that there may be a fiscal risk. The Finance Committee will have to ask questions about whether that fiscal risk is as great as the Department has estimated, interrogate that and test the numbers. I do not know whether the Minister or my Finance Committee colleagues have a view on this, but I suggest that we seek an opinion from the new independent fiscal council. It may feel that it is not something to which it wants to contribute. It has, however, published a significant report today on public finances in the region and is starting to make its voice heard in the public debate, so it can perhaps give us evidence on the potential fiscal risk.
Thank you very much for giving way. I apologise to both the Member and the Minister, because, unfortunately, I have to head off to get jabbed. Thank you very much for your contribution to the debate. I would not like the Minister to think that I was being disrespectful. The Health Minister has instructed me to go and get jabbed, so I am going to do it.
I thank the Chairman for that intervention. I am glad to see that he is off to get jabbed. I point out that I am too young to be eligible for a booster just yet, but anyway.
As I was saying, when we come to debate the substance of the Bill, we need to ask those questions.
First, we have dealt with the question of accelerated passage: we are not doing that. We need to understand, then, the process that was followed in identifying the issue and bringing it before the Assembly. Thirdly, we need to deal with the substance of whether the case is made that there is a £255 million fiscal risk to the public purse here, specifically and especially in relation to councils, if we do not proceed with the measure, and whether there are, potentially, different ways of doing it. My party and I will go into that with a genuinely open mind, because it is important that we protect revenue here. It is also important, as I said in a previous debate, not only that we do serious scrutiny but that we are seen to do it.
I will make one other point. It has been stated that an estimated £50 million Barnett consequential is coming to the Executive that could be ring-fenced to provide further rates support to businesses. The implication is that that support would be in lieu of or some kind of compensation for the compensation that businesses might otherwise succeed in getting were this law to be passed and, therefore, the appeal not to be necessary. We need to understand whether that Barnett consequential is coming anyway. At times, it has been implied that this law needs to be passed in order for that Barnett consequential to become applicable. I want to understand whether that is the case.
We will not stand in the way of the Bill proceeding through Second Stage to Committee Stage. It is important that, having said in the debate on accelerated passage that we want to do more scrutiny, we actually do that scrutiny and take it seriously. Part of the context for that is the broader fiscal picture for the Executive and these institutions. My party strongly believes that our institutions should move towards being better at raising and spending money here. That is partly why the Minister — there is probably some agreement between us on this — has appointed not only the fiscal council but a new Fiscal Commission to look at that. When we have a tax base to defend and revenue for public services is entrusted to us, it is important that we are serious about scrutinising those questions. The ambition of the Bill, its unique nature and the fact that other jurisdictions have scrutinised the matter make it important that we do our scrutiny properly. I am happy, as other Members of the Committee are, to commit to doing that speedily rather than slowly.
This is a unique Bill, around which there are substantial questions and concerns, including those raised with me by someone who describes themselves as "a whistle-blower". There are also real questions to ask about the fiscal position. We will do our job, as a party and as MLAs on the Finance Committee, by asking those questions, because that is why we are here in the first place.
The past 20 months have been an incredibly difficult time for local businesses, which have faced huge uncertainty, financial worries and a range of restrictions throughout the pandemic. It is important that we acknowledge the hardships that many businesses have faced and the strain that that has put on business owners and staff.
The situation that we find ourselves in risks putting additional financial pressure on local businesses and, indeed, on households. As things stand, councils considering their rate-setting process, which must be concluded in February of next year, will be aware of the risk of significant payouts being needed for thousands of non-domestic properties on the basis of appeals due to COVID-19. With that in mind, they will need to make financial preparations to cover the cost, increasing rates to ensure that they will have the money to cover successful claims and to continue to provide essential services. That risks hitting households that are struggling with the soaring cost of living and local businesses, just as they are struggling to recover, with even higher rates bills. The implication for the regional rate has not been mentioned today, but clearly it is an additional risk.
The Alliance Party will support the Bill in the hope that passage through the Assembly will prevent any further increase in rates for businesses that have already been hit hard throughout the pandemic. Our counterparts in Westminster and Scotland are progressing similar legislation, and it is important that we do the same. We must act quickly to ensure that the Bill passes before the end of the Assembly mandate to provide some certainty about the rates base for councils and businesses, which, no doubt, will be following our debate today.
I reiterate the need for the Finance Minister to make good on the commitment in the explanatory and financial memorandum to introduce rates relief for those hit hard by COVID-19. Those businesses often align with those that were hit hard by Reval2020. The impact of that has not been felt yet due to the relief that was granted. Just before the pandemic, I met businesses that were affected by Reval2020 and their representative trade bodies. They expressed genuine concerns that some businesses may struggle as a result of Reval2020. After an unprecedented 20 months, it is vital that the Minister can provide support to those who, due to COVID-related rates relief, have yet to feel the pinch as a result of the new measures. We are all aware of the cliff edge that businesses face in April 2022, when the current rates relief for many sectors is due to end. We need to ensure that a transitional relief scheme is ready for businesses so that we do not lose any more of them as a result of the impact of COVID-19.
If the Bill passes the Second Stage today, it will move to Committee Stage. I will reiterate the comments that I made at the debate associated with accelerated passage. My party supported accelerated passage; the House did not. I note that decision. I clearly outlined the reasons for our support, but we are where we are. I urge the Committee to make good on its commitment to make sure that the Committee Stage is expedited and the Bill comes back to the House for Consideration Stage within the statutory time frame, which ends on 25 January.
I will also reiterate that, as we are potentially moving to Committee Stage, arrangements should be put in place for those who are not on the Finance Committee to receive briefings on the legislation to ensure that any debate at Consideration Stage and Further Consideration Stage is informed by the information and facts associated with the issue. It is a complex issue, and there are different views on it, but there is a key financial risk for households, businesses and Northern Ireland's public finances. It is important that we safeguard those and go forward with proper scrutiny of the legislation, but I am conscious of the timescale. There are only a number of weeks left in the mandate, and councils are legally obliged to strike their rate in February.
I welcome the tone of the debate. It is clear that the Minister has taken on board the Committee's concerns about accelerated passage and the sweeping nature of the Bill. At the outset, I say that I will not oppose the movement of the Bill to the Committee Stage. Any problems that we have with the Bill can be teased out in Committee. Now that we have been allowed that opportunity, I see no merit in opposing the substance of the Bill, whilst, of course, preserving my position — I am sure that many others feel the same — that I reserve the right to raise concerns about the substantive nature of the Bill in Committee.
I commend the Chair for the commitment that he has given to the House. I think that he has the full support of the Committee that we will do everything that we can to meet the statutory 30-day deadline. That is a more than reasonable request, but it is also incumbent on the Committee to get its skates on. I tend to be one of the more long-winded and verbose members of the Committee for Finance, and therefore I will have to exercise some self-discipline to ensure that we get the Bill through as quickly as possible.
In his opening remarks, the Minister stated that he had provided the chronology. He has slightly missed the point that, had he been able to come before us on 17 November, we would not only have had that chronology but could have teased out how we ended up in this position. It is one thing having a piece of paper; it is another having the opportunity to quiz the Minister and his officials on it. That said, we now have an opportunity to deal with all those issues.
To help speed things up, I know exactly where the Minister is coming from on the Bill. Everyone understands the dilemma that he and LPS find themselves in. No reasonable person would want to open the floodgates. I suppose that, basically, every business in Northern Ireland would claim that their business and income had been affected by coronavirus. I cannot think of any business that would not say that, apart from, maybe, some of the multinational supermarkets or the off-licences. Very few businesses would not argue that the coronavirus has had a devastating impact on them, so I understand the dilemma.
One thing that I will ask when the Bill comes to Committee is whether it is possible to have a threshold, an exceptional circumstances clause or a special provision that would allow businesses that have been totally or to a large extent wiped out by coronavirus to appeal. I understand the difficulties that that could cause. How do you define what is "exceptional"? Where do you set the threshold? How do you stop people clogging up the system with bogus appeals that have no merit but will still have to be heard? I want to examine that to see if that is possible for the businesses that have been particularly badly affected.
I fully recognise the circumstances surrounding the Bill. I understand that the scope of the issue goes further than the ongoing valuation appeals to those that will have to be taken regarding the valuation of similarly circumstanced properties and that it could amount to £255 million, as has been stated. Further, I understand that a similar situation is faced by the Administrations in England, Scotland and Wales, where the result has been the passage of similar legislation to remove the right to appeal valuations on the basis of the unintended consequences of COVID-19.
There are serious concerns about the lack of scrutiny that has been created by the Minister's unprecedented desire to use accelerated passage for legislation that has not been consulted on and that applies retrospectively. That continues a long line of concerns surrounding the number of Executive Bills that are passed with little scrutiny or evidence gathered. That is not the way to produce clear, properly functioning legislation. It seems to be unique to Northern Ireland, because, while similar legislation has been proposed in England, Scotland and Wales to deal with non-domestic rates valuations, similar emergency procedures for accelerated passage have not been used. The impact of the use of accelerated passage for legislation that has not been consulted on is that it could be rammed through in a matter of weeks, without most of the impacted businesses even knowing that it exists. With any other legislation, the Committee —
Order. I ask the Member to take his seat. I remind the Member that the debate on accelerated passage has already happened and the Assembly expressed its view on it. We are now at the Second Stage of the Bill.
Thanks for that. I am being supportive of it. My party colleague has stated that support. I am just going through the circumstances.
It is notable that, despite the Department not having time to consult on the impact, the Minister has stated that the Department sought extensive legal opinion from April 2020 on the impact of the COVID health regulations on article 39A of the Rates Order, which affects the Bill that we are talking about. In addition, LPS took the time to get advice from the Department's solicitors. There was an obligation to consult and manage and get a response. As this is a unique taxation matter, there is, by the Department's reckoning, neither a statutory obligation nor a legitimate expectation to consult on the Bill. That could impact on the NAVs of hotels and pubs by up to 60%, of shops by 30% and of sporting facilities by 50%. Surely, that creates a legitimate expectation to consult.
For any legislation to be meaningful, it must be clear, accessible and able to act in a just and actionable way for those impacted. Passing retrospective legislation without consultation and by accelerated passage does not achieve that.
Serious questions need to be asked about the Minister's approach to the legislation. The Department confirmed that it first asked for a legal opinion on the impact of the coronavirus health regulations on article 39A of the Rates Order 1977 in March 2020. The Department stated that the legal position was clarified in August 2020. At the very least, the non-domestic valuation list was published when there was a question over the legal position, and the Department has been aware of a potential issue for 19 months and of a confirmed issue for 15 months. Why are we rushing through all this legislation now, when we are 19 months down the line? Surely there was the opportunity to open discussions on the Bill after the legal opinion came back, which was, at least, in August.
The Minister stated that it would have been premature to consult councils and affected groups before the Executive signed off on the accelerated passage of the Bill. Why? Presumably, the Minister would still have brought forward legislation on the issue, as it still needed to be dealt with. If he had opened discussions earlier, he could have avoided the whole debate and leaving businesses afraid of future large bills appearing through their doors.
There is an understanding of the unprecedented situation that we have been dealing with here with COVID-19 and the need to deal with it. However, the answer cannot be for us to pass retrospective legislation without consultation, when there are so many questions around how much of an impact it will have on our businesses, how that impact will be negated and how the Minister missed so many opportunities to pass it in an open, honest and accessible way.
I approach the Bill with a number of unanswered questions. It takes us back to the 2020 revaluation. Article 39A of the Rates (Northern Ireland) Order 1977 is very clear that statutory provisions require certain matters to be taken into account in setting the revaluation. One of them is the "physical enjoyment of the hereditament". Since the 2020 revaluation was for 1 April, it was abundantly clear before 1 April that the physical enjoyment of the hereditaments was adversely affected by COVID, yet the revaluation proceeded as if it was not. Now, legislation attempts to block appeals against the very point that COVID should have been taken into account. My first unanswered question is this: how did we get to the point where the 2020 revaluation was issued, with the knowledge that there was bound to have been adverse impact on the physical enjoyment of the hereditaments owing to COVID? Why did we proceed to issue that revaluation on 1 April?
I imagine that, certainly, those of us in the Finance Committee have seen the letter from the person who calls themselves a "whistle-blower". We have no way of measuring its truth or otherwise, but if we put some credence or weight on what the letter claims, before 1 April, the Department was advised that, by law, it would have to take the impacts of COVID into account. Now, if that is right, it adds to my question: why did the Department, therefore, proceed with the revaluation knowing that it had not taken into account the adverse impact? Was it always the intent to say, "We'll do it anyhow and sort it out later"?
I thank the Member for giving way. Does he agree that if you own a small fish and chip shop opposite a pub, of course your takings will have dropped because of COVID and you are going to lose the rental value of the property if it was set on the open market?
Yes. The Member reminds me that, also under article 39A of the Rates (Northern Ireland) Order 1977, you have to take into account not only the "physical enjoyment of the hereditament" but its physical setting. Clearly, a chip shop beside a pub that is no longer open is bound to experience the adverse impact on its physical setting. So, of course, that is right. It underscores my question, however, which is this: how did we get ourselves into this situation, where we proceeded to issue a 2020 revaluation knowing that it must have been infringing the requirements of article 39A?
My second major question concerns the fact that we are heading towards a 2023 revaluation based on 1 October 2021 just past. Is that revaluation going to reflect the COVID impact at October 2021 going forward into future years? Or is the Department minded to find some device or mechanism to nullify the impact of COVID on the 2023 revaluation? We need to hear a declaration of intent from the Department on that.
When I look at the Bill, I wonder whether some thought process has been given to clause 1(3), whereby further regulations amending the section, which is the power given in clause 1(3), could be made to take care of the 2023 situation. I trust that the Minister can be forthright in explaining both how we got to this point with the knowledge, before the 2020 valuation was issued, of the adverse impact of COVID and whether or how he anticipates dealing with the 2023 valuation, given the COVID impact that is bound to prevail there as well.
I am deeply concerned about this legislation and what it says about how the Executive dealt with the beginning of the pandemic and how they intend to resolve an issue that could cost hundreds of millions of pounds. All the while, this is coming from an Executive that already have, to put it mildly, a questionable record in wasting public money.
Another MLA has, rightly, asked two important questions: what did the Minister know about the situation and when did he know about it? I will add one more: will he verify the whistle-blower's account, which was that his Department received and ignored legal advice that could have avoided the situation? Does he accept or deny that? I would like an answer to that when the Ministers sums up, because I find it alarming that, in a recent newspaper article, a departmental whistle-blower has claimed that the legislation is:
"an attempt to reverse a massive error which civil servants knew they were making but went ahead with despite their legal advice highlighting the problem."
I cannot go along with that, my party cannot go along with that and I do not think that anyone else should go along with that. Nor are we happy to go along with the Minister's apparent assertion that because businesses got some support during the pandemic, he and his Department are within their rights to cut off the appeals process for them. What precedent does that set?
From yearly Budgets to COVID regulations, Stormont's record on democratic scrutiny is abysmal, but this latest effort from the Minister takes the biscuit. It is crude in the extreme to claim that MLAs who do not go along with this get-out clause for the Minister will be responsible for a £255 million loss to the public purse, or whatever the amount being quoted, or that small businesses that take up their right of appeal will be responsible for the loss of £255 million to the public purse. To be clear, the fault for this latest financial scandal is with the Minister and his Department for apparently failing to take seriously the legal advice to make an alteration in the rates because of the COVID pandemic. Any attempt to blame those who had no idea that they may have been wrongly charged and who, in many cases, suffered through the pandemic is not only crude but shameful.
If the Minister believes that those who received relief during the pandemic should pay more through their business rates, he should write it into legislation and bring it to the House. However, that is not what happened here. In response to his Department's mistake, the Minister is attempting to shift blame elsewhere. It is shamefully similar to the Executive's approach to the pandemic since March 2020 and is symptomatic of the mantra that it is one law for the politicians and another for everybody else. The fact that the pandemic cannot be taken into consideration with rates valuation is not only absurd but totally unfair. Not all businesses were supported, and some that were supported were supported more than others.
It is impossible for me or other MLAs who are not in the Executive or on the Finance Committee to get the full details behind this scandal. That a journalist, through a whistle-blower, has provided the most clarifying information to me and the public is a shameful indictment of the Minister and his Department's role in this. I cannot in good conscience rubber-stamp legislation that has been rushed through with such a laissez-faire attitude, and nor can I in good conscience vote against the interests of those running small businesses who have been in contact with me throughout the pandemic, who did not receive enough support, who are still suffering financially and who are in places having to work through this pandemic, while the Executive have abandoned the basic principles of social distancing and track and trace in order to keep themselves out of poverty and their small businesses alive.
The Minister has not bothered to address or consult them about the Bill. He has shown utter disrespect to those who were impacted by the pandemic and the Executive's disastrous approach to it. Is it any wonder that he tried to rush this through today without any scrutiny.
I will vote against the Second Stage of the Bill if my vote is counted today.
I thank Members for their contributions. I will try to address some of the points raised.
I will say at the outset that I absolutely support some of the last points, and legislation supports the right of people to come forward and be whistle-blowers. One difference is that I will stand in front of the Assembly and account for all the decisions that the Department and I have taken. My officials will go in front of the Committee, and, in a public fashion, account for and provide documentary evidence to support what they did. After that has run its course, maybe you can judge whether there is a scandal here and not simply from one article in one newspaper on a Saturday afternoon.
Some Members raised questions in relation to the £50 million Barnett consequential. The Barnett consequential will come to us if the legislation is passed in Westminster. Interestingly, the House of Lords is complaining about the legislation being rushed through Westminster. Scotland has not yet introduced its Bill, and, by the way, none of the other legislatures are facing the same issues as us with the prospect of a mandate ending in the next couple of months. That Barnett consequential will come across if the legislation is passed. It will be provided for the purpose of the passage of the Bill. Of course, it is not hypothecated, but, in answer to Mr O'Toole's question, if the Bill is not passed today within that time frame, I am not sure what argument he would like me to deploy to say that the Executive should ring-fence that £50 million for rates support when the non-passage of the Bill leaves open the prospect of people appealing and getting further support for something for which they have already been paid. On that basis, I am not sure what argument I would make for ring-fencing £50 million to provide support to businesses if the legislation does not pass. The £50 million Barnett consequential, however, will come to us if the legislation is passed in the British Parliament.
One of the issues that concerns the Chair is the right to appeal. It should always concern us when the right to appeal against anything is removed. Of course, in this case, it applies only and singly to the issue of coronavirus, given that the Executive had already taken measures.
Again, I do not recognise where Mr Carroll is coming from. We have provided over half a billion pounds of support to businesses through rate relief and grants during the pandemic. He wants to protect the public purse and make sure that public funding goes to public services, which are under pressure, yet he seems to be making an argument against supporting the Bill by saying that he would prefer that money to go to businesses. I am sure that he would be the first to stand up in the Chamber and denounce me if I had decided to not introduce legislation and had just allowed that to run its course and, in doing so, potentially, undercut the public purse.
Steve Aiken, as Chair of the Committee, mentioned the possibility of a middle ground approach. Of course, the Committee now has the opportunity to discuss and analyse the Bill. This goes back to the point that Mr Allister made, and I will deal with that as well. I would argue that Reval 2023 and the date that we have settled on — 1 October — is, in fact, the middle ground. That will take account of the impact of the pandemic on businesses in the time ahead when we get to the Reval in 2023. I will answer Mr Allister's point. I have said publicly that it will take account of COVID, so there is no sleight of hand to try to head this off down the track somewhere. That is the middle ground in that we are saying to businesses, "You were paid. You got compensation for the impact of the pandemic on your business". The Assembly, in passing the legislation, agreed which businesses would and would not get support, and we felt that some did not need support during the pandemic. However, we had, in fact, compensated those people. We therefore need to act on something that would give them the opportunity to be doubly compensated. In that regard, the middle ground is to take account of the impact of the pandemic through the revaluation on 1 October and how that will impact in 2023.
Steve Aiken incorrectly asserted that rates bills are resuming. I remind him that the two-year rates holiday goes on until at least 31 March, and it will then depend on what we are able to do after that.
Keith Buchanan and others raised the issue of the time frame and the advice received in spring 2020. There are two pieces to that. One is whether the impact of coronavirus could be a factor in allowing somebody to claim compensation, and there was advice around that. The second piece is the potential impact of that. This is November 2021. He should take himself back to spring 2020. The initial restrictions were brought in for, I think, a period of six weeks. The legislation was time-bound and could only go that far. None of us knew, in spring 2020, what the financial impact would be. We were hoping that an initial lockdown would enable us to cope with the virus, and, as a matter of fact, a lot of businesses reopened in summer 2020. Then, around this time last year, we went into a more protracted lockdown that lasted through to the spring. That meant that the cost of this — it may well have been a smaller cost to the Executive and one that they could have absorbed in a different way — has gone up incrementally over the duration of the pandemic. That is an added factor.
There are two factors. One is whether people would have the power to claim compensation on that basis, having already been compensated for that, and the other factor is what the total cost of that was to the Executive. That necessitates the legislation. None of those things was known in spring 2020. They have developed, and legal advice has developed, and that is why the Bill was introduced in Westminster only in late spring this year. It was different, and we had to introduce our own legislation. That is why Scotland has yet to introduce a Bill in its legislature on the same issue as we have been dealing with since that time. I assure Members that nobody was sitting back and putting the public purse in jeopardy in the hope that this would go away or that we would not have to deal with it. The full costs of this have accumulated over the period of lockdown, and, the longer the lockdown has gone on, the greater the costs that have accumulated.
That brings me to Matthew O'Toole's point about the Estimates. Of course, he can interrogate this when the Committee comes to deal with it. The revenue loss outlined is estimated. It was developed through very detailed analysis of every property sector and the likely impact of the pandemic on each sector across four scenarios. We believe that they are realistic and that they take account of relevant factors that will minimise the risk, including a very generous package of rate relief. We have implemented the publication of a new valuation list on April 2023, and that will act as a backstop for the losses.
It is, however, the strongly held opinion of the commissioner of valuation and the director of rating policy, both of whom are chartered surveyors with much experience, that the courts tend towards a wider interpretation of rating legislation in applying reductions to rateable values. The estimations have not been taken lightly.
Andrew Muir made the point about being briefed. I am happy for departmental officials to brief him on the matter, if he so wishes, in the time ahead. I appreciate his argument to the Committee about expediting the matter. He raised the issue of transitional rate relief. It is a traditionally complex scheme that applies in Britain. It is generally self-funded, meaning that the reval winners fund the reval losers. As far as our circumstances are concerned, it is less than ideal.
Mr Wells has gone, but I need to correct what I said in the debate on accelerated passage, which was that I had provided Committee members with a chronology. I since understand that that is on its way and has not reached Committee members yet. I apologise for incorrectly saying that in the earlier debate. We will provide it, and the officials and I will be there, if need be, to talk to the Committee in the time ahead.
We have all heard about and get this, but Mr Wells mentioned the exceptional circumstances that people have suffered. We have asked Ulster University, beyond the end of this rates holiday and coming into the new financial year, to look at businesses that continue to struggle and that will do so in the time ahead. Of course, we no longer have the COVID financial support that we had from Whitehall and Treasury to meet those costs. If the Executive were to do something in the new financial year, it would come from their own coffers. We have, however, looked at those matters.
The issue of travel agents that Mr Wells mentioned in the earlier debate is a useful example. We were trying to find a way to support travel agents, and we recognise the loss that they have incurred. Eventually, the Executive Office undertook to put together and did put together a programme of support for them. One of the issues with travel agents in particular, however, is that half of them operated out of their home or in their own property and thus did not have a rateable property. It is difficult for a rates provision such as this to reach all those businesses in a way that would be equitable. We should recognise that.
Pat Catney raised points about the impact of article 39A. As I said to Mr Buchanan, there are two impacts to be considered: will it be liable as a consequence of coronavirus, and what is the cumulative cost? We did not know that, because, in spring 2020, we were operating on the same basis that everyone in the Chamber was operating on, which was that, if we took sufficient action to deal with it, coronavirus might be with us only for a short period. It has gone on, however, and restrictions have been reintroduced and extended for longer than any of us dared to consider at that time in 2020. Hindsight is a wonderful thing, but we were dealing with two issues. One was the impact of coronavirus, while the other was not knowing its extent and whether it could be dealt with in another way until the full cost was known.
I dealt with Mr Allister's second point about not intending to use this again, because we have given a commitment that we will take account of the impact of the pandemic on businesses at 1 October 2021, and there is no intention on my part or that of officials to use any sleight of hand to undo that date in the time ahead.
The question that the Member asked was this: why am I moving ahead with that? The answer is that it had already been legislated for. The valuation list had already gone through a process. We were heading into a situation in which there was a choice, at that stage, on 1 April 2020. We knew from the valuation list that about 60% of properties were due a reduction in valuation, so we could stay with that, knowing that we would impact negatively on 60% of properties, or we could move ahead to see what the coronavirus restrictions brought. At that stage, the restrictions were predicted to be for only six weeks. That was the choice that was made in April 2020. The decision was to go ahead, but I am sure that the Member will get a chance to explore that decision.
My point was slightly different. As I read it, under article 39A of the Rates (Northern Ireland) Order 1977, there is a legal obligation that, at the date of issue of the revaluation, it should have taken into account anything that affected, adversely or otherwise, the physical enjoyment of the hereditament. Was the Department in receipt of legal advice by 1 April 2020 that it therefore had to, or should, take account of the COVID impact on the valuation list that it was about to issue? Did it issue it nonetheless?
As I said, those were some of the issues that the Department was grappling with. It received legal advice prior to 1 April 2020, and there was further exploration with officials and further legal advice over the months beyond that. Therefore, the issue was not settled in those terms on 1 April 2020.
As I said, the balance of choice was the Department setting aside the 2020 revaluation — people could still have appealed on the basis of the 2015 revaluation — knowing that 60% of businesses were likely to face a more beneficial outcome and denying them that in order to wait to see what came out of COVID. Therefore, there was, as I do not doubt that there was in some of the public airing of this, a difference of opinion about the best course of action to take. The course of action was decided and others are, of course, free to disagree with that if they choose.
The legal advice began two or three days before 1 April 2020 and continued over that period. Questions and answers went backwards and forwards, views were given, probed and challenged and some of the legal advice changed as time went on. There will obviously be an opportunity for the Committee to analyse all of that in the time ahead. Suffice it to say that there are, of course, questions and matters to which the Committee will want to apply itself. Of course, departmental officials and I will undertake to give whatever support and advice that we can to the Committee.
I do not buy into the notion of scandal that people tried to present. If people want to go with that, it is fair enough. This is a particular problem. The circumstances did not apply in any other circumstances that any of us had come across before. The pandemic hit and affected all businesses to a certain extent, which was why all businesses got four months of rate relief at the start of the pandemic. There was a further focused exercise through which the Executive and the Assembly agreed that certain businesses would get a rates holiday, not just for the rest of that financial year but for two years, to accommodate and compensate them for the impact of the pandemic. Those businesses that were forced to close were also able to access the LRSS to compensate them for that closure.
To have provided all that compensation from the public purse, and then, in a further drain on the public purse, to have allowed businesses to claim again on the basis of legislation that was never intended to deal with wholescale closure — it was intended to deal with a localised closure and a limited impact on businesses — would have been unfair. I absolutely do not say that because I resent the support that businesses got. They needed that support, they were entitled to it and we were very glad to be able to give it to them. However, the public purse — the money that we need for public services — would have taken a further hit if those businesses had been allowed to claim again. I fully respect the points about retrospective legislation and the denial of a right to appeal — matters that will concern all MLAs — however, from our perspective — I hope that, as we go through the stages of the Bill, the Committee and, indeed, the Assembly will also come to this view — this unique course of action is the only one that is open to us to deal with the issue. It will deal with this specific issue, not the wider issue of appealing rates amounts on the grounds that the matter was supported when the Executive had the funds to do so. With that, I commend the Bill to the Assembly.
Question put and agreed to. Resolved:
That the Second Stage of the Non-domestic Rates Valuations (Coronavirus) Bill [NIA 44/17-22] be agreed.