Rating Policy: Strategic Road Map

Ministerial Statements – in the Northern Ireland Assembly at 4:00 pm on 9 December 2024.

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Business resumed.

Photo of John Blair John Blair Alliance

We return to the statement from the Finance Minister on the rating policy strategic road map. The Minister has to conclude her statement.

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

Just before Question Time, I started to speak about my plans to review non-domestic vacant rating. I am attracted to the option of increasing the liability in that area, but it must be done in a managed and coordinated way. Ahead of any increase in NDVR liability, I call on Executive and council colleagues to work with my Department to explore the use of existing and potential capital grant funding powers to help wider regeneration and decarbonisation work. That work would precede any implementation of a higher level of additional non-domestic vacant rating liability.

I also intend to explore options in the system for expanding the parameters of the Back in Business scheme or to provide other forms of similar rate support to help to mitigate the risks of development through allowing a developer a period of vacant rating exclusion after a development has been completed but before it is let and first-occupier discounts such as that deployed in the Back in Business model. My aim is to work in a concerted and coordinated way to get property stock back into use or properly redeveloped or repurposed.

The last revaluation of domestic property for rating purposes came into effect in April 2007. Therefore, 2027 will see our current domestic valuation list operative for a 20-year period. Just as my Department is now operating non-domestic revaluations on a three-year cycle as part of business as usual, it now needs to be able to take forward more regular domestic revaluations. Whilst that does not need to be done at the same frequency as for the business sector, it is right that it be integrated into our business as usual planning. That will see the current domestic tax base of over 800,000 domestic properties assessed and revalued to ensure that distribution is reflective of the current market. That is a significant piece of work, but it will enhance fairness in the domestic rating system. I am today announcing that I have asked Land and Property Services (LPS) to commence immediate preparatory work on the revaluation of domestic property. Once that preliminary work is complete and its findings considered, I will go to the Executive to seek a decision on that work proceeding for 2030.

Councils, businesses and trade bodies, as well as household ratepayers, have been telling me that they want a system that is fairer and more equitable and that utilises the strengths of our devolved system design. Today's statement outlines my initial plans for securing those objectives. I am determined to build a fair and progressive rates system that stimulates our economy, grows our tax base and provides appropriate support for those who need it. The statement outlines the building blocks to achieving that.

Photo of Matthew O'Toole Matthew O'Toole Social Democratic and Labour Party

Minister, we, as the Opposition, have always encouraged you when it comes to ambition around rating policy. There is not that much clear ambition here. Some of the things that you are looking at are welcome, including vacant property relief. However, exactly how much money will be raised from the measures that you are announcing today? By my count, it will be less than £10 million, which, by anyone's calculation, does not represent a significant new form of revenue-raising.

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I thank the Member for his question, and I disagree with him. What we are announcing today is ambitious. It is probably the most radical look at rates in a couple of decades at least, and it sets the direction of travel with regard to us having a progressive rating system, as I outlined. The specific measures that we will consult on next year will obviously be subject to Executive agreement at a later time. I must emphasise that the reason for taking forward those consultations is not just about income generation, although that is important because our challenges in public-service funding are well documented. Reducing the early payment discount by 2% would raise £4 million. The max cap elevation would raise £2 million for the Executive, because that is split between Executives and councils.

Photo of Diane Forsythe Diane Forsythe DUP

I thank the Minister for her statement on the review of the rating policy, including her commitment to align with the Executive priorities. In considering alignment with three specific Executive priorities — to grow the economy, deliver affordable childcare and reduce health waiting times — does the Minister acknowledge that there is a need for immediate action to save some businesses, including those in retail, hospitality and childcare and GP surgeries, as they look to the 1 April cliff edge of increased employer contributions and minimum wage? Will the Minister take steps to consider intervening now, applying rates relief to prevent business closures?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I thank the Member for her question. I met representatives of the business sector this morning. I have listened to the business sector. Probably like many Members in the Chamber, I have had significant correspondence from businesses and business representatives who face significant challenges as regards the cost of doing business and in relation to the impact, as she has outlined, of the British Chancellor's autumn statement. One of the things that I have announced in today's statement is that I will commission research into the cost of doing business. It is important that we have an evidence base and that we understand the issues. Obviously, businesses and business organisations will have the opportunity to feed into that research.

Like everybody in the Chamber, the Member will be well aware of the challenges that we face with the Executive's budget, so it is important that we have the evidence and an understanding of what the issues are and that any rates supports that we put in place target the right issues. That is why I have taken the approach that I have in relation to the strategic review that I announced today of all rate reliefs to ensure that they are still fit for purpose and still delivering on their policy objectives. We should take that considered look, and, if something is not working or is not still achieving its objective, we could release funds that could be redirected to other supports, as the Member has outlined, where there could be demand.

Photo of Deirdre Hargey Deirdre Hargey Sinn Féin

I thank the Minister for her statement. Minister, how important is the domestic revaluation?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

It is important to emphasise that the purpose of the revaluation is to restore fairness; it is not about raising more rates. It is vital that our rates system reflects the economic environment. That is why I have asked Land and Property Services to commence the immediate preparatory work on the revaluation of domestic property. That will see the current domestic tax base of over 800,000 domestic properties assessed and revalued to ensure that distribution reflects the current market.

Members will appreciate that that is a significant piece of work, but it is the right thing to do to enhance fairness in the domestic rating system. By definition, a revaluation will reset all the values to a new rate. It is inevitable that some ratepayers will end up paying relatively more and others relatively less than they currently do as a result.

Photo of Steve Aiken Steve Aiken UUP

I thank the Minister for her remarks made so far. Further to her remarks just made about Reval2030, obviously, we have known for some time that LPS has been involved in a lot of preparatory work for that. Can the Minister indicate when we will be ready to go with Reval2030? With the preparatory work that has already been done, we should not have to wait until 2030 to reach that point.

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

My Department and LPS have only just begun the preparatory work on that. I understand that they will brief the Finance Committee this week on that specifically. They will be able to set out more details. Significant preparatory work will have to be done. Then, I will have to take it back to the Executive to seek agreement to take it forward.

Photo of Nicola Brogan Nicola Brogan Sinn Féin

Gabhaim buíochas leis an Aire as a ráiteas.

[Translation: I thank the Minister for her statement.]

The Minister talked about the support available for businesses and ensuring that it meets its aims. Could the Minister outline the existing support that is available to businesses, le do thoil?

[Translation: please.]

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin 4:15, 9 December 2024

Around 70% of non-domestic ratepayers here get some form of rate support. That proportion rises to 75% when non-domestic vacant rating is taken into account. Almost 57% of all pubs get some form of rate support; 65% of the hospitality sector, as a whole, is in receipt of support via the small business rate relief scheme; over 63% of retailers get some form of support, 80% of which is provided to small retail properties with a net added value (NAV) of less than £15,000; around 30,000 businesses from a tax base of just under 75,000 get small business rate relief; and over 4,400 manufacturers get 70% off their rates by virtue of industrial derating, which is a tax relief that is unique to here.

Rates cannot be reduced or removed easily through additional support, as the system remains our only substantive income-generating lever for public spending. Every pound that we provide in new rate relief will be paid for by other ratepayers in the system paying more or by a reduction in public spending.

Photo of Phillip Brett Phillip Brett DUP

May I agree with the Minister that the rating system may not be the ideal vehicle for the type of immediate help that is needed for our business community? Does the Minister agree that it was a dereliction of duty by the Economy Minister to fail to make a single bid for a business support package in the October monitoring round?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

As I have announced today, I have commissioned research into the cost of doing business. Obviously, I will work with Executive colleagues on that. That will inform Executive decision-making, going forward.

Photo of Pádraig Delargy Pádraig Delargy Sinn Féin

Will the Minister elaborate on her plans for non-domestic vacant rating?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I am happy to provide further detail on that. The issue is twofold. The first issue is the overall level of liability that should be charged in relation to vacant commercial units. One of my key aims is to align rating policy to help tackle the blight of vacant properties in our towns and cities; an issue that all Members will be conscious of. Increasing non-domestic vacant rating liability from 50% of the occupied liability to a higher level of liability was consulted upon as part of the revenue-raising process. It has the capacity to raise £1 million in revenue for the Executive for every 5% increase in liability. However, some consultees expressed a genuine concern about their ability to let older retail or office properties that have ongoing issues due to general economic factors, including the demand for high-grade, energy-efficient stock.

As I said in my statement, I am attracted to the idea of increasing liability in that area, but it has to be done in a managed and coordinated way. Any increase in liability would need to be explored alongside the existing or potential capital grant-funding powers to help the wider regeneration and decarbonisation work that would have to precede any implementation of a higher level of additional non-domestic vacant rating liability.

The second issue is the suite of exclusions that apply within non-domestic vacant rating. At the moment, exclusions from liability apply where the occupation of a property is prohibited by law, where a property is a listed building or where a property is a historic monument, for example. All those things will have to be looked at in the context of wider regeneration matters. That is why it, alongside small business rate relief, will form part of those two planned reviews in the incoming financial year.

Photo of Philip McGuigan Philip McGuigan Sinn Féin

I thank the Minister and welcome her statement and, additional to that, the fact that she intends to carry out a review of the cost of doing business here. In the Minister's discussions with businesses, today and previously, what has she heard from them about the impact of the increased employers' National Insurance contributions?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

As I said to Diane in a previous answer, that is something about which I have had significant correspondence. I have listened to the business community about the challenges posed by the autumn Budget in recent weeks. As I announced in my statement, I plan to commission research into the cost of doing business here, with a particular focus on the impact on our sectors of the announcements of planned additional employer National Insurance contributions, as well as other announcements that will, obviously, impact on some sectors more than others. The sectors most impacted on will be engaged in that work, and the findings will help inform Executive decision-making. It is important to be clear: an Executive of a devolved region cannot fully offset all the fluctuations that are the result of decisions taken on reserved taxation matters.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I thank the Minister for her answer. Does she have a time frame for when she expects her study on the cost of doing business to be completed? Today's statement was trailed as being urgent; what businesses need to see is urgent action.

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I thank the Member for his question, and I take his point. We are in the process of engaging with potential researchers to be able to conduct that research and scope the terms of reference. I would like to see that commissioned and reported on very quickly. We will have to confirm time frames with whoever is going to take it forward for us.

Photo of Timothy Gaston Timothy Gaston Traditional Unionist Voice

I take the Minister to her short-term measures. Bearing in mind that councils strike the rates in February, will the proposal in today's statement have any impact on the rates for 2025-26, or is it for 2026-27? On that basis, given that councils deliberate over a number of months on what rate to strike, it is important that you give them timely advice to let them know how much more money they can expect to get from the proposed changes.

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I thank the Member for his question. He is quite right: it is not for the incoming financial year; we are looking beyond 2025-26 to potentially 2026-27. Obviously, we have to go out and consult on the measure and then take a policy decision based on the findings of the consultation. That will have to return to the Executive to be agreed before it can be taken forward.

On the point about engaging with councils, I completely agree. This morning, I met the Society of Local Authority Chief Executives (SOLACE) to discuss the proposals that I brought forward today. I am committed to continuing to engage with it in the months ahead on all this work.

Photo of Paul Frew Paul Frew DUP

The Minister said today that she is starting to build a progressive rates system, but what she really said is that she is preparing to strip away reliefs. Surely it would be far better if that £4 million in savings went to our hard-working constituents, who would get much benefit from it, rather than it being in an inefficient government coffer.

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I do not agree with the Member. I was very clear in my statement in setting out that "review" does not mean removal. It means looking at each of the rate reliefs that is in place and ensuring that it still meets its policy objective. We are consulting on some of the measures to determine whether they still meet their policy objective. Some consultation has already been done in that respect. There is a case for reducing the early payment discount, which is, I believe, the particular measure that he is referring to. Of course, if money were freed up by changing some of the specific reliefs or measures that are in place, that could be redirected to other rate reliefs, for example. I am lobbied on a regular basis about a whole range of rate reliefs. At this point, however, we do not have the funds to put towards any such reliefs. For me, it is about taking a holistic look at the system to ensure that it is fit for purpose and that the rate reliefs that are in place align with our Executive priorities.

Photo of Paula Bradshaw Paula Bradshaw Alliance

Apologies, Minister: I was not here for the start of your statement. I have a lot of constituents who are termed "property rich, cash poor" and will be concerned about the proposal to elevate the maximum capital value. Have your officials made an estimation of how much that would be in monthly rates for a household?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

That issue is raised with us a lot when we start to talk about the max cap. As I set out in the statement, it is really important to emphasise that means-tested rate reliefs for those on lower incomes or those in receipt of the lone pensioner allowance or disability allowance will remain in place and will increase proportionate to the raising of the cap.

We have a breakdown, but I do not have the monthly figure. The Member looks confused. Rate reliefs are means-tested, and a percentage is applied to, for example, the lone pensioner allowance or some other allowance, and a proportionate increase will then be applied. I do not have the monthly figure, but I think that the weekly figure, at the absolute max end, is between £14 and £18, depending on council area. Of course, a number of properties will fall between £400,000 and £485,000 of rateable value. Somewhere in the region of half of properties will be in that space, so rates bills for them will not increase by the maximum amount.

Photo of Cathy Mason Cathy Mason Sinn Féin

I thank the Minister for her statement. What are her thoughts about the calls for an independent review of rates?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

The rates system and rate reliefs here were subject to public consultation, review, reform and revision in 2007, 2012, 2016, 2017, 2019 and, most recently, this year. A number of changes have already been implemented as a result of those reviews. For example, more frequent revaluations have been introduced; the Back in Business rate support scheme and the rural ATM scheme were reintroduced; and new legislation was made to enable councils to strike different levels of household and business rates. In addition, the Department previously availed itself of impartial advice from the Ulster University Economic Policy Centre (UUEPC), including on the targeting of COVID-19 rates support, and commissioned a comparative study of domestic rates against council tax.

The UUEPC is also currently undertaking research into business rate poundage differentials across council areas. The findings of the most recent consultation have been used to inform the further work that I have outlined on how best to align the rates system with the Executive's strategic priorities. The strategic review cycle that I have announced today is more appropriate than a external review, which would not be the best use of the limited resources that are available to the Executive at this time.

Photo of Gerry Carroll Gerry Carroll People Before Profit Alliance

Thank you, Minister, for your statement, even though there is nothing in it about reviewing industrial derating, which, in large part, is a handout to major corporations such as Caterpillar, Coca-Cola and Moy Park. I presume that you are happy to maintain that situation. How do you intend to reform the rates system to make sure that it is connected to wealth and to corporations' profits?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I thank the Member for his question. It is important to emphasise that, when considering industrial derating, 54% of properties have an NAV of £15,000 or under. That is the NAV that is used for small business rate relief. Some 81% of properties have an NAV of £50,000 or under, so they are by no means large businesses under the rating system. As the Member pointed out, industrial derating supports large manufacturers, but those that fall into that bracket employ some 94,000 people here. One per cent of manufacturers are deemed to be large concerns, and they alone account for almost half the employment and more than half the turnover here.

The broad consensus from a lot of the engagement that I have had about industrial derating specifically is that it is an important strategic relief that has supported the creation of jobs and of a thriving manufacturing sector. Rates in and of themselves are, of course, a property tax, so they are representative of the size of the business. The larger the business, the more rates that are paid, so, in that way, it is a progressive taxation measure.

Photo of John Blair John Blair Alliance

That concludes questions on the Minister's statement.