Proposal for a Draft Rates (Amendment) (Northern Ireland) Order 2004

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Mr. Pearson: I do know of the letter to which the hon. Gentleman refers. He will have to ask the manufacturing focus group why it reached that conclusion. When we asked it to justify its figures relating to job losses, we did not receive an answer. I appreciate and understand that there is concern, and it is important that the Government are seen to respond positively to that. Some of the concerns result from the fact that industrial derating has been seen as a means of compensating for other costs that are perceived as being higher in Northern Ireland, particularly energy and transportation costs.

Rev. Ian Paisley (North Antrim) (DUP): I am sure that the Minister realises that derating is a good selling point for those trying to get employment into Northern Ireland. He is taking away that vital selling point and making it easier for Northern Ireland's competitors to have the advantage. That is bound to tell upon new industries coming to Northern Ireland. [Interruption.]

The Chairman: Order. Before we proceed, may I invite hon. Members not to engage in private conversations in the Committee? Other hon. Members may not wish to hear what is being said; the Chairman does.

Mr. Pearson: May I reply to that question by continuing what I was going to say in response to the hon. Member for Cotswold (Mr. Clifton-Brown)? Let us recognise how well the Northern Ireland economy has done during the past decade. Manufacturing industry in Northern Ireland has done well compared with the rest of the UK. [Interruption.] There are job losses; there have been job losses throughout Europe in the manufacturing sector. That is part of the process of economic competition. Manufacturing output has

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increased by 8.1 per cent. during the past five years in Northern Ireland. There are some excellent, highly successful, profitable manufacturing businesses located in the region, and we are absolutely committed to doing all we can to ensure that we support them in staying competitive and in becoming more competitive in future.

Mr. Iain Luke (Dundee, East) (Lab): I appreciate the concerns expressed by Opposition Members. I make the point that there are other parts of the UK. One of the areas that I represent has significantly higher unemployment than some of the areas that Opposition Members represent. We must struggle with the uniform business rate, which obviously needs to be reformed. We have to compete as strongly as Northern Ireland does, and have the same problems with transport connections as the rest of the UK market. We are concerned about the issue of equity and competition throughout the UK.

Mr. Pearson: As always, my hon. Friend makes some valid points. It is important, as a Government, that we are clear about our policy.

Mr. Harry Barnes (North-East Derbyshire) (Lab): Is not there also supposed to be another side of the coin? There is a distinction between Northern Ireland and the rest of the United Kingdom, because it was supposed to be getting a peace dividend through the peace process. Should that not be taken into account when assessing the position?

Mr. Pearson: My hon. Friend raises some wider points that are not entirely within the scope of our discussion. However, it is important to recognise that the funding that is provided to Northern Ireland under the Barnett formula is a substantial and fair settlement. It supports a wide range of Government programmes, including industrial support measures that are primarily delivered through Invest Northern Ireland.

Before I continue, I must give way to the hon. Member for Montgomeryshire (Lembit Öpik).

Lembit Öpik (Montgomeryshire) (LD): I must apologise for having a private conversation but I have been trying to get in through five interventions and I felt unloved by the Minister.

Does the Minister accept that any peace dividend will not bring Northern Ireland closer to the rest of the United Kingdom, so it will always be at a competitive disadvantage due to the cost of transport? The second point, which worries me most, concerns the statement that he made about five minutes ago saying that he believed that there would not be a single job loss. Would he not accept that that is the type of thinking that worries manufacturing organisations because it implies that the derating will have no business impact at all? That logically cannot be the case.

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Mr. Pearson: I do not want to play with words, but I do not want to be misrepresented either. Let me be clear about what I said: I do not believe that there will be any sustainable job losses.

David Burnside: What is the difference?

Mr. Pearson: In reply to the hon. Gentleman's comment from a sedentary position, the difference is that some businesses will naturally do well and some will naturally shed jobs as a normal part of events. If we have a changed policy over a phased eight-year period, good, properly run businesses in the industrial sector have nothing to worry about from the phased introduction of industrial rating. It is a sensible policy measure.

I know that there are concerns and anxieties out there, for various reasons. The hon. Member for Montgomeryshire mentioned that costs were higher elsewhere. That is why last year I commissioned a study into the costs of operating businesses in Northern Ireland—to help us to identify the most pressing cost issues facing businesses. That step was well received by the CBI and other business organisations. The findings of the study were published in October 2003. They show that in overall terms businesses in Northern Ireland do not have a cost disadvantage relative to the rest of the United Kingdom and the Republic of Ireland.

We need to keep close watch on the situation. There are areas where costs are higher, but there are areas where costs are lower. As a Government, we will continue to undertake regular assessments of local business competitiveness.

Rev. Martin Smyth (Belfast, South) (UUP): Will the Minister give way on that point?

Mr. Pearson: No; I will answer the hon. Member for Cotswold first.

Mr. Clifton-Brown: The Minister answered the first part of my intervention, but not the second. That was that the order provides for a transition until 2011 with percentages, but it also provides for those percentages to be varied. Will the Minister guarantee that if the measure has a greater effect than he expects on unemployment, he will alter those percentages to phase it in more slowly?

Mr. Pearson: I cannot offer that guarantee because we are discussing something that does not start until 2005, when I sincerely hope that local politicians will be in a position to take a decision such as the one mentioned by the hon. Gentleman. In the draft order, we have ensured that the decision will be up to the Assembly, which will have the powers to change the percentages in it. If a situation materialises in which there are major problems as a result of the phased introduction, the Assembly would have the power by regulation to change those percentages.

Mr. Roy Beggs (East Antrim) (UUP): The Minister will be aware of how much advice was given to the Government about the adverse effect of the aggregates tax on Northern Ireland. We lost jobs and it took

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nearly two years to get some amelioration of the situation. Does he agree that, if the order proceeds and there is industrial derating, we can never again introduce industrial derating because of EU regulations?

Mr. Pearson: I totally accept that we are phasing in the introduction of rating for manufacturing businesses. The existing industrial derating concession is completely out of date and it is a blanket approach that bears no relation to modern manufacturing. There are better ways of supporting manufacturing businesses that need and deserve support. But let me make myself clear: we are gradually phasing it out over a period, and the Assembly will have the power to change the legislation and the percentages at any time during that period. That is how the legislative system works and it is right and proper that there is that capacity. It is built into the draft order.

May I also say—before I move on to vacant property, which I hope I can deal with more briefly—that I am also aware of various proposals for small business and hardship relief schemes. I am actively considering the desirability and practicality of introducing such schemes, and I will certainly consider amending the existing order to provide the power to introduce such relief. Again, I hope that it would be the Assembly and local politicians who determined the detail of such schemes if they decided to introduce them.

Rev. Martin Smyth: On that point, will the Minister give an assurance that it would be a constant rather than a periodic review? If the Assembly is not up and running, rather than simply going through the Order in Council procedure in which we can do nothing unless the Government make up their mind, will we have the opportunity to amend the order in Parliament? There is no way for the people of Northern Ireland, through their elected representatives with their colleagues in Parliament, to make a change through the Order in Council method.

Finally, does the Minister agree that the CBI may not speak for all manufacturing bodies in Northern Ireland? That was illustrated with the example of some of the quarry owners, and some of the legislation being considered will again have an adverse effect upon them.

Mr. Pearson: On the hon. Gentleman's first point, my Department regularly keeps economic developments under close scrutiny. One would expect the Government to closely monitor the progress of the Northern Ireland economy, and through Invest Northern Ireland we are well in touch with a wide range of businesses. I am confident that our finger is close to the pulse of the manufacturing sector.

On the hon. Gentleman's second point, I accept that the Order in Council procedure is not satisfactory and that it is not what we want to see for Northern Ireland. We want local politicians to make those decisions. The measure will not come into effect until April 2005, which is certainly beyond the time scale during which I or any other UK Minister would expect to be in this sort of position for Northern Ireland. I would like to

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think that there would be an early restoration of devolution. It is up to the hon. Gentleman, his colleagues and others to bring that about.

On the hon. Gentleman's third point, I speak regularly with various business organisations. I certainly believe that the CBI is an authoritative voice in Northern Ireland, but I recognise that there are other voices. I was speaking to the chief executive of the Northern Ireland chamber of commerce and industry only yesterday. It is important that the Government listen to a wide range of views, right across the business community, and that we do so on a regular basis. It is also important that the Government listen to other social partners. For example, we have in Northern Ireland a beneficial partnership approach and an involvement in initiatives such as the economic development forum, which is very valuable.

May I move on to the second issue in the draft order, which is the rating of vacant non-domestic property? At present, rates are not paid on such property in Northern Ireland. That is unlike the position in the rest of the UK, where such property has been subject to local property taxes for many years. The current level is set at 50 per cent. of full liability. Again, that issue was dealt with during the public consultation on the rating policy. A large body of opinion favoured the introduction of vacant rating in Northern Ireland. The advantage of that approach is that it will encourage better asset management and provide an incentive for owners to bring vacant property back into occupation and use. It will also create greater fairness in a system that aims to share the burden of local taxation among those who benefit from regional and local services.

Others expressed the view that vacant non-domestic property in Northern Ireland should continue to be exempt from rates, but the Government concluded that the exemption should be removed and arrangements introduced that are broadly along the same lines as those that operate in the rest of the UK.

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