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I heard what the Minister said, but from the point of view of the whole country, Northern Ireland should not be bullied into being the test bed for a policy that the Government do not have the courage to try out first in England or Scotland. This order is a grim warning about where the Government are heading. This party cannot support this order. We ask the Government to withdraw it. If they do not, we shall seek a means when it returns to the Floor of the House to give the House an opportunity to cast its verdict on the deplorable policy and grubby tactics involved in it.
Baroness Harris of Richmond: The Minister is going to hear more of the same from these Benches, which gives me no pleasure. Nevertheless, I thank him for introducing the order. In the press and in background publications, the Government have talked about the introduction of a fairer system of rates for Northern Ireland. While we agree that the current system needs to be reformed, we object to the proposals in the order. The proposed system is blatantly not fair; in fact, it is grossly unfair. The Secretary of State has made comparisons with England and Wales, but such comparisons have little relevance because they operate on a different local taxation system and the structure of the cost of living is different from Northern Ireland. However, if we want to go down that route, the Minister will find that the average Northern Ireland household income is19 per cent lower than that in the UK, that more Northern Ireland households—21 per cent—rely on benefits than in the UK overall, where the average is 12 per cent, and that Northern Ireland households pay 26 per cent more for fuel, light and power than the rest of the UK.
A major concern that has arisen in government consultations on this issue is that the scheme does not take into account a person’s ability to pay. We have heard from the noble Lord, Lord Glentoran, about property prices in Northern Ireland. Indeed, they are rocketing. A recent Belfast Telegraph article reported that house prices are rising at a rate of £110 a day, compared with a rise of just £30 a day—which is still enough—in the rest of the UK. The Nationwide house price survey for the third quarter of this year showed the average price of a house in Northern Ireland to be £159,859, which is a 33.4 per cent increase on last year. The average price of a house in Belfast is at an all-time high of £204,816, which is a 24 per cent rise in the past 12 months. In such circumstances, a person who bought his house 10 or 20 years ago, when property prices in Northern Ireland were significantly lower, is likely to find himself with a huge increase in his rates payments, which he may not necessarily be able to afford to pay, especially if he is on a fixed income.
As we have already heard, pensioners are extremely worried about their ability to afford the new rates, and the public response to the consultation carried out in 2004 contained many stories from pensioners or people approaching retirement who were extremely worried that their houses are now worth considerably more than they were when they were bought. Because such people are now retired and their incomes are fixed, they will find it extremely difficult to pay the increased rates. A large proportion of those who face rate bills that top £3,000 will be older people who have retired from work. Massive extra bills will create havoc for those who have to pay them and for those who have to collect them, as larger numbers of people may not be able to afford to pay. Those older people worked hard throughout their careers to pay for their home, and they retired safe in the knowledge that they had paid off their mortgage and their financial situation was sound. It is not so any more. With rate bills of more than £3,000 falling on their doormats, they now face a situation in which they own their home but cannot afford to live in it. This situation is potentially catastrophic for them. Furthermore, punitive rates will hit the economy hard by reducing disposable incomes in Northern Ireland.
The Minister will not be surprised to hear me ask what consideration was given to the introduction of a regional income tax based on a person’s ability to pay, rather than on the value of his home. The Secretary of State has spoken about a cap on rates, and there has been some discussion of rate relief for pensioners, but neither of those proposals is in the order that we are looking at today. There is provision in the order for a rate relief scheme, and such a scheme is to come forward in regulations, if the department decides to bring forward such regulations at all, but what chance will Parliament have to debate and discuss such a scheme? Who will qualify for it? It is unacceptable for the Government to ask the Committee to consent to this order without the details of the scheme being in place.
However, our concerns are about not just the content of the order, but also why it has been brought forward at this time. The Minister sought to explain the Government’s position on that. The Secretary of State made a Statement in the House only a week and a half ago that heralded the agreement at St Andrews as opening a way to a new dawn for democracy in Northern Ireland. We welcomed that Statement and congratulated the Government on the work that they had done to achieve such an accord. However,24 November is now less than a month away and, as the noble Lord, Lord Glentoran, asked, is this legislation so vital that it must be pushed through Parliament at this time? If the Government were to wait until after 24 November, we would know whether the Assembly will be restored. If it is restored, would it not be better for local politicians, who are accountable to the people of Northern Ireland, to introduce a rate system that they feel best suits the needs of Northern Ireland? Indeed, the parties have been asked to respond to the St Andrews agreement by 10 November, which is only two and a half weeks away. By then, we should know whether there is a clear indication that a First Ministerand Deputy First Minister will be nominated on24 November. How can the Government say that this legislation must be pushed through today, before we have a clear indication of the prospect of devolution, when this process has been ongoing since May 2000?
The process of rates reform was begun by the Northern Ireland Assembly. It should be concluded by the Northern Ireland Assembly. It should not be pushed through Westminster when there is a real chance that the politicians of Northern Ireland, who have been elected to take decisions on issues such as this, will be exercising power—as we hope—in the Assembly within a matter of weeks.
Lord Rogan: I, too, thank the Minister for introducing this order. I shall start by agreeing with him that most people in the Province agree that the rating system in Northern Ireland was in need of reform. We share the aim of the order, which is to make the rating system in Northern Ireland fair and more understandable. However, I, like most people in Northern Ireland, feel that that has not been achieved by it. I shall mention several areas of concern.
There are inconsistencies between the order and the law as it applies in England and Wales. I should declare an interest as I live in Notting Hill. I have lived there for 20-odd years. Unfortunately, it is not Notting Hill in London. If I lived in Notting Hill in London, I would be paying rates of about £3,000, but, because I live in Notting Hill in Northern Ireland, my rates will be upwards of £6,000. Capping rates is acceptable in England and Wales, but it was not acceptable in Northern Ireland in September. Now, in October, it is apparently acceptable. What has changed to make it acceptable now when it was not acceptable a month ago? I do not believe that I heard the Minister correctly. I am sure that I got him wrong when I heard him say that it was changed as a punishment for the electorate for non-agreement with the politicians.
However, I shall be positive for a minute. Following the so-called St Andrews agreement, we are now told that the Government are looking at a cap of about £3,000, which is positive, but surely we need more details. Why put the cap at the maximum level for England? Why would it not be more appropriate for it to be at the slightly lower maximum figure for Wales, an area that is more similar to Northern Ireland in per capita- income terms?
There is another inconsistency. As the noble Lord, Lord Glentoran, has said, many households in Northern Ireland are asset rich and cash poor. I agree with him. We are not speaking about large farmers or landholders. In many cases, we are speaking of old-age pensioners, people who bought their houses some 20 years ago, widows and widowers—people whose assets have increased but whose income has, unfortunately, not increased proportionately to pay these rates. There is a clear case for a single- occupancy and pensioners’ discount in the Northern Ireland system. Again, this applies in England. Surely Northern Ireland ratepayers should not be denied this relief.
The Minister has argued that the new rates system represents a win for most Northern Ireland property owners: 55 per cent are the same or better off, and only 45 per cent are worse off. I ask him to clarify whether the 55 per cent he speaks of is inclusive of those who were already not paying any rates because of housing benefits. The Minister said that the new system is revenue neutral. Surely that is inconsistent with the Government’s policy of increasing revenue from rates in future.
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Lord Rooker: I can answer some points, but I probably did not sufficiently explain the benefits to low-income people. I will not go over it again.
I know that we are far more polite in the House of Lords, but the Liberal Democrats should be ashamed of themselves. More low-income people will benefit under this system than under the present arrangements. Even a pensioner couple living in a £500,000 house would have to have incomes of over £35,000 and/or savings of over £16,000 in order not to get any help under this new system. At that level, they would still get help. They are going to be the minority. Most of the speeches that I have heard only make the case for the 45 per cent of those who have benefited under the present system. Obviously, because there has been no revaluation for nearly 40 years and house prices have gone up by different percentages in different areas, people have clearly gained. We must take account of that.
We cannot go down the road of local income tax. It is seductive but impossible to explain, as the last general election proved. Property taxes are cheap to raise; the cost of admin is cheap, which is an important factor. You do not want to waste money collecting the tax in the first place, you want to collect the tax. Doing so on a basis that people can understand must be fairer.
Before I respond to the individual issues, I must apologise. This is one of the problems of being part of the action when the issues are being discussed, but not being part of it at the end. I thought that we had put a single-person option unrelated to ability to pay into the order, but it is not there. I alluded to the fact that it may be. There are things that the Assembly can do, but they are all related to the ability to pay—low-income households and low-income pensioners. They are things that are specific to pensioners, but they are related to income.
The only non-means-tested relief to which I referred is the one for people with a disability, when the house has been modified because of the disability. That 25 per cent is not means tested, but the other relief that is non-means-tested is the one for young people or people in education living in a household. That is related not to ability to pay but to the pursuit of education and the age of the young people. I apologise for that.
Most people in Northern Ireland will gain. That is the central issue, which people do not seem to appreciate. It is very difficult to argue against more people gaining, which is what the Conservatives and Liberal Democrats appear to be doing. This is not the poll tax, which meant more losers; with this, there are more gainers. I gave the figures of 68 per cent, if one looks at it in terms of households, of people who either gain, remain the same or pay less than £1 extra. If you take the narrow view of gainers and losers,55 per cent of people will either have the same situation or they will gain.
I appreciate that the people who tend to complain are the losers. Most people, but not all, who tend to be the losers in this are those living in the properties whose value has gone up faster than the average. If they had all gone up on average, there would be no difference.
Baroness Harris of Richmond: Does the Minister appreciate that the majority of those people are pensioners who have very little ready income?
Lord Rooker: Yes, but I gave an example. A pensioner, even in a house worth £500,000—and I do not know whether there are many houses of that value with pensioners living in them—would have to have savings of more than £16,000 and/or £35,000 gross annual income not to get any help with the rates. It is not as if they will be penalised. The idea that we are penalising pensioners who are living in high-value houses, irrespective of income, cannot be true. Those are not nominal sums of money; in modern parlance, £16,000 savings or £35,000 annual income. Those pensioners will still get help and gain under the present system; they are not losers. That is in a house worth £500,000; not to mention houses of lesser value in which the gainers would gain more.
Lord Trimble: I draw to the Minister’s attention the figures that are available on the Valuation Agency’s website, which shows that the question of gainers and losers depends very much on geographical locality. In Newry and Mourne, 57 per cent of people are losers; in Cookstown, it is 63 per cent; in Dungannon, it is59 per cent; in Castlereagh it is 67 per cent; and in Belfast it is 56 per cent. I wonder where all the gainers are when all those losers are piling up in area after area. Has the Minister looked at the quality impact assessment that was done on this, which showed that the effects were really quite disproportionate in some categories?
Lord Rooker: I have seen some of the figures in some of the areas relating to communities and their housing, but some communities are living in lower value housing than other communities, and they will gain, because their houses have not gone up as much as the average. If that is the case in pockets of communities, someone might claim that we are being beneficial to one tradition rather than another. We are not. It just happens to be that the dwellings that they are living in have not gone up as much as the dwellings that others are living in.
Noble Lords cannot defend, I hope, the fact that there has been no revaluation in the past 40 years. If there had been rateable value revaluations—as is supposed to happen and did so before, every 10 years or so—you would catch up. It is all very well the noble Baroness saying “Yes, I agree”, but because there has been no revaluation, hundreds of thousands of people have lost out. They are paying more rates than they should because their houses have not increased by as much rateable or saleable value as others. Why should they lose out? They become the gainers under this system. They happen to be the majority of households in Northern Ireland. One can always make a case out of where people live, but we are not taxing people on where they live but on the value of the properties they are in. Because they have not all increased by the same amount, some people have gained more than others. Others have lost more than others. That is what we are trying to put right with a fairer system, so that we are on a level playing field.
The noble Lord, Lord Rogan, asked, since we would be willing to introduce a cap on the higher values following the return of devolution, why not now? We have put forward a fairer system, taking account of ability to pay. If devolution is restored, and we hope it is, a cap will be introduced. This reflects the concerns of local politicians about the impact of the reforms on certain groups. If we get devolution back, it will be local politicians effectively making the decisions. Until they are back, the status quo as planned in the order will apply. However, relief to one group will have to be paid for by other groups. That is the reality under the system in England.
I was also asked about introducing a cap at the same level as Wales. Lowering the threshold after 2006-07 would simply increase the impact on other ratepayers. It is revenue neutral for the year in which it is introduced, but if you change things afterwards and the pot of money to be raised remains the same from the same dwellings, and you then distort the system to give relief to some groups, you must raise the level on everybody else.
The noble Lord, Lord Glentoran, thought that collecting data by photographs was criminally wrong. It may be a difference between the devolved admin of Northern Ireland and England, but I was surprised that the information about housing in Northern Ireland held by the Valuation Agency is much greater than that held about English homes by local authorities. We did not need property information for the poll tax; it was irrelevant and sort of abandoned. Because the Valuation Agency has a comprehensive database, constantly refreshed since the 1970s, it did not use aerial photographs to produce these figures; it did not need to. The information they have about dwellings in Northern Ireland is astonishing. The photographs, by the way, are already in the public domain; it is nothing to do with the rates. Anyone can go on to a website and check properties anywhere around the world. This has been approached in an open and transparent fashion, but the Valuation Agency already held enough information to make these valuations because of its normal processes over the past 30 or 40 years.
The noble Baroness asked me about relief measures to ensure that there is maximum take-up. I accept that the minute you start means testing anything, you must ensure that people understand it. The Rate Collection Agency is looking at a range of measures that will make it easier to claim housing benefits, and looking at working more closely with the voluntary and community sectors. It will also use the media and information seminars. I accept that this is a big change for Northern Ireland. It is a cultural change, which affects every household in Northern Ireland. Whether they pay rates or not, it is a big change. Therefore, the maximum possible publicity and information has to be given. I have given figures relating to pensioners and this is not an attack on them. More people will gain than lose under the new system.
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The noble Baroness asked me about local income tax, on which I am serious. Obviously, it is very seductive to have a local income tax, but that is not government policy. Her party was completely unable to explain it at the last election. The Northern Ireland Act 1998 prevents a local income tax and some other taxation matters being introduced. There was very little support for that measure during the extensive consultation exercise. There would also be concerns about the potential to evade it compared with a property tax. As I say, it is a lot cheaper to collect a property tax than it is to collect from individuals. It would certainly have a disproportionate impact on employees.
The noble Lord, Lord Glentoran, asked me whether people in rural areas benefit from the same level of service provision. It is true that distances are greater. It is for the community “kitty” to collect the money to pay for services and for a small proportion of public expenditure in Northern Ireland. It is not as though a massive amount is collected for that and most it—I will be corrected on this—comes from general taxation rather than local rates.
There is no question that Northern Ireland has got a dispersed population. It is so dispersed that there is a bungalow in almost every field, but I do not want to start another debate. There is no doubt that service provision tends to be more expensive where that is the case and the problem is exacerbated. It is no different in rural areas of Wales. Services are not just for the local council, they are also for the region and one has to make a judgment over everything. I have already refuted the allegation that Northern Ireland is being used as a test bed for reforms in Great Britain. It is not. We deliberately adopted specific systems for Northern Ireland that take account of local circumstances and avoided a one-size-fits-all approach.
The Lyons Inquiry is reviewing local government financing and funding, and I would not want to pre-empt discussions. Clearly, anyone interested in local government reform will have a look at what is happening in England, Scotland, Wales, Northern Ireland and elsewhere in the world. It is a very sensitive issue. Local government tax is probably the single biggest up-front tax that most people pay, which is why council tax is so unpopular in England. When you pay PAYE, VAT and excise duty, you do not notice them up front. When you get the bill for council tax, you know about it, which makes it very unpopular.
The noble Lord also asked me about the miscellaneous powers that justify fining people who refuse to give government officers entry to their property. The power of entry provided in the order would be used only in exceptional circumstances. I understand that this power is less intrusive, rather than more. As far as I know, it has not been used in collecting the values for the 700,000 dwellings in Northern Ireland. We need people to co-operate as neighbours and we need to take action against those who opt out of providing part of the kitty. There has been no need to use the powers of entry in order to collect the information.
Our view is that first-time buyers will benefit. The properties that have risen less than average tend to be those that first-time buyers go for. First-time buyers will gain because their rates will be less than they are today. So the new system will benefit first-time buyers. If you are a first-time buyer going in for a £300,000 house, perhaps that will not apply, but the vast majority of first-time buyers buy houses that are less than the average price and that have gone up, by and large, by less than the average over the past 40 years. Therefore, under this system, they will pay less in council tax than they do in rates. First-time buyers will gain, most people will gain and most pensioners will gain. I cannot believe that people will not want this new system.
Why are we rushing this order through in time for the November Privy Council? That is assuming it gets parliamentary approval, and I take nothing for granted. This has been a lengthy process, and it is part of a wider reform. We cannot simply leave this matter alone and say that, because the process has taken so long and is revenue neutral, we do not need to do it. The work has been done, the consultations have taken place, the information technology is in place and the preparatory work has been substantial. It is a fairer system and because there are more gainers than losers—the figures back us up on that—why should we hold back? We want to get more aid to the low paid, faster. That is why we have introduced the order rather than delayed it.
I have dealt with the cap and restoration. Not introducing a cap affects less than 0.5 per cent ofrate payers, about 3,000 dwellings out of 700,000 dwellings, but I accept that a small number of people are affected by that. I have dismissed the bullying charge. I am not saying that I do not take it seriously, but I do not think that noble Lords took the view that we had been bullying; as I said, powers of entry have not been used.
The equality impact assessment found that Protestants and people in the “other religion” category are likely to face an above-average increase in their rates bill in the new system, but, in many cases, that is linked to affordability, and where that is not the case, assistance will be provided for those on low incomes. The initial analysis undertaken on the basis of the new capital values published early this year shows that the difference on the basis of religion in average rates bills under the new system will virtually disappear once the other factors are controlled. Once we can control for ability to pay and other matters, the difference on religion disappears, which is a good thing. The difference is because in some areas, people live in community blocks and values have gone up at different rates; the distortion has not been caused by religion but by the increase in valuation. We have to make that clear.
We accept that certain councils have a higher percentage of households that will pay more, but often very little is being paid. For example, the noble Lord mentioned Newry and Mourne. I accept that averages can be very misleading, but one has to use a figure. The current average bill is £660 a year, and the new average bill will be £713 a year. In Cookstown, the current average bill is £601 a year, and the new average bill will be £642. That works out at about 75p a week. I do not think I would go to jail for that.
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