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Baroness Amos: I can only repeat what I said before. There are two different issues that the noble Lord is bringing to the attention of the Committee. The first issue is that this is a new body that wants to expand.
Of course, that desire will be at variance with the care and maintenance provisions at the core of the present relationship between the agencies and their departments.The second issue relates to the general way in which public expenditure disciplines are deployed. The noble Lord will be aware that there is a discipline that each department has to put into force. I am aware of that from the way in which the Chancellor and the Chief Secretary to the Treasury have been firm with UK departments about those public expenditure disciplines. Of course, that again is at variance with the expansion plans that the agency would like to put into force.
Regarding consultation, there has, as I said, been a degree of misunderstanding. My firm understanding is that significant consultation has taken place. I shall write to the noble Lord about that. I can only reiterate that I am happy to have a meeting.
On Question, Motion agreed to.
Rates (Amendment) (Northern Ireland) Order 2004
4.26 p.m.
Baroness Amos: I beg to move that the Grand Committee do report to the House that it has considered the Rates (Amendment) (Northern Ireland) Order 2004.
The draft order is part of a major programme of rating reform initiated by the former Northern Ireland Executive in 2000. It is a matter of regret that the Northern Ireland Assembly is not debating it. While efforts to restore devolution continue, we must proceed for two reasons. First, the need for reform is pressing. Secondly, the creation of a modern and fairer way of raising local revenue is in the best long-term interests of everyone in Northern Ireland.
This draft order provides for two key reforms of the non-domestic rating system in Northern Ireland. The first is the rating of vacant property. That measure is widely supported and will take effect from 1 April 2004. The rate to be paid by the person entitled to possession of the property will be half of the occupied rate, which is in line with the rest of the United Kingdom. The exemptions to that new rate will largely mirror those contained in the equivalent GB regulations in all but one respect; stand-alone warehouses will not be exempt from the vacant rate in Northern Ireland. That is because they are usually general purpose buildings that could be readily converted and put on the market for sale or letting to a range of buyers or tenants. The same cannot be said of industrial property, which, as in the rest of the UK, will not be subject to the vacant rate.
I should also draw the attention of noble Lords to the new completion notice system provided for by Article 5. That system is aimed at preventing developers from deliberately not completing new buildings in order to evade the vacant rate. Such a system has operated effectively in England and Wales for many years. In addition, the draft order also gives
the Department of Finance and Personnel powers to serve notices and to enter land for information-gathering purposes. Those powers will help the department to levy the vacant rate effectively.The second reform dealt with is the phased removal of industrial de-rating. That exemption is being removed because it is no longer an effective way of encouraging economic development and benefits only one section of the business community. All businesses use public services and infrastructure to create wealth and employment. Therefore, it is only fair that all businesses, including manufacturers, should contribute towards the cost of providing them. Rates based on the rental value of property are a long-established and widely accepted means of doing just that. Industrial de-rating was abolished in England and Wales in 1963 and phased out in Scotland by 1995 for similar reasons.
Manufacturers in Northern Ireland are not being asked to pay full rates immediately, given the potential detrimental impact that such an approach could have on them. Instead, there will be a prolonged phase-out period, starting on 1 April 2005. Only 15 per cent will be due on that date. The percentage will increase by the amount stipulated in Article 3, and full rates will not become due until 1 April 2011. That approach was adopted in the light of suggestions made to the Government during the consultation phase and of the outcomes of a thorough assessment of all the evidence relating to the potential impact.
The Government are committed to creating an environment in which all businesses in Northern Ireland—not just one particular sector—can increase their profits to meet all their costs and compete effectively, so that sustainable employment levels can be achieved. Action has also been taken to ensure that local business competitiveness will be regularly assessed and to address some of the other costs that businesses in Northern Ireland are concerned about, such as energy and insurance costs. The estimated benefits of recent announcements about a reduction in excess electricity inherited from privatisation—some £30 million a year—stand in contrast to the costs of phasing out industrial de-rating which, in the first year, will be only an estimated £8 million.
It is also intended to make regulations under Article 8 of the draft order to provide for an exceptional hardship rate relief scheme for all businesses by 1 April 2005. The provision was inserted after the latest consultation exercise and the debate in another place in January and has been widely welcomed.
The reforms contained in the draft order are sensible, modernising measures that will help create a modern and fairer rating system in Northern Ireland. They will also bring about much-needed investment in public services and infrastructure in Northern Ireland and therefore enhance our prospects of creating the modern, dynamic economy that the Government and all businesses want. I commend the order to the Committee.
Moved, That the Grand Committee do report to the House that it has considered the Rates (Amendment) (Northern Ireland) Order 2004.—(Baroness Amos.)
Lord Glentoran: I thank the noble Baroness the Lord President of the Council for explaining the order so clearly. I have a few comments.
I accept that some of the changes are sensible and are probably needed, but there is one general point that we must consider that does not apply to England and Scotland. Although, as I said, the Northern Ireland economy is strong, it is fragile. It is a small economy, and it is sensitive to all sorts of things. It is most sensitive to what happens across the border in the Republic of Ireland. I spent 30 years in industry in Northern Ireland working for Redland plc, a multinational, and looking to encourage inward investment in the construction industry manufacturing sector. Throughout that time, we were always competing with the Republic of Ireland and the tax benefits there, in particular. In those days, there were, I think, something like 20 or 30 years of tax-free benefits. As I understand it, the rate of corporation tax in the Republic today is 10 per cent, as opposed to 40 per cent in the United Kingdom. When one talks of putting extra costs on businesses, such matters become sensitive.
As for the rating of vacant non-domestic warehouses, can the noble Baroness explain further why the Government have chosen to do it in Northern Ireland, although they have not done it in the rest of the United Kingdom? It is a matter of particular concern for small businesses, and I would like to see clear reasons why Northern Ireland warehouses are different to warehouses in Scotland, Wales or England.
There are clear reasons why derelict and empty property has a negative impact on communities, not just on the business sector. I also wonder whether Her Majesty's Government have taken into account the possible social effect. I mentioned Harland & Wolff in debate last night, which must have acres of empty and disused buildings; I am not thinking of that, but I do not know what the cost of putting rating on to that acreage will be on the Olsen Group or whoever owns those buildings. However, it will be pretty negative and will encourage them to clear out quickly.
I am also thinking of village areas such as the lower Shankill and other parts of Falls, where there have been village communities in the past. Those of us who know the city well—I do not know Derry and Armagh quite as well, although I certainly know Portadown—know that village communities are trying to regenerate in such areas, but there are empty shops and little businesses. Until now, those have been de-rated, as I understand it. Someone will now have to start paying rates on them.
Will that lead to the bulldozers moving into lower Shankill and other areas and clearing the sites? Will it reduce their value for redevelopment to almost nil? If so, is that a good thing? Has the thinking been done on it? I admit that I have not gone into the detail of thinking it through. As a conservative type of person, I would hate to see lower Shankill and its character
destroyed. It is one of the oldest parts of Belfast and, once upon a time, was the major thoroughfare into the city. I worry very much about that.So far as industrial de-rating is concerned, I made a point earlier about the competitive costs of Northern Ireland business and industry in relation to the Republic, not to the mainland. There are on-costs. We have the highest energy costs in Europe. I heard the noble Baroness say that the Government propose to subsidise energy costs to the tune of £30 million, but I suspect—I hope she will tell me that I am wrong—that they have not yet had clearance from the EU. That matter will have to be cleared with the European Union before Northern Ireland can receive a government subsidy for its business and industrial energy.
If the EU puts its foot down and says to Her Majesty's Government, "We will not allow you to subsidise Northern Ireland industry's energy by £30 million", what then? The de-rating will be in place, so business will have had another serious tax imposed on it while not even having had the benefit of the subsidy about which the Government talk today. I am not at all happy about the phasing-out of industrial de-rating at this stage.
As I said, we have a vibrant economy at the moment, but a very fragile one. The policy was a useful tool when competing with the Republic. Zero rating on structures such as new buildings and factories has been of significant value to many people. It could be balanced against the 40 per cent corporation tax rate, versus the 10 per cent rate in the Republic. There are other issues as well, such as the increased transport costs of raw materials in and out, which also make it quite difficult for manufacturing industry to compete in Northern Ireland.
Fortunately, Northern Ireland has an extremely competent, effective and hard-working labour force. During my years in industry, it was really that which kept the industry going, and I am sure that it is today. However, small businesses and up-and-coming entrepreneurs do not need the phasing-out of industrial de-rating. At this stage, I do not agree on that issue.
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