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Lord Smith of Clifton: We welcome the order. It is a tidying up and modernising order and is welcome for that reason. I particularly welcome its lengthy phasing-in. That is absolutely appropriate. It provides a great deal of lead time for industrialists and others to prepare for the future.
I am confident that the economy in Northern Ireland will go from strength to strength. The noble Lord, Lord Glentoran, mentioned some of the difficulties that business in Northern Ireland faces in terms of international competition and so on. That is very true, but Northern Ireland has some tremendous strengths. The noble Lord mentioned the stable and highly-qualified labour force which is the envy of the other three parts of the United Kingdom. We should not underestimate the degree of entrepreneurship and
vitality that is to be seen which, since I first knew Northern Ireland, has brought about unimaginable changes. It is an extremely welcome development.The Government have always exhibited great sensitivity to the changing factors in Northern Ireland. If, for example, the European Union did not allow an energy subsidy, I am confident that the Government would, quite rightly, adjust their policies to take account of that.
All in all, I agree with the order. I have one specific question, which I raised with officials yesterday. It concerns the relationship of agriculture to industry. The boundaries of those sectors are becoming increasingly blurred with the rise of agribusiness. I should be grateful if the Lord President could explain to me, once again, how industrial and commercial undertakings on agricultural land are to be rated. What formula will be used to ensure fairness between a business which is not located on agricultural land and a business which is?
Lord Laird: The draft Rates (Amendment) (Northern Ireland) Order 2004 is an important piece of legislation. However, I can offer it only my partial endorsement as, despite a full discussion of the order in Committee in the other place, the Government have not fully taken into consideration the effects that sweeping changes may have on industry in the Province.
My colleagues and I recognise that Northern Ireland's rating system is in need of reform and modernisation; thus we want to see the Government guaranteeing that this legislation will result in a fair rating system for all in Northern Ireland.
We welcome the rating of vacant non-domestic properties in Northern Ireland as it has worked well in Britain with no serious adverse effects. Far too many vacant properties run into disrepair and it takes only one or two dishevelled sites to make an area appear run down. This obviously has a knock-on effect for all those living in the area and certainly no-one would favour the adverse effects on our local community caused by property lying vacant or derelict indefinitely. It is to be hoped that the introduction of rating will provide an incentive for the owners of such properties to address the condition of their holdings.
While I very much welcome the introduction of a hardship relief scheme for all businesses, I would ask the Minister to elaborate on this point. When does she expect this relief scheme to come into force? How will a business qualify? What relief will it be entitled to and how will this be calculated? The Minister, Ian Pearson, said in Committee in the other place last week that the Government were still considering the principles of a small business relief scheme. Can the Minister tell us what stage their considerations have reached and whether such a scheme is likely to come into force in the near future? Moreover, community businesses should be considered for relief as well, not to mention the Orange Order and Ancient Order of Hibernians halls which, in effect, provide a focal point for local communities in rural areas.
I turn now to the removal of industrial de-rating which, in our view, could have a seriously detrimental effect on many businesses throughout the Province. We must carefully consider the impact of de-rating on employment figures and on the future of industry as a whole in Northern Ireland. Responding to such concerns, the Government have claimed that this legislation will have no impact on employment. In that respect, our fear is that their calculations are based solely on a study by DTZ Pieda Consulting for the Department of Finance and Personnel, which suggested that the impact on profits that firms generally make would be no more than 2.7 per cent.
However, as has been pointed out to the Government on numerous occasions, other stakeholders argue that the impact would be much higher. For example, the CBI Northern Ireland has indicated that the impact of rates could be between 10 and 15 per cent. According to the CBI, the agri-food, clothing, manufacturing, engineering and electronics sectors will be hard hit by those proposals.
If there was a clear disparity in those figures between 1 or 2 per cent, we would not be too worried. However, such a disparity of 10 or 15 per cent suggests that there is a serious discrepancy in the methodology used to attain these conflicting projections. It is extremely worrying that the CBI and manufacturing focus groups are firmly convinced that the impact on manufacturing profits will be much greater than 2.7 per cent.
The regulatory impact assessment concludes that there will be a net overall benefit from the proposals, largely due to the finance raised for use on essential infrastructure projects. However, according to the CBI, the RIA assessment is inadequate regarding the impact on the manufacturing sector—Northern Ireland's largest wealth-creating sector—which, over a period of years, will be faced with an additional cost of £50 million per annum.
Nor does the assessment account for the negative impact that the proposals will have on creating a more self-sustaining economy. With regard to the intention to phase out industrial de-rating, the CBI also suggests that the expected yield—estimated at between £55 million and £60 million—is overly optimistic and underestimates the impact that the introduction of rating will have on the competitiveness of the manufacturing sector and the viability of parts of it.
I am interested to know why the Government have chosen to ignore those findings and have pushed ahead with legislation in the face of such startling reports. Have the Government carried out further independent research that would suggest these stakeholders are wrong in their assessment? If so, can those findings be made available?
Another significant problem arising from this order relates to the significant cost and reliability issues relating to energy, transport, insurance and waste disposal which Northern Ireland already faces. The Government's proposals do not fully take that into consideration. Moreover, Northern Ireland's industries operate with lower average wages and higher energy and commodity
costs than the rest of the UK. We also have the potential for increased water rates in the near future. The benefit of industrial de-rating has helped to offset those higher costs until now. The introduction of this policy will only add to costs, making marginal facilities unviable and reducing investment in new facilities.More consideration must be given to how high costs can be offset and moves made to reduce other costs through a more holistic approach, as rates must not be considered in isolation. Reducing those other costs would encourage greater entrepreneurialism and, ultimately, would increase economic growth throughout Northern Ireland. I hope that the Minister has registered our continuing concerns. I look forward to her response.
4.45 p.m.
Lord Maginnis of Drumglass: I shall speak briefly to this order, as I cannot understand the timing of these measures. We have already heard about Northern Ireland being over-administered. That is nowhere so great as at local government level. There is already a plan to review the whole of public administration and to reform local government in Northern Ireland. That appeared to me to be something that might have been expedited, rather than using the present system of local government to add to the taxation burdens of the business community in particular.
A huge danger of stopping the de-rating of vacant industrial premises would be that, whereas incremental redevelopment takes place in Northern Ireland at present because it is mainly made up of small businesses and involves comparatively small amounts of money, whole areas of derelict or almost-derelict land would be cleared. We will have huge, blighted areas in our market towns, where only bigger investors will be able to invest the large sum of money required to deal with, say, a one-acre or half-acre site.
The problem with the governance element of rating in previous years has been that rates have increased at a much higher rate than inflation. Rates of increase have approached, if not hit, double figures. That encourages a sort of profligacy in district councils. In Dungannon Borough Council, on which I sit, my party prevailed on our finance officer this year to reduce the rate. The finance officer presented figures this year in which the rate of increase had decreased from 7.5 per cent to 6.4 per cent. However, when those figures were presented to the full council, Sinn Fein, the largest party, supported surprisingly on this occasion by the SDLP, decided to reinstate the 0.8 per cent, with no justification whatever.
That issue perhaps falls outside the scope of the order, but I raise it because the excuse given for retaining the higher figure was, "The bigger part of the rates element imposed by government takes no account of the needs of our society, so why should we constrain ourselves?". I hope that the local government auditor will look at that case. When he does, he will have to realise that what
appears to be undue and perhaps precipitant action by government in this legislation is encouraging profligacy elsewhere.
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