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Baroness Amos: I thank noble Lords for their comments. I should like to go through the points in order.
The noble Lord, Lord Glentoran, was concerned about the impact that the order might have on inward investment, particularly the relationship between Northern Ireland and the Republic. My understanding is that corporation tax is 12.5 per cent in the Republic.
I wish to repeat what I said in my opening remarks. We are fully committed to creating the right environment in which all businesses in Northern Ireland can compete successfully and grow. That is why a study was commissioned last year by PricewaterhouseCoopers, looking at all the operating costs faced by businesses in Northern Ireland. It concluded that, in overall terms, businesses in Northern Ireland did not have a cost disadvantage relative to Great Britain and the Republic of Ireland. That is because some costs are lower in Northern Ireland, while others are higher. Basically, they cancel each other out.
However, the report did identify some specific increasing costs such as energy and insurance. The noble Lord pressed me on the question of energy costs, which I shall come to in a moment. That is why we have already taken action to address these obstacles.
The PricewaterhouseCoopers report also recommended that further regular assessments of local business competitiveness should be undertaken. An undertaking to do so in the future at sectoral level has already been given.
On the specific issue of energy, a matter raised by the noble Lord, Lord Glentoran, and picked up by the noble Lord, Lord Smith of Clifton, we have announced proposals to remove from businesses some of the excess electricity costs in Northern Ireland inherited from privatisation. Work is ongoing on the scheme, subject to ensuring full compliance with EU state-aid rules—a point noted by the noble Lord, Lord Glentoran. We estimate that this scheme will reduce electricity costs to business by around £30 million a year. If we fail to secure EU approval for this, we shall seek to reduce energy costs in other ways such as opening up the market for competition. A strategy is being developed to address these issues. I hope that the noble Lord, Lord Glentoran, is reassured that we are not depending only on getting this through the European Union.
I turn to the issue of exemptions on vacant property rating raised by the noble Lord, Lord Glentoran. He asked particularly why warehouses are to be rated when they were exempt. We see no strong case for excluding warehouses from the rate. They are general purpose buildings that can be readily occupied by a range of businesses and are easy to let or sell. However, it is only stand-alone warehouses that are to be rated;
that is, those with flexibility as regards use. A warehouse that is part of a qualifying industrial property will not be rated.
Lord Glentoran: My Lords, may I press the noble Baroness on one point? What is the comparison on the rating of warehouses between what is being proposed for Northern Ireland and that which obtains in England and Wales? I sought to make that point earlier. As I understand it, warehouses are rate-free in England and Wales and Her Majesty's Government propose to change the status for Northern Ireland only.
Baroness Amos: My Lords, the noble Lord, Lord Glentoran, is quite right. It is an exception in terms of the equivalent Great Britain regulations. It is being done because warehouses in Northern Ireland are usually general purpose buildings which can be readily converted and put on the market for sale or letting to a range of buyers or tenants. Warehouses are not subject to the vacant rate in the rest of the UK. We are proposing to rate them in Northern Ireland for the reasons that I have given.
To finish on that point, I should like to ensure that the noble Lord understands that manufacturing premises will not be liable for the vacant property rate. It will apply only to stand-alone warehouses. If I am able to give any further information on this point, I shall write to the noble Lord.
I understand that Scotland also does not operate a system of completion notices in relation to new buildings, although the legislation is in place to allow for it. So there are different operating methods within each of the countries.
On the issue of cost and competitiveness, Invest Northern Ireland has developed a tailored and strategic approach designed to help companies to compete and grow. That approach is aimed at supporting a diverse range of businesses in both new hi-tech industries and the more traditional manufacturing sectors. Although only established in April 2002, Invest Northern Ireland has already had a significant impact on improving the competitiveness of the Northern Ireland economy. During its first year of operation, for example, it assisted more than 2,000 new businesses to start up, attracted 10 inward investment projects offering the prospect of 817 jobs, and it has helped businesses to develop and expand. We hope that the support that has been put in place will mean that the competitiveness of businesses will continue.
The noble Lord, Lord Glentoran, raised a point about the impact of the policy on the lower Shankill area. A new targeting social need analysis has been carried out. The results show that the impact of introducing vacant rating was likely to be positive in terms of encouraging the occupation and use of non-domestic property. Given also that high concentrations of vacant properties tend to occur more in areas of high deprivation, the new targeting social need impact is likely to be positive overall. Although the impact on property owners specifically could not be gauged, we do not believe that someone who holds an unused property asset can be described as "deprived".
The noble Lord, Lord Maginnis, raised the issue of the impact that the issue may have in deterring speculative and incremental development in Northern Ireland. It is considered that the introduction of vacant property rating will have a positive impact by providing an incentive to bring vacant property back into occupation and use. There may be a marginal impact in the short term in terms of speculative development in secondary areas, but it is expected that it will lead to an adjustment in rental values and acquisition costs in the medium to long term.
The noble Lord, Lord Glentoran, in general, was pressing as to why this reform is needed and the noble Lord, Lord Maginnis, specifically asked why now when there is an ongoing review. We believe that this will contribute towards delivering a fairer and modern rating system in Northern Ireland, the central aim of the review of rating policy launched by the Assembly in 2000. Public services confer benefits on businesses directly and indirectly, and it is only fair that the whole business community contributes to their funding and shares the burden of local taxation. It will also raise revenue to help fund significant investment in Northern Ireland's public services and infrastructure.
The noble Lord, Lord Smith, pressed me specifically on the issue of industrial undertakings on agricultural land and how we would measure the two. Agricultural land has always been exempt, along with industrial land. Provision exists within the 1977 rates order to apportion between different uses of the land. The department can therefore apportion between purely agricultural uses, which remain exempt, and industrial uses which will lose their exemption. Agricultural land includes farmland, meadows, pasture, land for poultry farming, orchards
and so on. It also includes agribuildings. It is determined by the department or appeals to the court if there is any concern that the apportionment has been made wrongly.The noble Lord, Lord Laird, pressed me on a number of issues. He was particularly concerned about the impact on jobs and on profit. A claim has been made that 30,000 jobs will be lost as a result of this policy. It is our view that the claim does not take account of the fact that rates are being phased-in over a prolonged period. As a result of the consultation and the concerns that have been expressed about this, firms will have more than eight years from when the policy was announced to prepare for paying full rates.
Rates will be only one element of the cost structure of firms. We do not think it credible to argue that there would be a loss of such a large number of otherwise sustainable jobs as a direct result of having to pay rates in seven years' time. There is no evidence to support that argument. Of course, any job losses would be a matter of great regret, but we have to accept that jobs are created and lost all the time for a variety of reasons. I must reiterate that, in our view, there is no evidence to support the argument that substantial numbers of jobs would be lost.
As to the different kinds of figures cited on the percentage of profits for which full rates would account, the figures range from 2.7 per cent to between 15 and 20 per cent. The Invest Northern Ireland study is likely to be the best available indication of profit impact and its figure is 8.5 per cent. Of course, that does not mean that the profit will fall by 8.5 per cent as a result of the phasing-out of industrial de-rating. The impact is likely to be somewhat less. It will depend on the circumstances of individual firms and on a range of other factors.
On Question, Motion agreed to.
- The Grand Committee adjourned at seven minutes past five o'clock.
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