Why time is here for rates reform
For two years, I was responsible for Northern Ireland’s rating system in my then role as Finance Minister. I remember, during one of the many Assembly debates about rates, paraphrasing Winston Churchill’s famous quote about democracy by describing our rates system as the worst form of local taxation except for all the rest.
Rates revenue is a small but not insignificant chunk of our region’s public expenditure. In our fiscal system where we have an annualised budget and limited ability to roll over unspent funds from one year to the next, the roughly £500m that is generated by rates every year provides an important measure of certainty to the Finance Department as it plans the Executive’s budget.
It has been abundantly clear now for many years that our rating system is no longer fit for purpose. It has been unable to adequately adapt to a fast-changing world with no real ability to address the rapid rise in online retail, something that is reflected in the fact that the retail sector accounts for almost twice the rates revenue as its contribution to the economy as a whole.
So profound has been the last two years on customer facing businesses in city centres, that we simply must avoid a return to the way things were and use this as an opportunity it is to do things very differently.
For the last two years, businesses in retail, hospitality, leisure and tourism have enjoyed a 100% rates holiday.
Whilst this was a sizeable investment by the Executive, it equally reflected a considerable amount of pragmatism on their part. Ministers couldn’t credibly have issued rates bills to businesses that they had closed down for considerable periods over the last 18 months.
The harsh reality is that had their rates bills landed on their doorsteps, many business owners simply wouldn’t have been able to pay them and enforcement by the Executive could have resulted in the permanent closure of countless businesses.
We are six months away from the start of the next financial year and things are starting to return, slowly but, we hope, surely, to normality, but it won’t be long before business owners will have to find the funds to cover one of their biggest overheads.
What’s more, for lots within the hospitality sector, for example, their new rates bills will be based on a revaluation which will mean a rates bill that is massively bigger than the last one they were last issued with.
What’s more, for lots within the hospitality sector, for example, their new rates bills will be based on a revaluation which will mean a rates bill that is massively bigger than the last one they were last issued with.
The first question the Executive needs to consider is whether or not it wants to reintroduce rates bills for these recovering and still vulnerable sectors without any relief or tapering.
Nothing short of fundamental real rates reform is required. The recent proposal by the Shadow Chancellor that a Labour Government would scrap business rates in England is the kind of recognition that this is a very real issue for many businesses and whether or not they have a future or not.
