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16 April 2003 Minister Proposes Phasing In Of Rates Bills For Industry

The Parliamentary Under-Secretary of State with responsibility for Finance has launched a Policy Paper, arising from the Review of Rating Policy, on the rating of vacant property and the removal of industrial de-rating.
Ian Pearson MP said: "It remains the Government's aim that devolution will return to Northern Ireland as soon as possible. However, the need for investment and reform is so pressing and clear that I am convinced that it is right that these matters should be brought forward without delay. That is why the Government's plans set out in this paper will proceed and enabling legislation will be drawn up. It is my hope and expectation though, that this will be dealt with by a local Executive and Assembly."
The Minister said three major and far-reaching proposals were set out in the Policy Paper, which will be brought forward in the form of draft legislation. The first key decision concerns manufacturing industry.
Making the announcements today, he commented: "I have listened carefully to the concerns expressed since I announced the decisions in principle last October and my proposal is that industry should begin to pay 15% of the rates bill from 1 April 2005 onwards. The phasing in of the full rates bills should be extended over seven years, with the change not being completed until 2011.
"There has been much speculation about the impact that these measures will have on Northern Ireland's economic well-being. They have been considered very carefully and we have consulted further with organisations and businesses. I have made it clear that any change will be handled sensitively.
"I recognise that sudden change in this area would impact on many businesses. Phasing in rates over a seven-year period will allow firms a lengthy period to adjust to paying rates and I consider it a reasonable time scale when set against the Government's decision to remove industrial de-rating, which was first announced in October 2002.
"As a Government we are also committed to reducing energy prices and I will be publishing a consultation paper on an energy strategy very shortly."
Mr Pearson said that the majority who responded to the public consultation favoured the abolition of industrial de-rating. They saw its focus on traditional manufacturing as being out of date and not in keeping with the promotion of a diverse and modern economy:
"Alternative relief measures have been considered but it would be extremely difficult to devise an effective grant or loan scheme that would equitably assist the range of businesses affected," he pointed out.
On the rating of vacant property, the Minister explained that the decision had been taken to introduce the rating of non-domestic (commercial) vacant property from 1 April 2004 along the lines of the system that operates elsewhere in the UK. This provides for a 50% rate liability, an initial three-month exemption and the continued exclusion of certain property such as vacant manufacturing premises.
The third issue centred on the decision to defer the introduction of the rating of vacant domestic property and to address this in the context of wider reform of the domestic system. This will be the subject of a separate Policy Paper expected later this year.
On the rating of non-domestic vacant property, Mr Pearson said: "I continue to think it is right in principle that vacant property should be rated. This will increase the tax base and provide a useful incentive for encouraging the effective use of property assets. I believe it is fair that from 1 April 2004 owners of vacant property in Northern Ireland should pay a contribution as they do in the rest of the UK."
Turning to domestic vacant property, he commented: "I have already concluded that the domestic rating system is in need of fundamental reform and have decided that it should be based on capital value. There are therefore strong reasons against extending liability to include vacant houses and apartments until the whole system is made fairer. I have agreed that the issue of taxation of vacant domestic property should be considered as part of the further work on the new Domestic Property Tax and that no changes should be made except as part of the change to that system."
Mr Pearson emphasised that the decisions are consistent with the majority of views expressed during the Review of Rating Policy: "I am convinced that these are reasonable measures that do no more than bring Northern Ireland into line with the rest of the United Kingdom and are a sensible way of spreading the burden of local taxation.
"The additional revenue generated by these measures will boost spending on important public services such as health, education, transport and other key services. The opportunities afforded by the Reinvestment and Reform Initiative (RRI), announced last year, will be funded in part from these changes to the rating system.
"We are taking forward the Executive's commitment to reform public services generally while making every endeavour to ensure that people will not be asked to pay more than absolutely necessary - a central aim of the Review of Rating Policy."
NOTES TO EDITORS
  1. On 5 December 2002 the Minister, Ian Pearson MP, launched the Public Consultation Report on the Review of Rating Policy. He announced that it was his intention to proceed with the introduction of the rating of vacant property and the removal of industrial de-rating, issues that had received broad support during the public consultation period of the Review of Rating Policy.
  2. The Policy Paper on 'The Rating of Vacant Property and the Removal of Industrial De-rating' outlines decisions and timings taken in relation to these issues.
  3. The rating of non-domestic (commercial) vacant property will start from 1 April 2004 along the lines of that in the rest of the UK. This provides for 50% rate liability, an initial 3-month exemption and the exclusion of certain property such as manufacturing premises.
  4. The introduction of the rating of vacant domestic property will be deferred and addressed in the context of wider reform of the domestic system. This will be the subject of a separate Policy Paper expected later this year.
  5. The gradual removal of industrial de-rating will start in April 2005, with 15% of bills being payable in 2005-06 and will be phased out over a 7-year period.
  6. The measures set out on the introduction of vacant property rating and the removal of industrial de-rating will be subject to confirmation by the Executive following the restoration of Devolution.
  7. Subject to its views, they would be brought into effect through primary legislation with the Act, to come into operation on 1 April 2004. Public consultation on the Equality Impact Assessment has begun and the period set aside for this is 12 weeks, which means a closing date of 8 July 2003. The results will be analysed and any significant adverse effects identified will require a review of the draft provisions and if necessary the introduction of mitigating measures.
  8. A review of the existing criteria for entitlement to industrial de-rating will be undertaken.
  9. A public information programme will begin to advise those in the manufacturing sector and owners (and their agents) of vacant property in the non-domestic sector about these plans.
  10. The Policy Paper launched today can be viewed at: www.nics.gov.uk/ratingpolicy/