Industrial Derating

The decision to phase out industrial derating was announced in April 2003 following a public consultation exercise on the Review of Rating Policy in May 2002. Rates were re-introduced to the manufacturing sector from April 2005 but full rates will not become due until 1 April 2011.

Under the previous Administration, a Working Group was set up to look at  relevant issues and as a result a lower increase in rate liability  was provided for 2007/08, 30% instead of 35%. This was a concession for one year only as a review was scheduled for 1 April 2007.

In April 2007 the Department engaged the Economic Research Institute of Northern Ireland (ERINI) to undertake a rigorous study into the effectiveness and impact of the policy to phase out industrial derating.

The Terms and Conditions of that Review are available at

The Minister of Finance, Peter Robinson MP MLA, said in the Assembly on 12 June that until this independent examination is complete, no decisions on the future of industrial derating would be made. The ERINI is due to report in the autumn.

In the context of the publication of the consultation document on the draft Budget 2008-11, Peter Robinson announced on 25 October 2007 that he believes the best way forward will be to cap industrial rates at 30% over the budget period. This assessment was made in light of a preliminary report from the Economic Research Institute for Northern Ireland (ERINI). As mentioned above, ERINI was commissioned by the Department to undertake a study on the phasing out of industrial derating commenced in April 2005 under direct rule. Their final report is expected shortly and will be considered by both the Committee for Finance and Personnel and the Executive following which further announcements will be made.

The Report on the Review of Industrial Derating Policy which was undertaken by ERINI was received by the Department on 1 November 2007.

It sets out the background and reviews the rationale for the derating policy. The Study included consultation with key stakeholders, a postal survey of a sample of manufacturing firms, in-depth case studies, analysis of the industrial valuation database, establishing links with the Northern Ireland Annual Business Inquiry and marcoeconomic modelling on the impact of industrial rates on the Northern Ireland economy as a whole".

This independent study has helped inform the budget proposals which are out for consultation, in particular the proposal to hold the level of rates paid by the manufacturing sector constant over the Comprehensive Spending Review period (ie the next 3 years).

The report will be scrutinised by the DFP Committee during November and in the light of their assessment the Minister will refer the matter to the Executive to ratify decisions on the way forward, before the necessary legislation is presented to the Assembly.

The report also looks at alternative revenue raising measures, which have not been picked up through the Executive’s Review of the domestic rating system. These include suggestions on local levies for vehicle testing and new registrations, in addition to ideas around charging supplementary fees on liquor and bookmaking licences. These suggestions have been made to fulfil the requirement for ERINI to identify potential alternative sources of revenue. The particular ideas contained within the ERINI report have not been prompted nor considered by the Department.

Nothing will even be contemplated until there has been a proper assessment of effectiveness and impacts, a process of consultation with potentially affected parties and last but not least, the will of the Assembly.

The Report can be accessed(from 12.00noon on 13 November 2007) through the ERINI web site at http://www.erini.ac.uk/act_download.cfm/publication_key/2164/