Northern Ireland Assembly, Tuesday 15 May 2007, Private Members’ Business
Mr B Wilson: That this Assembly notes the introduction of unfair changes to the rating system, and calls upon the Department of Finance and Personnel to conduct a full review of the new system, including in particular, consideration of further income-related reliefs and a full income-based system.
I congratulate you on your appointment, Mr Deputy Speaker.
Since the recent rates revaluation, I have been approached by a number of my constituents whose rates have increased dramatically, in some cases by more than £1,000. For some, their rates would have doubled had it not been for transitional rate relief. Most of those constituents live in an old family home and exist on a modest pension. The rates increase will cause extreme hardship in most cases, and in extreme cases it will result in people having to sell the family home. It is unacceptable that elderly people who have worked all their lives and have saved for their retirement are now being hammered by those excessive rate demands.
The Executive must revisit the options for funding local government services. The present system, which is based on the regional rate, increasingly puts the burden on the elderly and those on a fixed income. It also hits low-income families. That cannot be acceptable in a civilised society. Rates are a regressive tax, and they bear little relation to a person’s ability to pay. They not only create hardship for those on fixed incomes but have a disproportionate impact on the low-paid. The Department of Finance and Personnel’s own figures, which are based on the 1999-2000 household survey, show that a house with a weekly income of £100 would pay 11·6% of that in rates, yet one with a weekly income of more than £400 would pay only 2·5% of that figure.
The new valuations, which are based on capital values, that were introduced in April 2007 highlight the rating system’s unfairness. Any system, however, that is based on property values is inherently unfair, as it totally disregards a person’s ability to pay. The problems raised by that revaluation are not new, but they are fundamental to any system that is based on property values.
For years, I have highlighted the plight of many elderly constituents who live on small pensions and who must pay more than 10% of their income on rates. The current proposals have emphasised and exacerbated their hardship. It is time for something to be done to reduce their burden.
Rates are a regressive tax, and they bear no relationship to one’s ability to pay. How can one justify an old-age pensioner’s having to pay the same as a family of three wage earners, simply because they live in a similar house? Moreover, payment of rates does not relate to the use of facilities. Can it be argued that a pensioner makes more use of an ice rink or squash courts, creates more rubbish, or uses more water than a family of four? Is it right that a person who lives on a pension should pay full rates while a young person who earns a substantial wage and lives in the family home should contribute nothing to the cost of local services?
Rates should be replaced by a tax that is based on ability to pay. The recent change from a rates system that is based on rental values to one that is based on capital values is merely tinkering with an unacceptable system that needs fundamental reform.
I have long argued that rates are inherently unfair because they take no account of ability to pay. In 1982, I raised that issue with the then Secretary of State, Jim Prior, when we met him to propose the abolition of the regional rate. The problem has worsened significantly in recent years as successive Finance Ministers — both Executive and direct rule — have raised the regional rate disproportionately to pay for the upgrading of our economic infrastructure. Few people would dispute that we must raise additional revenue to upgrade that infrastructure, but that should not be done through an unfair rating system that places the burden heavily on the most vulnerable sections of our community. I therefore call on the Minister to carry out a full review of the means of funding local services.
I recognise that, in 2000, the Executive set up a review of rating policy and began an extensive consultation process. However, the terms of reference for that review were extremely restrictive and the consultation was unable to consider options other than those that were based on property values. My submission, which proposed a local income tax, was dismissed as going beyond the terms of reference.
Much has happened since then. The regional rate has almost doubled, and both the Lyons Inquiry and the Burt Review of local government, inEnglandandScotlandrespectively, have suggested changes to local government finance.
There were more than 100 responses to the consultation inNorthern Ireland, but the input from some political parties was limited by the terms of reference and, in other cases, was non-existent. I was the only elected representative to oppose the principle of the charges and to call for the replacement of rates by a tax that is based on ability to pay, such as a local income tax.
Three of the political parties that were then represented in the Assembly did not submit any evidence, and the comments of the other four queried the details of the new system, rather than the principles behind it, which are fundamental to the achievement of a just system. Over the five-year consultation period, there was very little interest from most politicians until last year, when the new valuations were announced. Politicians then demanded that the proposals be withdrawn.
The motion calls for a review of all the options, particularly income-based alternatives such as a local income tax. That would clearly be fair, as it would be based on one’s ability to pay; it would tax non-householders who do not pay at present, and it would not act as a disincentive to improve property. Other options include a local sales tax; a services tax; green taxes, which would help the environment as well as raising revenue, based on the principle that the polluter pays; and a land-value tax.
The Green Party in the Scottish Parliament has proposed a land-value tax, which is being considered by the Scottish Parliament and Executive. The Assembly should examine that option, because such a tax would benefit people on low income and would encourage the development of derelict land. When land is derelict, no one pays tax on it, and no income comes from it. A land-value tax would stop speculators from building up land banks on which they pay no tax, but from which they benefit from almost daily rises in land prices. Many developers, particularly in the greaterBelfastarea, have land banks where affordable homes could be built.
The values of those land banks have increased dramatically in recent years. It is wrong that developers rather than the public should benefit from the appreciation in land prices. We should examine all those options, and the Assembly should seek to acquire tax-raising powers so that all increases in public expenditure are not met solely from the property tax paid by the ratepayer but from a basket of taxes.
I accept that such a review will take time; however, a great injustice could be resolved immediately. We should end the discrimination against single householders inNorthern Ireland. Since 1993, single householders in the rest of theUKhave benefited from a 25% rebate. That takes into account the fact that they make less use of public services than larger households. That rebate has helped millions of householders inGreat Britain, the majority of whom are pensioners.
In 1992, I wrote to the then Finance Minister, Michael Mates, to ask that he introduce a similar discount inNorthern Ireland. He rejected my request, pointing out that local-government finance is different inNorthern Ireland. I wrote to all subsequent Finance Ministers and have a file of their replies, which were pretty awful. Those Ministers did not understand the issue — for example, Paul Murphy pointed out that the Exchequer funding forNorthern Irelandis much higher than in the rest of theUK. Mark Durkan replied that the issue would be considered in the course of the review of rating policy. The matter has been put off, year after year, since 1992. Why should Mrs Jones fromBangorin northWalesget a 25% discount, while Mrs Jones fromBangorinCountyDowndoes not? Such discrimination cannot be justified, particularly as the regional-rate burden has increased significantly in recent years. In North Down alone, 5,600 single pensioners would benefit from such a rebate. We call on the Minister of Finance and Personnel to introduce the 25% rates discount for the single householder and to end this discrimination.
In conclusion, I ask the Minister to set up a review of the funding of local services and to consider moving from a property-based tax to a mainly income-based tax. That review should also examine all other options, such as a local sales tax, service tax, land-value tax and green taxes. If necessary, the legislation must be changed to give the Assembly tax-raising powers, which it should have anyway. It is essential that the burden of taxation be spread more evenly and does not continue to fall most heavily on the elderly and those on fixed incomes. In the meantime, I ask the Minister to introduce the 25% discount available in the rest of theUK, thereby reducing the hardship and concern experienced by tens of thousands of pensioners inNorthern Ireland.