---

Rates (Capital Values, etc.) (Northern Ireland) Order 2006

rose to move, That the Grand Committee do report to the House that it has considered the Rates (Capital Values, etc.) (Northern Ireland) Order 2006. The noble Lord said: We now get to the really long debate. The draft order is part of a major programme of rating reform initiated by the Northern Ireland Executive in 2000. I repeat that it is of course a matter of regret that the Northern Ireland Assembly is not debating it. However, while efforts to restore devolution continue, we must proceed on the basis that I outlined in our previous debate. The last revaluation of domestic property in Northern Ireland was in 1976. But the situation is even worse than that, as that revaluation was based on late 1960s rental values, which even then was a declining sector. As a result, the current rating system means very little to ratepayers and is unfair to some people, with some households paying more than they should be and others paying a lot less, given the relative values of their properties. In the interests of all ratepayers in Northern Ireland, we need to put this right sooner rather than later by creating a modern and fairer way of raising local revenue for investment in local public services. I say at the outset that I had no idea about this. I knew that Northern Ireland had not had the benefit of the poll tax, which was thought a good idea by some at the time. Of course, consequent on that, people in Northern Ireland did not end up with the benefits of council tax, which has also been found to be somewhat in need of reform. To be still on the old rating system is another matter. I have seen some rates bills involving poundage figures of £3-plus in the pound and all this—it is absolute nonsense and very unfair, as property values have changed since the late 1960s differentially. If values had all changed at the same rate and everybody’s property had gone up by the same price, there would be no unfairness. But there is unfairness; it is as simple as that. We have so far introduced two modernising measures—the rating of vacant non-domestic property in April 2004 and the phasing-out of industrial derating from April last year. This draft order will introduce a further two. The first is to increase the level of sport and recreational relief from 65 per cent to 80 per cent. This has been widely supported and will of course bring Northern Ireland into line with the level of mandatory relief in Great Britain. The decision whether to give councils the discretionary power to award a further 20 per cent relief will be taken once the new local government arrangements for Northern Ireland are up and running. The second reform is the full exemption from rates for community halls, subject to certain conditions. If I recall, those conditions are, for a start, that the halls have no alcohol licence, so that there is no income stream coming in, and that they are open to the wider community. This measure is being introduced with the specific aim of encouraging the wider use of halls occupied by certain organisations, many of which are already being used to some degree for community purposes, such as mother and toddler groups and clubs for young people and pensioners. These organisations are prescribed in Schedule 3 to the draft order and include the Grand Orange Lodge of Ireland, the Ancient Order of Hibernians and the Grand Lodge of Freemasons of Ireland, as well as other similar organisations. On the domestic reforms, the draft order also paves the way for the most radical change to the rating system since it came into existence 150 years ago—the introduction of household rates bills based on capital rather than rental values from April 2007. This is where Northern Ireland will have the most modern system of local government revenue anywhere in the United Kingdom. We are not going back and inventing a system—it is not as though it will be unique to Northern Ireland—and I am absolutely convinced that it will work satisfactorily. Articles 3 to 8 of the draft order will enable the Commissioner of Valuation in Northern Ireland to publish the capital value of every domestic property in Northern Ireland in spring this year. We had hoped to be able to do this in April, but it is now more likely to be done during June. What this really means is that, in June, every property in Northern Ireland—every house or flat—where somebody lives will get a document giving them in effect their capital value figure based as at 1 January 2005. So it will be somewhat out of date, but there has to be a snapshot date. Because we are going to implement this from April 2007, the ratepayers of Northern Ireland will have sufficient time to find out more about the system and challenge the figure with the authorities if they want to do so. There is a long enough time to do that; it is a longer period than people had in Great Britain before the council tax came in in 1993. The term ““capital value”” is defined in Schedule 2 to the draft order and it is in broadly similar terms to that used in Great Britain, with some modifications, to reflect the fact that a discrete rather than a banded system is to be introduced in Northern Ireland. Northern Ireland is not having council tax; it is not having a banded system. Each property will be judged discretely on its value. Specific needs and circumstances have been taken into account. The evidence from consultation and independent research shows that it will bring about a fairer distribution of the rating burden, and that is the main purpose of the process. I am going to be really bold, although I do not know whether I will be there at the time this comes in. This is not designed to raise more money—said Jeff Rooker. It is designed to be fairer and neutral revenue. That is not to say that the rates will not go up as we need more money, but the change in the system is not designed to raise more money. It will be done on the basis of being neutral revenue, which is why we cannot estimate what the rate would be until we see what all the values are to bring it level with this year’s income. That is why we are proceeding on that basis. There is no connection whatever with what is happening in England, where there has been a suspension of the revaluation and where local government is being looked at. This is purely a system for Northern Ireland. Safeguards will be introduced to protect those on low incomes and those most affected by the change. Some 60 per cent of people will either gain or will see no change. That means that 40 per cent are going to pay more. People living in very expensive properties—which I have seen in photographs and driven past—in properties in the £1 million, £0.75 million, £1.5 million range will pay a lot more in rates. They are going to pay a lot more, which will probably mean that people living in small, terraced houses will pay a lot less. The relative change in the values over 30 years between the two has been enormous. If they had both gone up by the same percentage valuation from the 1960s to now there would not be any difference; but they have not gone like that. Some properties have gone through the roof. One always assumes that people living in large properties, in the main, have sufficient income to pay more into the local government kitty. For those who cannot pay more there will be a system, particularly for those who are just above housing benefit levels, because we want to be absolutely fair about this. There will be a further order later on; this is a two-stage process. The system will be based purely on ability to pay and transitional relief over a three-year period. There will be more details in further orders later in the year. I also point out to noble Lords Articles 13 and 14. Article 13 strengthens the existing obligation on public bodies to provide the district valuer with information that is relevant to a decision to alter the valuation list. Article 14 applies that duty and the existing power of entry for valuers and the power to call for returns for the purpose of the order. Note that it is an existing power of entry that will be transferred over to the new system. These powers are necessary to ensure that the new capital values are as accurate as possible. The power of entry will only be exercised where the information required cannot be obtained by other means, so there will not be armies of people knocking on doors saying, ““Can we have a look at your property?”” That will not be the case; it will be very much the exception, simply because of the system that is being used. The system is vital, and it will be a much more modern system. Some people with more money will put their shoulder to the wheel, and quite right too. Also, it will be a system that people can understand. The council tax in use in England is more modern, but people do not understand it. They do not understand the banding system, with the artificial limit of the higher and lower figure in councils that was put on so that the mansion—however big—in a local authority in England can never pay council tax that is more than three times that of the smallest property. Yet the ratio of price difference is vastly higher than that. That is an issue. In Northern Ireland it will be a much more transparent, fair system, which above all will be understandable to the ratepayers. It is all very well it being understandable to—I was going to say the anoraks but I would not describe these good, technical, caring people behind me as anoraks—the experts and the academics, and those who have to deal with long-term finance. It is more crucial, in a way, that the people who are paying the money understand it and see that it is fairer. You can then explain why the figures change. What we do with the money is up to Ministers to explain. For example, we have had a large increase in part of the rates this year to fund the new programmes for children and young people; for upskilling; and to fund the energy programmes. We can specifically say where that money is gone, and therefore we are happy to explain it. It would be much easier to explain on the basis of a rating system that is much more transparent in the first place. I beg to move. Moved, That the Grand Committee do report to the House that it has considered the Rates (Capital Values, etc.) (Northern Ireland) Order 2006.—(Lord Rooker.)