Official Report: Minutes of Evidence

The Chairperson (Mr McKay): Good morning, Minister.

Mrs Foster (The Minister of Finance and Personnel): Good morning.

The Chairperson (Mr McKay): Good morning, Brian.

Mr Brian McClure (Department of Finance and Personnel): Good morning.

The Chairperson (Mr McKay): Minister, do you want to present the Bill to the Committee? We will then go straight to questions. It should not take too long.

Mrs Foster: Thank you very much, Chair. I thank the Committee for responding to my request to address you about the short Rates (Amendment) Bill.

I want to start by acknowledging that the backdrop to the Bill has probably been more contentious than any of us would have liked, given its relatively benign content. However, Committee members are aware that the recent private Member's Bill — your Bill, Chair — fell at Second Stage, and they know my view of that Bill and my reasons for opposing it. I do not intend to go over that issue again today, Chair, but I hope that the Committee will allow a line to be drawn under it and that we can all move together in a spirit of cooperation and, hopefully, get the outcome that I think we all desire.

From the last briefing from officials on the Bill on 9 September the Committee will know of its broad content. Brian, I think that you were here on that occasion.

Mr McClure: That is right, yes.

Mrs Foster: I do not propose to go through the Bill clause by clause, as it is very straightforward. However, there are two substantive clauses. The first is an enabling power that allows for enhanced relief to be provided to community amateur sports clubs (CASCs), subject to the criteria to be prescribed in subordinate legislation. In other words, it is an enabling clause. The second substantive clause allows commercial window displays to be disregarded from occupation for rating purposes. Essentially, it is an anti-blight measure that was suggested by business and advanced by the Department. The idea came from Peter Murray of the Buttercrane Shopping Centre in Newry, and it is a helpful proposal in relation to anti-blight.

The main purpose for my attendance at the Committee is in relation to the need for accelerated passage for the Bill. Committee members will be only too aware that we are rapidly approaching the end of the mandate. They will also be aware of my view that two matters pertaining to clause 1, sport and recreation relief, led to an inability to bring the Bill forward before now under the normal rules.

The first issue that underpins the need for accelerated passage relates to the concept of community amateur sports clubs and their status for tax purposes, including the fact that their treatment for rating purposes was the subject of a recent state aid case in Great Britain against Her Majesty's Government. The decision was not reported on until 30 April. It remains an issue for the Department, and a final assessment needs to be made so that we do not fall foul of state aid rules. That is why we feel that an enabling clause in the Bill is better and will allow us to work through the state aid implications. There is some comfort in the fact that the European Commission's decision was silent on rates. However, the final policy design remains a finely balanced judgement, and we will have to do some final work on policy design.

The other reason, of course, is the private Member's Bill that was introduced immediately before the summer. I know that people will say that, technically, it may have been permitted for an Executive Bill and a private Member's Bill to run in parallel, but, with respect, I think that it would have been wholly inappropriate to have two competing Bills running concurrently. It has not happened before, at least not to my recollection, and it certainly would not have helped to inspire confidence in our Assembly as an effective legislature. Out of necessity, my preference was to take the Bill forward sequentially, and that approach arose from the absence of any commitment to amend the private Member's Bill. It is not a matter of politics, one-upmanship or gamesmanship; it is matter of trying to get the policy development right and have robustness in the legislation.

That leads me on to the policy intention with regard to the enabling power. As a result of the state aid case and given its silence on business rates, I would not be attracted to giving a blanket 100% exemption to all sports clubs — as the Committee knows from previous briefings, that treatment, even in GB, is subject to conditionality for the additional 20% — but I am prepared to take a risk-based approach to the issue. We are finalising the due process work and will arrive at a policy that manages competition risks to deal with the state aid issues. I therefore advocate a policy that, subject to consultation outcomes, utilises the new enabling power to grant enhanced rate relief under article 31 of the 1977 Order, as amended. We would do that by increasing relief from 80% to 100% for HMRC-registered clubs that are not premises on which a person may, under licences or a protection order, sell intoxicating liquor by retail. In other words, those clubs without a liquor licence will be able to avail of 100% relief. That will also harmonise the treatment of such clubs with the treatment of community halls under article 41A. It will not preclude clubs from gaining full relief if they obtain occasional licences, and we understand that clubs do obtain occasional licences from time to time.

I do not think it desirable to give 100% rates relief to licensed amateur sports clubs running successful bars, catering operations and function rooms, and my approach reflects that position. Clubs with successful social facilities would then continue to pay just 20% of rates on the sporting facilities. I think that that is balanced in light of the issue raised by the wider hospitality sector.

The Committee is aware of my assessment that we need a further, targeted consultation exercise over eight weeks to run parallel to the legislation, one process associated with the progression of the primary enabling power and another to complete due process work on the consultation.

By consenting to accelerated passage, the Committee will play its part in the legislation, although I am acutely aware that accelerated passage should not be used lightly. However, the position that we find ourselves in is not of the Department's making, and I stress to the Committee that it is not an attempt to shield the Department from the proper scrutiny that the Committee undertakes, and undertakes in a very serious way. I have outlined my view, however, why I believe it is a necessity if we are to get the Bill through in this mandate. It is essentially a matter for the Committee whether it grants accelerated passage or not. It is a non-contentious Bill that, I think, will be welcomed by the organisations affected. I want to reassure the Committee that asking for accelerated passage is not something that I do lightly; we resort to it only in exceptional circumstances. Chair, I am happy to take questions.

The Chairperson (Mr McKay): Thank you, Minister. I do not want to rehearse the arguments that I went over in the debate in the Chamber. However, Mr McCallister, who is presenting on his own private Member's Bill today and cannot therefore be here, was keen to ensure that we had a Committee Stage. Is there no way that an agreed Committee Stage of perhaps three or four weeks could be fitted in by agreement between you and the Committee?

Mrs Foster: I am happy to come back if the Committee wants to hold a special hearing on the issue as part of the process. It is not that I am not prepared to come to the Committee and have discussions; I am just keen, as I am sure are you, for the legislation to be in place as quickly as possible.

The Chairperson (Mr McKay): I am not opposed to accelerated passage per se. Certainly, we have already invited a number of groups to come to the Committee. What is missing for me is a timetable. Depending on when Second Stage is before the House, we may have three or four weeks to take evidence and then present a report at Second Stage.

Mrs Foster: That is a helpful comment. After this meeting we will send you, in conjunction with the Business Office, our best guess for when that would happen, bearing in mind that there is a lot of pressure on the Floor from private Members' legislation and, we hope, other government legislation as well.

Mr McClure: If the Committee lends its support to accelerated passage, we will write to the Speaker very shortly with a view to introducing the Bill before the Christmas recess.

The Chairperson (Mr McKay): Do you foresee the Second Stage being held before Christmas?

Mrs Foster: That is a matter for the Speaker. We could ask him for an indication when Second Stage will be. If it was in early January, for example, you could foreseeably have two meetings of the Committee to take evidence.

The Chairperson (Mr McKay): The paper says that the cost of introducing 100% rates relief for community amateur sports clubs without licensed premises will not exceed £750,000.

Mr McClure: That is correct.

The Chairperson (Mr McKay): How have you carried out those calculations? I remember that there were some issues when trying to get calculations for figures before.

Mr McClure: The calculation is based on those that currently qualify. We know how many amateur sports clubs there are, and we know those that are apportioned and those that are not. That is based on a careful analysis of existing clubs. We know that the number of sports clubs will not exceed that. We have not been looking to the HMRC register; we have been looking at and have gone through the Land and Property Services (LPS) data set on all amateur sports clubs. That is our maximum estimate. We think that about 70 or 80 clubs will be involved, but that is a less precise figure. I think that we can safely say that the £750,000 is the maximum cost of that relief.

The Chairperson (Mr McKay): With regard to using the enabling power, you say that you are minded to introduce the 100% for a certain category of community amateur sports club. However, if you carry out the consultation, and if you, or whoever the Minister may be at the time, is still minded to carry this out, when will the regulations come forward? Obviously, you could be in another Ministry by that stage, Minister.

Mrs Foster: I thought that you were looking to get rid of me, Chair. [Laughter.]

The regulations will come forward under affirmative procedure before the House.

Mr McClure: Yes, they will, and there are issues with scheduling a debate and how long it takes to pass the primary Bill. With a fair wind, the process could, perhaps, be taken down to four or five weeks, which would technically allow us to get the regulations through this year. It is not absolutely essential to get the regulations in place for the start of the financial year. It could be done in-year. I say that without having had the opportunity to talk to LPS about this, but my understanding is that you could still introduce it. It will be an application-based scheme, so you could still —

The Chairperson (Mr McKay): It could be introduced in this financial year.

Mr McClure: You could, possibly, have it in place, but I need to speak to colleagues in Land and Property Services to make sure that they are equipped to do that.

The Chairperson (Mr McKay): You indicated that there is likely to be a modest cost associated with the provision to derate window displays. Have you an estimate of the actual figure?

Mr McClure: No, it is a unique scheme; it is untried anywhere on these islands, so we are not sure what it will cost by way of revenue foregone. However, given that it is intended to help retail areas suffering from the blight of too many empty shops, I think that it could preserve some rate income, because anything that helps retail will help the tax base, as we are charging rates on the value of premises. Once you get past the critical mass of empty shops, a retail area can run down very quickly, so that will take away rate revenues. So we think that it is a protective measure.

The Chairperson (Mr McKay): What is the basis for the sunset clause?

Mr McClure: The sunset clause is included because this is an untried policy anywhere on these islands, and we want to make sure that it is not used as an avoidance measure by some ratepayers, or misused by some ratepayers. We want to monitor how successful the scheme is. There is provision to extend the scheme easily if there are no problems with it. So having the sunset clause is simply a way of managing risk. Subject to what the Minister decides, the Department's intention is to have it as a longer-term policy. We are going to trial it.

Mrs Foster: Yesterday, at Question Time, we touched on how we can re-energise town centres. This is part of what we are trying to do in town centres, as, frankly, many of them are looking very tired. We think that it is a way of dealing with that issue.

Mr Ó Muilleoir: I want to go back to the liquor licences in a minute, Minister, but, as you just said, we were told yesterday in the Chamber about the bold and dramatic steps and thinking outside the box. This is innovative, but I wonder whether it is too small. At the time, it might have seemed bold, but the situation is so perilous for our town centres that I wonder whether this will make any difference. I do not want to single out Enniskillen, but some shops there were decorated during the G8, and I have seen shops on the Lower Newtownards Road that have been decorated. After a while, though, nothing works except real tenants. I would rather light a candle than curse the darkness, but how do you feel about that? Will it make a significant difference to places like the Buttercrane Shopping Centre?

Mrs Foster: We wanted to do something with it because, first of all, it came from businesses. I am always keen to tell the business community to come forward with new ideas; we do not want them to come forward only for us to ignore them. We want to put the measure in place and to monitor it, as Brian said. It is not the total answer, but it is part of the answer. I hope that the review that we are undertaking will lead us to other new and innovative ideas.

It will not substitute for retail — you are absolutely right — but, hopefully, it will provide a more attractive space for people to come to when they are in towns and villages.

Mr McClure: Minister, you are meeting the Chamber of Commerce this month to talk about what the rating system can do to help, both as part of the review and before the outcome of the review.

Mrs Foster: It is not just about us and the rating issue; it is also about what DSD and DETI can do for town centres.

Mr McClure: You are absolutely right: this is a bit of a micro-policy. Couple that with other measures taken through the rating system, such as the empty shops rate concession, which has been very successful, with over 400 new ventures in empty shops. That started off as a micro-policy, and it seems to have been pretty effective, so much so that it has been copied everywhere else in the UK. Another policy that we have is the maintenance of the 50% rate on empty property. In England and Wales it is 100%, and it is 90% in Scotland.

Couple it with other measures that we are taking through the rating system. However, a holistic approach is required in which DSD, DETI and other Departments have their part to play.

Mr Ó Muilleoir: Are you suggesting that the 50% rates for the landlords of empty shops helps to animate or encourage new business? Are you saying that it is a help for business at this time?

Mr McClure: It does not penalise the owners of empty shops, as would be the case in England, Scotland or Wales. It does not do anything for business because it is the property owners who benefit, but it does not penalise property owners for a weak property market, which is what we have here. We may have too many shops in Northern Ireland.

Mr Ó Muilleoir: In some parts of my constituency, shops were built during the boom. There is trouble filling many of the extra shop premises along the Lisburn Road.

Getting off the point briefly, I was very energised when the Minister spoke yesterday about the University of Ulster research and a dramatic new approach to town centres. I was in Portadown and thought, "Wow, the heart has gone and been replaced by charity shops".

Mrs Foster: Part of that is because a lot of people moved out of city centres, so you do not have people living in them. We talked to DSD about whether we need to look at that again. We know about the Living over the Shop (LOTS) initiative that we had in the past, so do we need to revisit those sorts of things? A lot of the properties in town centres and city centres have shops on the ground floor but nothing on the floors above. Is there something that we can do on that? Addressing that would re-energise towns and cities at night as well. After 5.00 pm or 6.00 pm, some of our towns are completely dead.

Mr McClure: I had a meeting last week with DSD officials on that very issue. We talked about whether something can be done through the rates or whether there is some other way to re-energise the LOTS scheme. Their view was that, rather than living over the shop, a change of use is more important in getting people to live in towns.

Mr Ó Muilleoir: Do you mean for the entire store?

Mr McClure: To encourage a change of use for the entire property, not just for the upper floors. Upper floors are an issue, but the more important issue for DSD, and this is what its policy people said, is full conversion rather than the conversion of upper floors.

Mrs Foster: You talked about the Lisburn Road, which, as you know, used to be residential. A lot of those places were turned into shops.

Mr Ó Muilleoir: It is doing well; it is doing the best it has been doing for some time.

Mr Cree: On that last point, surely the trouble with talking about change of use is that you are talking about changing the whole thing; you are talking about the alternative being houses in multiple occupation and turning houses into flats.

Mrs Foster: Not necessarily.

Mr Cree: But it is an option.

Mrs Foster: It is an option, but not necessarily. I am thinking of some of our towns where places have been changed into shops or offices, and they could easily be turned back. A lot of places moved into offices, whereas people used to live in town centres.

Mr Cree: They were largely single, quite big houses before they were turned into shops and so on. To turn that around again, the demand for big houses is probably not as great as it was. There is an obvious example — I have experience of it in my area — where lots of fine old boarding houses are all now in multiple occupation, which brings the whole area down. There is a downside to it as well.

Mrs Foster: It is a wider issue. It is not just for us in DFP to have that discussion; it is an issue with DSD. That is why Brian has been having those conversations. We are having those conversations about the small business rates relief, and I know that I have gone slightly off the topic, Chair, but we are having those conversations about small business rate relief as to whether that is the best use of that pot of money or whether we need to think about something new and different.

Mr Cree: It has been appreciated, I have to say.

Mrs Foster: The small business rates relief?

Mr Cree: Yes.

Mr Ó Muilleoir: Just to finish, I do not need it now, but could someone give us some estimates for the revenue that would come in under the proposal that the Minister is minded to bring in on liquor licences? If I understand it right, the bar of the club that serves drink would be eligible for 100% rates, but the rest of the property would be 20%. Is that what you are minded to do?

Mr McClure: Yes, that is what represents the status quo at the moment. I can give you the breakdown on how the current scheme operates and what it costs.

Mr Ó Muilleoir: The difference between that and your suggestion was that you would rate the area where liquor is served, but the rest of the facility —

Mrs Foster: At 100%.

The Chairperson (Mr McKay): Minister, just for clarity and because there has been some confusion in the past, if a CASC does not have licensed premises, would that mean that the pitches, the clubrooms, the changing rooms, the storage facilities and even the stands would all be 100% rates-exempt?

Mr McClure: Yes. All the sporting facilities will be exempt.

The Chairperson (Mr McKay): That is useful. OK, thank you.