Official Report: Minutes of Evidence
Committee for Finance and Personnel, meeting on Thursday, 3 December 2015
Members present for all or part of the proceedings:Mr D McKay (Chairperson)
Mr L Cree
Mr Gordon Lyons
Mr I McCrea
Mr M Ó Muilleoir
Mr Jim Wells
Witnesses:Mr Eugene Cassidy, Hospitality Ulster
Mr Stephen Magorrian, Hospitality Ulster
Mr Colin Neill, Hospitality Ulster
Rates (Amendment) Bill: Hospitality Ulster
The Chairperson (Mr McKay): I welcome Mr Colin Neill, chief executive of Hospitality Ulster; Mr Eugene Cassidy, regional representative of Hospitality Ulster; and Mr Stephen Magorrian, owner of hospitality businesses in Belfast and Downpatrick. I invite you to make an opening statement, after which we will go straight to questions.
Mr Colin Neill (Hospitality Ulster): Thank you very much for the opportunity to brief the Committee today. Hospitality Ulster, as you may or may not know, used to be known as Pubs of Ulster but was rebranded earlier this year because our membership is spread across pubs, hotels, restaurants, visitor attractions, sports stadiums and airports. Our industry sustains 60,000 jobs — one in 20 jobs in Northern Ireland, 45,000 of which are in food and drink. We pay £653 million a year in wages, £88·4 million in tax and put £1·1 billion into the Northern Ireland economy. It is worth noting that pubs alone raise an estimated £2 million a year for charities.
I want to put on record that we recognise the value of amateur sports clubs. They are very important and do a lot of good work. A lot of our members are their members. A lot of our members sponsor and support them. We recognise that they do really good work, but we come at this from a commercial point of view because we believe that our members also do good things. They employ people locally and pay their taxes and rates, a lot of which go back into the community that they come from.
I will hand over to our two members to give you a bit of insight into their businesses.
Mr Stephen Magorrian (Hospitality Ulster): Good afternoon, everyone. I own a few bars, including Horatio Todd's in Ballyhackamore, Molly Brown's in Newtownards, Denvir's Coaching Inn in Downpatrick and The Northern Whig in Belfast. As Colin says, I understand clubs. I have been a member of clubs for many years. I played football for Dromara Village FC for years and spent a lot of time fundraising for them. I have been an active member of Carryduff Gaelic Club, where my daughters play football. I currently sponsor the tennis club and the athletics club in Downpatrick, and I am running a bar for Ards Boxing Club this Saturday night for a world title fight there. I get clubs, but I have commercial interests as well.
I will give you an example. Hopefully, some of you know Horatio Todd's. After we bought it just over six years ago, we closed it, refurbished it and reopened it ,and it has done well. It has, I think, helped to revitalise the area. This year, in the rates review, my rates have gone from £42,000 to £82,500.
Mr Magorrian: No, that is for Horatio Todd's.
Mr Magorrian: That is for one premises. I own Denvir's Coaching Inn in Downpatrick, and my biggest competition in the town is Downpatrick Cricket Club. It has a better function room than we do and a better car park, but Denvir's has done well. We took it over in November 2013, and any money that we made in it has been reinvested. We have opened a couple of defunct rooms and use them as function rooms. However, because we have done well, the rates for Denvir's have gone up from £7,767 to £22,206 — in that one premises in Downpatrick, they have tripled. That is my concern. The better I do, the more rates I pay, and yet the suggestion is that my major competition's rates will go down, which will make things even worse for me. I understand clubs, but I have concerns from a commercial point of view.
Mr Eugene Cassidy (Hospitality Ulster): I have a pub on the Antrim Road in north Belfast. I have no problem with sports clubs, but I have a problem with clubs selling alcohol. I will give you a couple of examples. Most of the clubs that I visit are opened as bars. You can walk up the Falls Road to the bottom of Clonard Street and walk into what I thought was a bar but happened to be a Gaelic club. There is no sign at the door and nothing to indicate that it was a club. In fact, if you look at the Falls Road now, there are only three or four bars operating on it; the rest are all clubs. They are taking away from the local bars, and a couple of them have closed down.
The same problem arises in north Belfast, where I operate. Christenings, parties, funerals — the lot — are held in clubs not licensed to hold them. They are not licensed to hold them because they are run as an open bar or an open club. They let anybody in. People do not have to be signed in. That is not part of their remit.
I sponsor Cliftonville Football Club and support the local GAA club, Patrick Pearses. Each year, we give them money for their upkeep or whatever they have to do for the bit of advertising that they give us. We are one of the very few businesses in north Belfast giving money back to society. None of the clubs that I know of gives out anything at all. The local golf club — I am a member just because I live beside it and do not have to drive to it — now openly has discos on a Friday and Saturday night. It holds birthday parties. A couple of years ago, you would not have got in wearing jeans; now, people wear not only jeans but baseball caps and have raves in the middle of the club. None of these people should be able to run these parties. It is a golf club, and it should be solely for golf membership, but that is not happening.
That is only one section of the clubs in Belfast. Others are not even sports clubs. I think that what is proposed would be very unfair. I pay £14,000 rates each year for a small premises, and, on top of that, I pay Sky and BT Sport an extra £1,200 a month. Running a pub is a very expensive business at the minute. I also have 19 members of staff, full- and part-time.
In order to keep pubs going, everybody should be on the same playing field. We do not think that anybody should be getting a reduction in rates, especially if they sell alcohol. They should be on the same playing field as us. If you want to reduce all the rates, we will have no problem with that, but it is unfair to take one section and say that it deserves rates relief because it is made up of sports clubs. They are not purely sports clubs — they sell alcohol openly.
Mr Neill: It may also be worth explaining what Eugene said about having to pay for Sky. Subscription to Sky television is based on rates, so the higher your rates, the higher your subscription. I think that Stephen has said that he pays £1,500 a month.
Mr Magorrian: That is in the biggest premises, yes.
Mr Neill: The lower your rates, the less you end up paying. The altering of rates has a significant impact on how you do. It is also worth noting that public houses and hotels pay their rates on what is called an "expenditure and receipts" basis. Rates are based on turnover, so, if you do better, you pay higher rates. That means that they pay a disproportionately high rate, compared with other businesses. If you turned pub or hotel premises into a shop, only about one fifth of the rates would be collected, so that should be set against the position of clubs. As I said, the issue is not the clubs; it is the unfair competition, as we see it. My sons and I are members of clubs, and I am sure that most of the people in this room are members of clubs.
The Chairperson (Mr McKay): The Committee had some sporting representatives in yesterday. The issue is unfair competition, and you make a very good point. Some of the associations said that they would pay 100% rates on their bars but not on the rest of their facilities. They see those facilities as being of benefit to the community. That is why they believe that relief should apply to them and that there should not be a two-tier system of clubs with and clubs without bars. Would it be a fair resolution if the bars of community and amateur sports clubs were rated in the same way as your bars but their sporting facilities got full relief?
Mr Neill: That would really be worth looking at. Currently, licensed clubs pay 20% of the rateable value. Are you saying that they would pay 100% on their entire licensed area or just 20%? Paying 20% on the licensed area means that they would still make a big saving that they could use to reduce prices. If they had to pay the full market value rates on their licensed area, that would be fair.
Mr Ó Muilleoir: That was not our understanding or the impression that we got yesterday, Chair. Are the rates imposed on the bar areas of clubs just 20%?
Mr Neill: At the minute, the rating model for sporting clubs is 20% of rateable value.
Mr Neill: I stand to be corrected, but my understanding is that clubs pay 20% across the board, including the licensed area. If they had to pick up a 100% rate —
Mr Lyons: We need some clarity on that, because that is also very different from my understanding. Is there any difference currently? Is there a section that is cordoned off and rated differently?
Mr Magorrian: It is very difficult to do that because the area that is used for training becomes a function room, where there are dinner dances, discos or whatever. It is difficult to cordon off parts. We have tried the same argument about the amount of money that we pay for Sky. We say that we show Sky only in the public bar and not in the restaurant, but that argument does not work. Sky just bases the payment on total rates. I presume that it would be difficult for clubs to cordon off the area that is the bar.
The Chairperson (Mr McKay): Is there a compromise position somewhere? Obviously, at the minute, sports clubs are not happy that clubs without bars are getting the full 100% relief and those with bars keep the status quo. If the sporting associations say that they want to pay their way for the bars but not the stands and pitches, might there be a compromise?
Mr Neill: That would be worth exploring. If it were 100% and the proper marketable value rate on anywhere that is licensed for the sale or consumption of alcohol — that is the way that ours is termed — that would be worth looking at. We are not out to penalise clubs, because some of them may see their rates go up in such circumstances. It is about finding something that reduces that unfair competition and further subsidy that would make things worse. It is worth noting that we are in a very price-sensitive marketplace. Even in the tourism world, domestic business is streaming across the border because of the price difference, and we have seen a huge difference. Discretionary income in Northern Ireland per average household is £97 a week. In Scotland, it is £190 a week. We are a really price-sensitive market. Our concern is about any move that helps to reduce the price for a competitor that is not competing on a fair piece of ground. It is not about being anti-club.
Mr Cree: Colin, it is important that we get this wee bit right. My understanding is that the sports facility — to take an easy example, the grounds — is rated at 80%. The suggestion is that we move to 100%, similar to what obtains across the water, where local government picks up the other 20% in a lot of cases. It is with the licensed part that it starts to get woolly. It might be an occasional licence — I do not know. The licensed part should be rated as a separate entity. You will probably be able to explain whether the rates that a licensed premises pay are based on turnover.
Mr Neill: That is for a public house and hotel. The clubs' rates are based on cost. The normal rateable value for commercial premises is based on rentable value. A restaurant or shop is basically rentable value, and the tone of the area sets the average rent. My understanding is that clubs' rates are based on the cost value of a club but that that is subsidised down to a 20% payment of the actual value.
"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?"
"Yes, that is what represents the status quo at the moment."
So clubs pay 100% rates for the bar.
Mr Neill: Our rates are worked out totally differently. My advice from our legal people is that clubs now pay a 20% value. I am not saying that somebody is —
Mr Neill: No, I think that it is 20% across the board, but we could be wrong.
Mr Cree: We can follow that up. It is important to get that right.
Mr Cassidy: You also have to look at supporters' clubs. There may be no facilities attached to a supporters' club. Cliftonville supporters' club, for instance, has absolutely nothing to do with Cliftonville Football Club. It could be putting itself through as a sports club. In the same way, some GAA clubs are detached from where they play their matches, so it cannot be said that they are sports clubs, even though they have the same name. Glentoran supporters' club and Linfield supporters' club are supporters' clubs and not sports clubs, but they might fall under the remit of paying just 20%.
The Chairperson (Mr McKay): It will be down to HMRC. The Minister is proposing to set the bar at their having to be community amateur sports clubs (CASCs) and meet certain criteria through revenue and customs, so I imagine that that should not be the case. However, I sense that there may be a compromise somewhere.
Mr Neill: We want something that does not create further conflict for competition. The issue of competition is separate from who should be doing what. We are keen not to create a situation whereby our industry becomes further disadvantaged. Stephen mentioned that his biggest competitor is one of the cricket clubs. I brought some ads along with me today from clubs. You can see that they are undercutting Christmas dinner prices and so on in an area that they should not be. We are keen to compromise and to see clubs continue to do good work. It is about finding a model that does not create any further commercial disadvantage for our members.
Mr Wells: I have been in both Denvir's and the cricket club many times, so I know the situation very well. The fundamental difference is that Denvir's is a commercial enterprise. If it does well and makes a profit, that increases the value of the owners' shareholdings or profits. A cricket club would argue that every penny is ploughed into the development of the sport and perhaps the pavilion. So there is a community good in one but not in the other. Is that an argument?
Mr Magorrian: Not really from my point of view. If the cricket club wants to operate as a club with members only, that is fine. That is what it should do. However, when I drive down the Strangford Road, I see a sign: "Bar and restaurant open to the public". The club is advertising to everyone to book their Christmas dinner early and is undercutting us. If it is open to anyone who wants to come along, it is a commercial organisation and should pay the same rates as I pay. If it does better than me — great. If Murphy's down the street does better than me — great. That is competition, as long as they are paying from the same basis. However, when they are trying to do business in the same way as me but from a basis on which they should not be doing it, I do not think that they should be getting further advantages.
Mr Wells: If it is a club, people should not be able to walk in and avail themselves of the facilities like that. It is supposed to be for members, with one guest per member signed in at the door.
Mr Magorrian: Exactly — that is the issue. If all clubs in Northern Ireland were operating as clubs, we would probably not be concerned. The reality is that many clubs throughout Northern Ireland operate as commercial businesses; if you want to have a look, you will see that from the examples that Colin has. As I said, my biggest competition in Downpatrick is the cricket club.
Mr Wells: Yes, because the cricket club has a large function room that is bigger than yours.
Mr Neill: Mr Wells, we appreciate that clubs do good things, but paying people's wages, rates and tax are also good things that commercial entities do. That is rates and tax that go back to help communities. We employ a lot of the people who play football, GAA and other sports. There are other anomalies. A good example is the John Hewitt bar in Belfast, which is owned by a charity. It is a not-for-profit organisation, and all its profits go into an adult resource centre. It pays full rates.
Mr Wells: We heard evidence yesterday from representatives of big sporting organisations, and they made a couple of points. They said that they often run their functions in a local hotel or bar. In other words, there is a crossover, and they provide a lot of revenue for —
Mr Neill: We do not dispute that. The problem is that, when they run as a commercial entity when, within the framework of their licence, they should not do so, they are taking more away from those bars than they are bringing back.
It is not fair to say that it is all clubs — I stress that it is not — but it is a big enough number to make an economic impact. I take calls every day from members. The problem is that a lot of our members have small premises in small towns. They do not want to fall out with their local club but they are finding it difficult to survive. We have headline figures for the number of tourists who are coming and so on. I can tell you for a fact that business in Belfast has been down about 5% on food and beverage all year. Outside Belfast, it is down by somewhere between 7% and 12%. We are not in a good situation. With any competition, we are very sensitive to any increase and loss of any further trade.
Mr Wells: Is the volume anything close to similar? The members you represent provide purely food and drink, or food and drink with entertainment. For the sports clubs, that is very much ancillary to their main purpose, which is provision of pitches, training, etc. Yesterday, they told us that, in fact, in many instances, the bar is very seldom open. Occasionally, it may be open after training, but, for most of the week, it is not open at all.
Mr Neill: I suppose that what I am trying to get across is that the ones that are running outside the remit of their licences are operating on a commercial basis. The ones that are just running for their members are being absolutely appropriate. They are licensed to do so and they should be doing so. The ones that are running on a commercial basis, albeit that the money is going to good causes, are taking away from people who have to pay their rates and their staff, and who create employment in rural areas where there may not be a lot of employment. If I even just take food and drink, as I said, 45,000 people in Northern Ireland are employed in the food and beverage sector. We have a higher GDP than agriculture. We are an important industry, but we need the bread and butter; the weddings, funerals, family events and people walking into the public bar, to survive and pay the rates.
Mr Wells: It would not be hard to have a higher GDP than agriculture at the minute, the way that farm prices are going, but I understand what you are saying.
Mr Neill: Those are 2013-14 figures. They are probably the latest ones available.
Mr Wells: Surely, the legislation is already there to deal with the situation.
Mr Neill: It is not enforced.
Mr Wells: It is about clubs behaving themselves. I am in and out of sports clubs all the time. I have never been asked for membership or to be signed in by a member. You just wander in. They are happy to take my money. I have never been in a GAA club, but I have been in soccer clubs and rugby clubs, and things like that. The problem is that no one is enforcing the law, which already says that I cannot do that. That is the issue.
Mr Neill: We do not want to run about trying to get clubs prosecuted. They are decent people doing a decent thing. There are no police resources to enforce the legislation. The legislation is flouted to an extreme degree. What we are saying is that, because of the situation, in the real world, an awful lot of clubs openly compete with us and, therefore, any further subsidy would make our world more difficult.
Mr Wells: Surely, the compromise here is that, above a certain level, clubs that are clearly operating commercially are put on exactly the same footing as the hotel and pub down the road. Some of them are very small beer. Some of them have six guys having a pint after training. There are other ones that, frankly, I know are bigger than the pubs of your members. Surely, the compromise is that, above a certain threshold, you are treated exactly the same.
Mr Neill: I feel, and I am open to my members joining in, that we can reach a decision where, whatever the model is, it does not commercially disadvantage our industry any further. It is not about trying to stick the clubs with a bad deal but about finding a solution. You would have to number-crunch it because I do not want to make it worse for clubs either. You can turn round and say, "You have to pay full market-value rates for anywhere that you have that is licensed. For anywhere else, you do not." Is that workable? As I say, I am coming from the point of view of finding a solution as opposed to saying no and that we stop everything and do not do anything, but you may go back to the clubs and they say, "We have done the sums on that, and it is worse for us." I do not know.
Mr Cassidy: I am wondering whether, if you had the clubs in yesterday, anybody asked them about the need to have alcohol. I can give an example from many years ago when I was playing GAA in division 1 in Antrim. We had a half-decent team. We decided then that we would open a wee club. The next thing that followed was a bar. Within three years, we went from division 1 to division 3 and we are still there — [Laughter.]
Mr Cassidy: — the reason being that the bar was more important than the club. The other thing that you have to remember is that there are an awful lot of young kids in these clubs, especially in the GAA and in soccer. They are being taken off the streets and into training. I do not think that alcohol should be served in clubs where there are kids playing and training. That is all right for the seniors at night or during the day but not where there are kids involved in clubs. A typical example is St Enda's in Glengormley, which is one of the biggest clubs for children on a Saturday and Sunday morning. My grandkids go to it, and I would not like to think that the guys are standing in the bar while they are out training as a team. I think that the two should be completely divorced from each other.
Mr Lyons: I will bring in a little bit of information from our packs that might be useful in answering a couple of queries. Article 31 of the 1977 Rates Order says that there can be a reduction of rates on certain rateable properties used for prescribed recreation. That is defined as:
"a recreation, whether conducted indoors or outdoors, which in the opinion of the Department demands an appreciable degree of physical effort and which is of a kind specified by the Department".
I do not think that supporters clubs would fall under that. For further clarity, it says that the level of reduction in such cases is currently 80% of the normal rate, however ancillary social facilities such as bars, restaurants, card rooms etc remain fully rateable. They are currently at 100%. Hopefully, that will provide some clarity for members.
Picking up on what you said, is it your opinion that there is a little bit of disparity between how much of a problem this is in urban and rural areas? I am getting the impression from you, Eugene, that, in the Falls, an example of an urban area that you mentioned, the clubs are taking all the business away. Is that less of a problem in rural areas? The impression that we got yesterday was that, as Jim said, there are two or three fellas drinking for 20 minutes after their game or whatever.
Mr Neill: It is spread right across the Province. In rural areas, it is probably more challenging because you have a smaller community. You have small towns and small villages, and it is very hard for the local hotel or pub to complain about unfair competition because it is their neighbour. A lot of the time, they come through us to try to make a complaint. I respect that the clubs' intentions are to do good. It is not that they feel that they want to break the law, but the problem is that that has a huge economic impact on the surrounding area.
Mr Lyons: You do not see any disparity at all then; you think that it is as much a problem in the urban areas as it is in rural areas.
Mr Magorrian: It boils down a lot to the individual clubs, what facilities those clubs have and how they see their commercial future. Someone said earlier that clubs used to do well because they had cheaper drink and so they could undercut pubs on drink prices. That opportunity has now gone because supermarkets now provide the cheap drink. How do clubs now survive? They start to undercut on functions, and they look at meals and things like that. Can they get weddings and whatever? The last wedding that I was at was at a racecourse, so that is a new angle for them.
Mr Magorrian: No, that was a long time ago. Those are the sorts of things that clubs are now going into. That is what they are looking at and, in so doing, they are competing with hotels, pubs and people like that on a commercial basis. That is the bit that we are concerned about.
Mr Lyons: I am not long in this place, but it shows you how one group of people can come in then and another group can come in and give a completely different picture. They really were crying poverty yesterday.
Mr Magorrian: This is the issue for our industry and for the club industry as well, if I can refer to it that way. I have given you two examples of where my rates have gone up because I am doing well. If I do well, I get punished, and the rates go up. That is just the way that our rating system currently works. Some places in our industry are doing well, and other outlets are not doing so well. That is why pubs are closing. It is because they cannot compete. More and more pubs will close. The day of the pub and the drinking-man's pub is gone. For any licensed premises to survive now, it needs a number of strings to its bow. They need to provide food, they need to provide alcohol and they need to be able to run functions for private parties. They need to have beer gardens. You need to have accommodation, if you can have it. You need to have a lot of different string to your bow.
Clubs are looking at the situation in exactly the same way. There are some clubs that will cry poverty. I am a member of a club in Carryduff. We do not have a bar, and a 20% reduction in rates would be a great help to us because we are running 28 teams at the minute, most of which are juvenile.
Any help is great, but there are other clubs that are doing really well because they have a function room that caters for 600 people. They are cleaning up because all the local clubs are having their functions there and they are doing really well. The likes of my business cannot compete against them because they just undercut me.
Mr Lyons: Is there a difference between the bigger clubs and the smaller ones? Jim touched on this; are there 30 or 40 big clubs with function rooms that are taking a lot of business away from you, and many hundreds of other smaller ones that were accurate when they said yesterday that they are just a few fellows —
Mr Magorrian: That would probably be my perception, yes.
Mr Lyons: Should something be done to address that? Is it the case that, as Jim says, the bigger clubs are treated in a different way because they are directly competing with you?
Mr Magorrian: The ideal situation would be, as Mr Wells suggested, that the law should be enforced, but, of course, we do not have the resources to do that. That is why we are saying that, in the absence of being able to apply the law, do not be giving them any further benefits. Do not be enhancing their position any more because it is only going to make them stronger.
Mr Neill: It is fair to say that they are feeling the financial pressures that our industry feels. Drinking habits have changed, whereby 70% of all purchased alcohol is consumed at home. That has changed the whole beverage model. It is worth noting that clubs are closing as well as pubs. In the last 10 to 15 years we have lost about 600 pubs. Despite all the news about the new hotels in Belfast that we keep hearing about, we have probably fewer hotels than we had 10 or 15 years ago. The regional ones are closing and it has been centred in. It is the bread and butter. Tourism is a really good growth opportunity for the whole Province, particularly our industry, but, at this stage, it is still the icing on the cake. You need weddings, funerals, Christmas dos and other functions to pay the bills, pay the rates and keep on working through.
Mr Ó Muilleoir: I do not drink enough in your establishments to help your bottom line. Mr Wells says that I drink too much, but I know that I am not in them enough. You are doing a wonderful job; it is good for the community. Restaurants and bars have a small footprint but they are big employers and they are crucial to vibrant and successful communities. They are the bedrock of our tourism, so we are very supportive of you and we applaud what you do. I am a big admirer of what you have been doing, Stephen, and of what Colin has been doing. Mr Cassidy has a wonderful pub on the Antrim Road; I was there one night making a presentation. However, I think that perhaps you are on the wrong track here. The law should be applied across the board. No one here is suggesting that the law should not be applied to everyone. You may want to talk to the Justice Committee or the Justice Minister.
Mr Ó Muilleoir: Maybe you should go back to him. The issue that concerns us is the rates burden. If there is anything that we can do to ease the rates burden on small businesses, we are keen to do it. I want you to help me with a clarification. Mr Lyons very kindly helped with the other clarification. Horatio Todd's is a wonderful establishment and it is very well thought of; I almost got to visit it on the day of the Van Morrison event. Are the rates for Horatio Todd's assessed only on the value of the property or do they also look at turnover?
Mr Magorrian: No, they only look at turnover.
Mr Magorrian: Hotels and pubs work on turnover. If you invest in your premises and they do well and you are paying back the bank loan, the rate review comes along and your rates go up. Your bank loan stays the same but your rates go up.
Mr Ó Muilleoir: That was useful. Someone told me that about cinemas; I did not know that that was how cinemas were assessed.
Mr Neill: Cinemas, petrol stations and our businesses are assessed on what is called an expenditure and receipt basis. The big challenge of it is that, when you are assessed, if the valuation, for example, is in 2013, it is applied in 2014. It is set for five years, so if your sales go down, you are still paying the full rate.
Mr Magorrian: The reason for that, by the way, to help your understanding, was that, as Colin said earlier, rates are normally worked out on rentable value — the value that premises can be rented at. Traditionally in Northern Ireland, pub premises and hotels were family owned and, therefore, there was very little renting. There was no basis on which to set a rate because there was no evidence of what rents were or what the market could sustain. That is why the turnover model came into play. That is what we are still assessed on.
Mr Ó Muilleoir: I think that the Minister is minded, as is the Committee — we have not come to a conclusion — that there should be 100% rates on bar areas where drink is served in clubs, social clubs and sporting clubs but that there should be no rates on changing rooms, facilities, stands and so on. I think that we are going to change that. Maybe what you should give some thought to is that it is looking at a wrong target in complaining about the clubs. You are welcome to do that but you should come back and tell this Committee what you can do with the rates system to ease the burden. VAT is a dreadful problem. Every time somebody spends £10, you have to give £2 of it back to London in VAT. That concerns all of us. It is a big blow to the tourist industry and hospitality industry. I have a feeling that, if that were reduced, the quantum would go up because more people would eat out and so on.
You should look at the non-domestic rates review that Minister Foster is carrying out. The consultation ends in the second week of January. You should come back and make a case for hotels, restaurants and pubs, and how they might benefit and have their burden eased. I am not sure that we will back it, but you have more chance of getting a sympathetic hearing for that than telling us to do something different about the problems that we are considering.
My feeling is that the Minister is probably minded to do the 100% rating on the bar area, with the rest free of rates. However, it is an open discussion. I have ideas about how we might raise more money in the rates review from businesses; not by imposing more rates on small businesses but there are other areas where we might go to raise more rates. Maybe that could be used somehow or other if you made a proposition, and said, "OK, these hotels, pubs and restaurants pay 20% VAT. We can't do anything about that at the minute because we don't have VAT powers devolved but maybe we could ease up a little bit on the rates." Nobody takes my advice, Colin, but that is my advice.
Mr Neill: On your advice, believe me, I am already working down that line. We will be participating fully in the Minister's review of rates, particularly in the VAT area of the hospitality sector. I was giving evidence on this to the Northern Ireland Affairs Committee at Westminster yesterday. The VAT issue is unique to us in hampering Northern Ireland. We are now losing our domestic market, which is over 50% of our tourists. We lost 30,000-odd visits this year with the domestic market going South. The Southern Ireland market is now coming here for shorter times and staying less because of our VAT rate.
We are not out to try to do any harm whatsoever to any social club. We really just do not want the commercial situation to get worse as a result of the review. I am not saying, "Charge more", but we will not have any objection if you can find a formula that would maintain the status quo and mean that, in a commercial sense, when competing on a non-level playing field that that field does not get worse for us.
Mr Ó Muilleoir: Mr Wells made a suggestion yesterday that, if a club were operating at a high level and its revenues were x hundred thousand, maybe that was a different situation. I think that we have asked for more information on a couple of irregularities or whatever you call them.
Mr Wells: I was intrigued by your comments about Sky. Are your members treated differently? Did someone mention £1,200 a year?
Mr Neill: It is £1,500 a month. It is based on your rates and, because you are on a turnover rate, your rates model is high. The anomalies in the rating system are severe. I will give an example. I have a restaurant in Belfast, and restaurants are assessed on square footage, so it is based on rentable value. I have similar sized premises in County Down that is a pub but the business is 85% food. It just happens to have an article 5(1)(a) pub licence as opposed to a 5(1)(c), I think, as a restaurant. His rates for the premises with the pub will be five times higher out in County Down than in Belfast city centre, and his Sky TV is based on his rates.
Mr Wells: You have told us of an example of a sports club that is selling cheap drink at 50 shillings a pint; £2·50. Is that cheap? [Laughter.]
I never touch the stuff. Is that cheap?
Mr Neill: I am doing my sums to work out what a shilling is.
Mr Wells: You know what I am talking about, Leslie. Do they pay the same level of fees to Sky?
Mr Neill: No. In theory, you cannot gain access to a club unless you are signed in, although I stand to be corrected.
In reality, that does not happen. Sky does not police it. It has a flat rate of, I think, £200 to 300 a month.
Mr Wells: The way this particular event is being advertised is, "All and sundry, come and buy this cheap drink at £2·50 a pint and enjoy". How could you enjoy Arsenal v Spurs? [Laughter.]
In other words, "Come and watch this soccer match." That is operating as a strictly commercial concern. It does not even say that it is advertised to members; it is open to anybody in Bangor or wherever.
Mr Neill: You will see other examples there such as, "Buy your tickets in the local shop", or, for other premises, "Book your Christmas do." Indeed, I think the last one is, "Book your wedding." I am not trying to get clubs prosecuted; that is not what we are about. We are trying to show examples of the world we live in. In the real world, we are in competition with them and, obviously, any further subsidy makes that worse for us.
Mr Wells: It is the same for BT Sport. Apparently, they get that free with the broadband.
Mr Neill: No. That is paid on your rates.
Mr Wells: Right, so, taking the two together, if you are paying £1,200 —
Mr Neill: It is £1,500 for the Botanic Inn in Belfast.
Mr Magorrian: The Botanic Inn pays £2,360 a month to Sky and BT.
Mr Wells: Presumably, commercially, you cannot survive unless you have that service. People will not come in if you do not have Sky.
Mr Neill: You could be showing it in one small room, but the price is based on the full rateable value of your premises. You could have a function room or whatever and be showing it in one small bar, but you are hit for the whole lot.
Mr Wells: The other problem with some sports clubs is defining what the bar area is.
Mr Neill: It is basically anywhere that is licensed for the sale or consumption of alcohol.
Mr Wells: But a lot of clubs are flexible. You could knock down a partition wall in a room and your bar would effectively treble in size.
Mr Neill: That should be licensed for consumption, if it is legal and operating legally.
Mr Cassidy: It should be on their plans.
Mr Neill: There is a line around the area in which people are allowed to consume alcohol. Licensing is very strict in that a red line will be drawn around the area where consumption is allowed, and there will be another area highlighted for sale. It is so strict that, if this room were a licensed bar, and you decided to widen one of those doors by a foot to allow for a wheelchair or a disabled toilet, you would need to go to court and spend about £5,000 to get permission to do that. It is very strictly controlled.
Mr Wells: In sports clubs, if there is a big crowd in, the bar effectively becomes the entire building. So, if you are going to rate a space, how do you define what the bar area is?
Mr Neill: You would have to change the rooms but you would have to keep in the large function rooms and so on as part of it.
Mr Cree: Your brochure is very good. Does this include all forms of tax; corporation tax, income tax etc?
Mr Neill: I can tell you what we pay in corporation tax, if you like, for I had it —
Mr Cree: I would be interested in that, wearing a different hat.
Mr Neill: I had made a note of it when the Northern Ireland Affairs Committee was going through our tax regime yesterday. The hospitality sector at the moment pays about £70 million in corporation tax. We are not the biggest payer, because lots of our businesses are small or microbusinesses. Pubs pay £16 million, hotels pay £19 million and restaurants pay £35 million.
Mr Cree: That is all tax, then, in your brochure?
Mr Cree: What sort of vintage are those?
Mr Neill: I think that those figures from the Northern Ireland Statistics and Research Agency (NISRA) are from 2013. They are the latest figures available. We commissioned and released in May this year a full report on the economic value of the hospitality sector, which Oxford Economics did for us. I am very happy to share that with the Committee.
The Chairperson (Mr McKay): All right, folks. Plenty of food and drink for thought. I sense that there might be a possible solution here that the Committee could look at. It is certainly worth exploring what the impact would be on expenditure and receipts if that mechanism were applied to CASCs that have bars. We will seek the views of some of the sporting associations as well. What concerned me yesterday was that the biggest loser in this will be Ulster Rugby because all of its clubs have bars except for two. If it is going to miss out on 100% rates relief, that is obviously going to be of concern to the rugby fraternity. If it is prepared to accept that rate on the bar, we believe that it deserves relief on the rest of its facilities. Maybe that is where the compromise lies; somewhere in that territory.
Mr Neill: For sports clubs with no bar facilities, my members will bring in what is called an occasional licence, which is transferred to them. Sometimes, it is an economic call for a club. Is it worth having a bar for the sale of two pints once in a while or do we just delicense and bring in an occasional licence for club events, which is a very straightforward and simple thing to do?