Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): I welcome Sharon Magee, deputy secretary at the Department of Finance and interim head of Land and Property Services (LPS); and Andrew McAvoy, director of rating policy at the Department of Finance. They have been lucky or unfortunate enough to have had to be in front of the Committee a few times since we returned; I am sure that they looked forward to it with glee. I am sure that —

Ms Sharon Magee (Department of Finance): It is nice to see you all. Seriously.

The Chairperson (Mr O'Toole): — for the entire summer, you were dying to get the good weather — not that there is much good weather here — and holidays out of the way.

Ms Magee: It means that it is autumn: we are back.

The Chairperson (Mr O'Toole): It does. Our Committee is usually associated with bad weather and other unfortunate things not to be looked forward to.

Sharon and Andrew will brief us on rating policy matters, including the next steps following the consultation on non-domestic and domestic rating measures, with the consultation responses that were so ultra-sensitive that we had to talk about them in closed session. That was not, I hasten to add, because of LPS. Members will wish to note that the content of the consultation report does not differ from the original report that was provided to us in June. It has been indicated that the Minister will bring forward short-, medium- and long-term rating policy proposals, including a more strategic policy approach, in the coming weeks. Do we know that from the Department?

The Committee Clerk: Yes, we anticipate that.

The Chairperson (Mr O'Toole): Is that part of the Budget sustainability work?

The Committee Clerk: That was what the Minister said yesterday: that that was the process that we were following and that we were in train with it.

The Chairperson (Mr O'Toole): OK. So, we may get more detail on all this — the enacting of those policies — by the end of September.

As part of the process, the Minister will engage with Executive colleagues on those next steps and will continue engagement with business bodies and organisations and other stakeholders. Once those matters have been considered by the Executive, officials will be available to the Committee to provide information on the policy proposals and to advise on the analysis and policy considerations underpinning the approach. We invite officials to make a brief opening statement on the context.

Mr Andrew McAvoy (Department of Finance): I will keep it brief, Chair, on the work that we have done on the rating system since the return of the Executive. When the Minister returned in February 2024, we had the immediate priorities of the rate setting, which took place in March, and implementing rate support through the small business rate relief scheme, Back in Business and the rural ATM scheme. Two of the schemes had lapsed in the absence of an Executive. In parallel, we were closing off the specific consultation process on revenue raising that ran from 7 November 2023 to 13 February 2024. When that closed, the Minister wanted to undertake supplementary engagement with stakeholders, and she wanted to do full justice to the more than 1,400 responses in the consultation exercise. The report was finalised in early June. Copies were issued under embargo to the Committee and Executive colleagues, and we provided a closed-session briefing to the Committee on 12 June. At that stage, we were asked to come back after the summer recess to provide a follow-up session in public, and that is why we are here today.

On next steps, you are right, Chair, that Executive agreement will be needed on the Minister's proposals. Last month, we met the Minister, and she outlined the policy position that she wanted to be reflected in the Executive paper. We will work on finalising that for the next few weeks. In parallel with that process, we will bring through our business as usual statutory rules for the annual turn of the year rating legislation. That is the twin-track work over the autumn. The two pieces of work will probably dovetail around January, as we start to bring new legislation through the Assembly. We went through some of that last year, and we will be back on that cycle come January.

The Chairperson (Mr O'Toole): Does new legislation mean all the SL1s to update the ratings?

Mr McAvoy: Yes: the regional rate, Back in Business and small business rate relief. As part of that process, some of the stuff that may come out of the Executive process can filter in and run alongside the programme of legislation for the shorter-term measures.

The Chairperson (Mr O'Toole): OK. That is helpful.

Mr McAvoy: That is where we are.

The Chairperson (Mr O'Toole): Grand. That was useful, and your presentation was usefully concise. I will ask a few questions. I appreciate that there may be limits to what you can say about this, but do I understand correctly that you are providing advice to the Minister on the technical options for certain bits of revenue-raising that could be generated using the rates system, and that that is part of the evidence base?

Mr McAvoy: Yes. It is not necessarily all revenue-raising, either; we are just looking at rating changes that can be put to the Executive over the next few weeks.

The Chairperson (Mr O'Toole): Is your understanding that it would be included in the Budget sustainability plan?

Mr McAvoy: The Minister will consider them in tandem. We are providing evidence and analysis purely on the rating system. That will go to the Executive in isolation as well.

The Chairperson (Mr O'Toole): Are you telling me that, although you do not know about or make the decision on whether it is in the Budget sustainability plan, you are providing advice so that it will be ready, should its inclusion in the plan be required?

Ms Magee: The Minister wanted to know more about the rating system. There is a lot there. There are a lot of reliefs and policies, and she wanted to understand all of that. As you know from the consultation responses, a lot of it is very contentious. We spent quite a lot of time going through all the rating policies and everything that is available in Northern Ireland.

The Chairperson (Mr O'Toole): Is that beyond the stuff that is in the —

Ms Magee: We have looked at everything. We would have looked at that anyway as part of the rating policy work that LPS does, mostly in order to see that the policy delivers what it is intended to deliver and whether it supports the people that it is intended to support. We review all that stuff regularly anyway. That has been part of the work that we have been doing over the past number of months. However, the Minister wanted short-, medium- and long-term policy proposals that she could take to the Executive. Therefore, we are producing the facts and figures behind those proposals — the legislation and the time frames that would be involved — and the Minister will subsequently make a decision on which ones she wants to take forward.

The Chairperson (Mr O'Toole): Are you providing advice to the Minister that — I am not seeking to put words in your mouth; this is just an example — ending or tapering x, y and z reliefs would raise £10 million, £15 million or £20 million, or that, theoretically, she could be more generous with certain reliefs, and that to do so would require a particular legislative device and that she would have to do it by a particular date in order to realise such-and-such a savings in the next financial year?

Mr McAvoy: We are taking that analysis to the next level and formulating a package of proposals.

The Chairperson (Mr O'Toole): What does that mean? Does that mean that you are providing more sophisticated advice about what option would be more achievable or desirable?

Mr McAvoy: There are specific steps to formulate the suite of policies that would be implemented. There are things that you can do through subordinate legislation, and other things that require primary legislation. It is about sequencing that in such a way as will allow a suite of policies to be brought forward over the short, medium and long term.

The Chairperson (Mr O'Toole): Have you been asked to do any work to look at the economic impact? Picking a random example, some people might say that there is some dead weight in industrial derating. I do not know whether that is the case, and I am not saying that it is, but that might be an argument. On the other hand, some people might say that, if we are trying to attract manufacturers to avail themselves of our dual market access, that is a good calling card, particularly if there is a lower corporation tax rate 100 miles away. Are you capturing that context?

Mr McAvoy: Yes, and we are going beyond the specific confines of the revenue-raising consultation, which looked at specific policies but was basically about whether we keep it or remove it. The advice that we give to the Minister and the stuff that goes to the Executive will take a much more nuanced approach to policy: the options will not be limited to, "Keep," or, "Get rid of".

The Chairperson (Mr O'Toole): I would expect that, but have you been asked to hit a number?

Mr McAvoy: No.

Ms Magee: No, and we saw a lot of what you said about the economic impact in the consultation responses. Some of the responses were very detailed and set out exactly what would happen if you did away with one relief or improved another. We were aware of that from very early on, but, no, we have not been asked to hit a number.

The Chairperson (Mr O'Toole): OK. I will ask this before I bring in other members, and there will be a good few questions. The ratio is not exactly the same for all the consultation responses, but there are between 500 and 1,000 responses to most questions, give or take, and the ratio of responses is, broadly, 3:1 or 4:1 in favour of retaining the supports. Is that simply a product of the fact that you are more motivated to respond if you are a trade body or a business that directly benefits from the —?

Mr McAvoy: Yes, that is typical. We have seen that before. You are more likely to respond, and the weighting of the responses comes out in favour of retention because of that.

Ms Magee: That is also how you get the good economic analysis, because those people go to the trouble of setting out the case for retaining it. We would not get that without running those consultations. That is why it was worth doing: just to get that.

The Chairperson (Mr O'Toole): You say the economic case. I will pick on freight relief: if a haulier writes to you saying, "I will not disinvest fully, but I will have to curtail certain activities and, therefore, reduce my workforce", for example, do you take that at face value or do you dive into it a bit more?

Mr McAvoy: We will be doing a supplementary analysis on top of that. The fact is that it is useful, as Sharon says, for the likes of the example that you gave there, even to get the point across clearly and succinctly that, if you were to remove that freight transport relief, a cost would be passed to consumers.

The Chairperson (Mr O'Toole): You are working to enable this to be part of the budget sustainability plan at the end of this month, should the Minister decide to do that and the Executive agree to it. You are not saying that that will definitely happen, but you are —

Mr McAvoy: It will contribute towards that.

The Chairperson (Mr O'Toole): It will contribute towards that. OK; that is number one. Number two: there is no number or target that you are working towards, but I presume that you will offer a range. Theoretically, you could remove every single relief — I doubt that it will happen — and raise a certain amount of money, or you could just leave it untouched.

Mr McAvoy: Yes. Everything is scalable, so —

The Chairperson (Mr O'Toole): I presume that you have not been asked to look at any more generous reliefs, or have you?

Ms Magee: We have been asked to look at everything — all the reliefs. What would it cost if you enhanced that relief? What if you gave more help here? What would it cost and how would you pay for that? We do all that analysis, but then we hand it over.

Mr McAvoy: We have had engagement with stakeholders who are expressly requesting more relief from the system, so —

The Chairperson (Mr O'Toole): You would imagine that to be the case.

Mr McAvoy: As part of the advice that we are providing to the Minister, we are saying, "These people raised these points as part of the stakeholder engagement. Here is the advice and the costing". That is being provided to her as well.

Ms Forsythe: Thank you, Sharon and Andrew, for being with us again. The consultation that has been published was directed by the Secretary of State on very specific terms. Subsequently, however, the Minister, as you say, has been looking at the entire system. She talks about having short-, medium- and longer-term responses and actions on the back of the consultation. Are there any plans for short-term actions based on this consultation?

Ms Magee: As I said, we have reviewed all the policies and everything that was part of the consultation, and we have costed up what would happen if we removed them, phased them out or enhanced them. We have presented all that to the Minister. She also asked us how quickly we could do that, and what could be brought in in one year, two years and three years. We have provided all that.

Mr McAvoy: It is for the Executive to decide on the final package. The Minister will write to the Executive Office to outline her proposals, and we will implement the Executive's decision on that.

Ms Forsythe: In the Chamber yesterday and in the press today, the Minister confirmed plans for changes that will likely increase rates for households and businesses. Unsurprisingly, that has caused a lot of reaction and a lot of people are getting in touch with elected reps. A lot of people, including homeowners and businesses, are very concerned about what this means for them. What would be the time frame were something to be brought forward and agreed between the Finance Minister and the Executive? Would a significant change hit their bills in March 2025? What are we looking at here?

Mr McAvoy: Legislation could be passed to enable that time frame, but, again, it will be for the Executive to decide on the timing for those things to come into operation. We have been conscious that the coverage that there has been over the past few days would happen as soon as the report was published. There is a bit of a conflation with the consultation report and what people have said in that report. That is not the Department saying that; that is from the stakeholders who have responded. Likewise, maybe half of the reporting has been on what that says, and the other half has been on what the Secretary of State put out as the original proposals. As I outlined earlier, the Minister is moving beyond the binary options that the Secretary of State looked at.

Ms Magee: We were quite surprised by the press coverage. It is talking about the cap being removed. We have not said that, the Minister has not said that and the Executive have not said that, but that was in the press last night. I do not really know where that came from.

The Chairperson (Mr O'Toole): Is that the £400,000 cap?

Ms Magee: Yes, that was in the consultation, so what was in the press was near enough lifted from the consultation document, but that has not been announced by anyone.

Mr McAvoy: It is a decision for the Executive. These matters are all controversial and cross-cutting.

Ms Magee: It is a bit premature.

Ms Forsythe: Absolutely. I have another concern as a representative of South Down, which is a rural constituency. Is an equality impact assessment going hand in hand with this review of the system? I am very concerned about rural disparity and people in isolated rural homes being hit significantly harder.

Mr McAvoy: Any policy change has to have a rural impact assessment and an equality impact assessment, and we do the data protection side of things as well as the section 75 stuff.

Ms Forsythe: That is good to know. As I say, it is about the media reaction to this. Things are being put out as if this is happening, and there is a feeling that this is happening now. People are very concerned and are asking, "How am I going to afford this for my household?". Businesses are already under extreme pressure and are closing the doors because they are feeling the pressure from online business and what that means for them. They appreciate the Back in Business scheme, but, obviously, it does not last for that long, so the strong reaction to this is understandable and communication is key. Thank you for clarifying a few of those points.

Mr McAvoy: As I say, we were aware that, inevitably, that would happen just because of the nature of the original proposals. The reporting of it has picked up where it left off when the Department published the Secretary of State's proposals. It is unsurprising.

Mr Frew: Thank you for the presentation. It has helped to clarify a lot of things, and hopefully the media are listening. I know that it is not binary — you have already clarified that — but, if you were to remove all the reliefs, you would still not hit £113 million, which the Government have tasked the Executive to find with regard to the sustainability plan.

The Chairperson (Mr O'Toole): We do not need to find £113 million. A good chunk has already been found — £50 million or £60 million is left.

Ms Magee: The regional rate increase this year raised an extra £31 million, and that is every year.

Mr Frew: Is that part of it?

Ms Magee: That is part of that £113 million.

Mr McAvoy: That is annually recurring.

Mr Frew: Right, OK.

The Chairperson (Mr O'Toole): There is, I think, £50 million or £60 million left to find.

Ms Magee: The regional rate increase generated, I think, £31 million of the £113 million.

Mr Frew: OK. Thank you for that. I had forgotten about that.

It is fair to say that, even though you are not looking at this in a binary way to either remove or retain these reliefs, the fact that you could add another tier of grading or move a cap, either up or down, will cost money, even as regards process. Is that part of your administration costs?

Mr McAvoy: Yes. In the first instance, we will try to do policy that fits within parameter changes for the IT system so that it is not incurring a huge admin cost, and we will also look at options beyond that. However, there are lead-in times for these things, with IT changes and things like that, so, in the first instance, parameter changes are all that can be done within a short time. However, we can look at things beyond that as well.

Mr Frew: It is fair to say that, while you have a principle of a cap for whatever — whether it be size, scale, cost or value — raising or lowering that cap will still cost money, because you then have to process and identify people who then — the differential.

Mr McAvoy: We already know all the properties. They are already valued in terms of — you know, just set at the cap.

Ms Magee: That would not be a prohibitive cost. We would be able to do that easily enough.

Mr Frew: I suppose that I am asking how flexible the flexible system can be without costing us too much money.

Ms Magee: Inevitably, there are IT changes. In everything that we do now, there is an IT change, and there is a cost to that, but, as I said, the costs are not prohibitive. Some of the changes, as Andrew said, just move the parameters so that it is at 2% instead of 4%. It is not as simple as just going into the code and changing 4 to 2 — ta-da! There is a bit more to it than that, but it does not take months of development and testing as it would with a new system. We are just changing the parameters of the reliefs in the system that we have. We already have the ratepayers' details. We know who gets reliefs and how much they get; that is already automatically built into the bills. It is a matter of our IT team amending how that is calculated. It is all doable. Some of it is a bit more complicated than others but not to a degree that will inhibit us from moving forward with any of the proposals that the Executive sign up to and agree.

Mr Frew: Thank you.

Mr Carroll: I want to dig into the industrial derating. The document states that, at present, 4,500 properties avail themselves of it and 70% of those are in manufacturing. Given the scale of small businesses in our society, I am curious about that. Can you speak about those organisations that avail themselves of it? We are aware of some of the bigger corporations that get it. They are definitely not small businesses and are given half a million pounds or around that figure, which is very concerning.

I note that your average benefit is £15,000, taking in the higher figure and the larger small companies. Will you talk about the smaller manufacturing firms? Do they employ one, two or three people? As best as you know, what kind of organisations are they?

Mr McAvoy: I will double-check the figures for you. I think that around 2,600 of the recipients in the 4,500 have a net annual value (NAV) of under £15,000, which is below the small business rate relief threshold.

Mr Carroll: They have what, sorry?

Mr McAvoy: NAV — their property value. They are classed as small business hereditaments. From that point of view, a lot of the relief money goes to small businesses. Some of those small businesses will have a handful of people operating them, but they may occupy large premises. They can also operate out of industrial units in a small way.

Ms Magee: We use the £15,000 NAV threshold a lot. That is the small business rate relief threshold. It is a good indicator of the size of a building. Anything below £15,000 rateable value is a small building. A workshop could be of a size where the NAV could be £4,000, £5,000 or something like that. For a big workshop in an industrial estate stretching as far as the eye can see, the NAV could be half a million pounds. That gives you some idea of scale. NAV of £15,000 generally means a small premises. That is why small business rate relief is awarded to them. More than half of the companies that get derating are in small premises.

Mr McAvoy: Even the larger ones are still —. They are significant employers.

Ms Magee: We do not keep metrics on the number of employees. We keep them only on the size of the building.

Mr McAvoy: The manufacturing sector as a whole employs around 89,000 people in Northern Ireland. You were talking about the smaller businesses. I went to Cookstown to speak to 110 manufacturers at one of the consultation events that Manufacturing NI set up. When I was there, one of the fellows came up to me and said, "Will you come out and look at the factory? We will show you what goes on there". That was at Montgomery Road. He was a very small employer, in terms of the number of people employed in the place, but he was occupying two or three units with massive amounts of machinery to make lighting cables and things like that. He tried to stress to us the importance of the relief by explaining the size of the bill that he would have if it was removed. Stephen Kelly articulated that argument well for the sector. Obviously, we have to balance that with the revenue-raising side of things.

Ms Magee: As I said, Gerry, we do not have the metrics on the number of employees, but we have an idea of the total number of people involved in the manufacturing sector. I have had many years as a valuer. I was the person who went out to assess whether derating was warranted. I was in many premises where there were two guys working, making staircases, or in a wee workshop unit where three women were making coleslaw for hotels or something. They all get industrial derating. The size of the premises does not matter. If you comply with the legislation, you are entitled to the relief. The legislation says that you have to be operating as a factory. That means that you have to be altering something or turning it into something else, and it has to be manual. It is not creative work, and it is not using computers. It is not recording artists or anything like that. You have to make something. Everybody who complies gets the derating.

Mr Carroll: I appreciate that. I will go back to the point about Manufacturing NI. What comes to mind is the saying about turkeys voting for an early Christmas. Manufacturing NI is going to support it.

You made a point about small factories. I have no problem with that, but the fact is that Caterpillar gets almost £300,000 per year as a handout while people's rates are going up. Other companies are getting large amounts of money. I am not saying that you have to, but it is indefensible.

Ms Magee: Industrial derating was brought in to bring industry into Belfast. It was for the shipyards, ropeworks and tobacco factories. It was for big industry.

Mr Carroll: I do not think that it has worked, given the fact that a lot of those industries have left or are looking to leave. You do not have to comment on that. I think that some calculation says that trickle-down economics and operating economics in the interests of corporations works. It does not. You do not have to agree or disagree with that.

I will make another point on a separate issue: the cap on rates. Given what was mentioned and the consultation responses, in which some individuals talked about being asset-rich but income-poor, has the Department or the Secretary of State done any research on those individuals? How many of those several thousand homes would be affected by the cap being lifted or, potentially, prone to poverty?

Mr McAvoy: In my team, we looked at every recipient of the cap at the moment. We have analysed that information against the properties in which the ratepayers are in receipt of disabled person's allowance, lone pensioner allowance, low income rate relief, housing benefit or rate rebate schemes, so that we know exactly how many are in each category. That is the only information that we have on which we can rely and base decisions. You will hear an anecdotal argument being put forward that goes, "An older woman lives in that house on her own: how is she supposed to manage?". We will know that, and our decision will be informed by it.

Mr Carroll: Can that information be shared with the Committee?

Mr McAvoy: I do not see why not.

Ms Magee: OK.

Mr Carroll: What would be the reason for it not being shared?

Ms Magee: We just have not been asked for it before.

Mr McAvoy: It would need to go to the Executive first.

Mr Carroll: The Committee should be entitled —.

Ms Magee: There is no personal information in any of it.

Mr McAvoy: None of the decisions will be taken on —.

Ms Magee: You want numbers.

Mr Carroll: It will give us an idea of the percentage of those on benefits and the breakdown of those benefits.

Ms Magee: It was one of the things that we were genuinely concerned about: people who are asset-rich but income-poor. We were able to overlay the reliefs that we administer on top of those properties that get the cap. We were able to map that to show where they are and how many there are.

Mr Carroll: Chair, I want to request that information. Thank you.

Ms Magee: Okey-dokey.

The Chairperson (Mr O'Toole): We have a few requests for information that we will comply with.

Mr Tennyson: First, I will follow up on a couple of Gerry's questions. Has there been any consideration of potential implications arising out of state aid rules because of changes to industrial derating? Are there any barriers to changing it as a result?

Mr McAvoy: There are barriers to changing it. You cannot say that you want to take the current industrial derating provision and target that only at manufacturers who invest in the likes of skills initiatives or research and development or make organisational commitments. You are able to lower the level of support, and you might be able to cap the level of support when it comes to NAV thresholds and things like that, but, again, it is difficult in a space-intensive sector.

The basic answer is this: you can row back from the support that you are giving at the moment, but you cannot refine or target it in any way, because it is a pre-accession aid. It was in place before the UK joined the EU as a member state. We are allowed to have it under the subsidy controls as a result of that, but, if we were to target or change it in any way, it would have to comply fully with the current subsidy regulations.

Mr Tennyson: Is it fair to say that, on the basis of that, there is a high risk involved with the change because, if there is an adverse economic consequence, it is very difficult to row back?

Ms Magee: You could not row back.

Mr Tennyson: That is helpful.

Has there been any cross-departmental input to advice and the analysis that is provided to the Minister? For example, on issues such as industrial derating, has Economy been involved? On the landlords' allowance, has Communities had any input at this stage?

Ms Magee: No.

Mr McAvoy: When it goes to the Executive —

Mr Tennyson: It will at that point. OK. No problem at all.

Gerry had a question around those who are asset-rich and income-poor and the maximum value cap. Are there any mitigations that are under consideration at this stage if there were to be a change that you thought would be appropriate or feasible?

Mr McAvoy: There are already mitigations in the system, because there is means-tested support in the system. That will not change because that is dictated by your rates liability. If your rates liability goes up, the calculation is reassessed, so it is almost built into the system. The system was designed to originally operate without a cap, and the cap was introduced in 2007 by the then Secretary of State, Peter Hain, in anticipation of the Executive's coming back. The cap was £500,000 at that point, but the system was designed to come in with no cap whatsoever.

Mr Tennyson: That is helpful, because it is an argument that is often raised, but people cannot usually point to an example of an individual in circumstances that would necessarily be impacted in that way.

Have any of the reliefs under consideration been ruled out for change?

Ms Magee: We have just put through a whole suite of options on costs, analysis and legislation for everything, so it will be for the Minister to decide what goes to the Executive. We could not say what she has decided yet.

Mr Tennyson: That is perfectly understandable. No problem.

I have one final question. Andrew, it is to pick up on something that you said about this being significant and cross-cutting and that any decision would have to go to the Executive. Is that true of any change? If there were a small change to the maximum capital value, would that still be deemed significant and cross-cutting just because it is a change to rating policy?

Mr McAvoy: Yes, that is significant and cross-cutting. The Minister cannot make a decision on that in isolation. That is the precedent that has been set. If you were talking about a minor change to something such as small business rate relief or something that it is within the Minister's portfolio to refine, I do not think that that would necessarily warrant going to the Executive. That could be done with a negative resolution SR. For starters, changing the maximum cap requires a debate in the Assembly. By its very nature, it would fall within that.

Ms Magee: That is primary legislation, is it not?

Mr McAvoy: No, it is subordinate legislation.

The Chairperson (Mr O'Toole): The significant and cross-cutting test is not one that is done by officials. Are you operating that judgement based on precedent?

Mr McAvoy: Even setting the regional rate, for example, needs to go to a cross-community vote. It is because it is taxation.

The Chairperson (Mr O'Toole): What you are saying is that, theoretically, a Finance Minister could do it but that it would be very easily challenged in court.

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): That is extremely helpful.

You talked about looking at industrial derating in a more nuanced way. Gerry asked specific questions about certain sizes of businesses accessing it and had particular views on that. How difficult would it be, theoretically, for LPS to, for example, operate a test based on turnover? Is any of that legally possible?

Mr McAvoy: If we were to implement a test on turnover, it would fundamentally change the scheme. It would bring it into the new subsidy rules.

The Chairperson (Mr O'Toole): It would not just be a property tax then. It would be a property tax —

Ms Magee: It would be an income tax.

The Chairperson (Mr O'Toole): — weighted by income. It would still be a property tax on those who paid it, but the threshold would be an income one.

Ms Magee: The basis of valuation in the Rates Order is a rental value, so, if you were going to start taxing people on income, you would be changing the Rates Order.

The Chairperson (Mr O'Toole): It would be a rental threshold.

Mr McAvoy: It would create a difficult taxation —. There would be conflicting taxation principles.

The Chairperson (Mr O'Toole): I am not asking you to presuppose what the Minister decides — I recognise that you are just providing options — but, when it comes to industrial derating, are you looking at, for example, what would happen if you tapered or cut it off above a certain rateable value? Is that the kind of option that you are providing?

Mr McAvoy: If you were to cap it, for example, or say that you are allowed to get support only up to a certain amount, I do not think that that would fall foul of the subsidy rules because you are rowing back from the existing support —.

The Chairperson (Mr O'Toole): It is less of a state aid.

Mr McAvoy: Were you reorganising it to such an extent that you were targeting different groups, or where you are providing more support, you would fall.

The Chairperson (Mr O'Toole): From what you are saying, it sounds like any specific change to any of the domestic rating system —.

Mr McAvoy: Domestic?

The Chairperson (Mr O'Toole): Non-domestic. It would have to be relatively blunt, in terms of intervention, to avoid falling foul of state aid rules or to involve engaging state aid rules.

Mr McAvoy: Whether it falls foul of state aid rules or the UK's Subsidy Control Act 2022 —.

The Chairperson (Mr O'Toole): Sorry. I should have said that in general. It is still a state aid rule; it is just that we do not call it that, because it is a European term. To be fair, it is the same thing: it is a subsidy control regime.

It could be done in a blunt way, so that, above a certain rateable value, it is capped, tapered or whatever. That probably would not fall foul of a subsidy control regime, but for anything that is like, "Well, if you are in a particular sector, you'll get the full benefit" or the revenue thresholds and all of that —.

Mr McAvoy: In the first instance, it is a case of whether it triggers a reassessment under the subsidy control. We do not need to do it at the moment for industrial derating because it is established. If you were to re-target it, you would have to undergo full subsidy control assessments to make sure that it was compliant. There are some things that the rating system is designed to target quite well, which we saw with the legislation that we put in place during COVID to try to support certain sectors, but, generally speaking, rates is not always the ideal vehicle to provide support through. By its very nature, it is blunt, because it is always based on the property.

The Chairperson (Mr O'Toole): You are looking at options, but the options of tinkering too much in ways that are too subtle create other potential complications.

My final question is on vacant property relief. Am I right in saying that our non-domestic vacant property relief is, basically, the most generous in the UK or Ireland?

Ms Magee: Ours is 50%.

The Chairperson (Mr O'Toole): It is 50% for ever, until it is derelict, basically.

Ms Magee: Yes. I think that, in England, the councils can set their own levels; it is discretionary. Some of them are 50% or 70% liability, and some of them are 100%. It is up to the councils.

The Chairperson (Mr O'Toole): Are you aware of any that are 50% —

Ms Magee: Off the top of my head —.

The Chairperson (Mr O'Toole): — forever and a day until —?

Ms Magee: They are all for ever and a day, but, off the top of my head, I do not know of any that are 50%. However, I can find out.

The Chairperson (Mr O'Toole): As far as I am aware, ours is a permanent 50% relief until it genuinely becomes derelict or occupied.

Ms Magee: Or occupied, yes.

The Chairperson (Mr O'Toole): I do not think that the South of Ireland offers it at all. There might be a few months of relief.

Ms Magee: We will find out.

Mr McAvoy: We can get that for you.

The Chairperson (Mr O'Toole): That would be helpful.

Ms Magee: Do you want a cross-jurisdiction comparison?

The Chairperson (Mr O'Toole): It would be helpful, in order to understand. My understanding — you will know, but I do not — is that we are by far the most generous. I think that the total cost is £20 million or thereabouts, but that, obviously, is split between —.

Mr McAvoy: It is £19·7 million.

The Chairperson (Mr O'Toole): Is that split between the district and regional?

Mr McAvoy: That is just our bit of that.

The Chairperson (Mr O'Toole): That is just the regional bit?

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): If that were curtailed, there could be additional money on the district rate, too?

Mr McAvoy: If you give me a second, I will give you the exact figures, rather than a guesstimate.

The Chairperson (Mr O'Toole): Obviously, Andrew, you can write to us. I am just interested.

Mr McAvoy: The non-domestic vacant rate (NDVR) has a 50% liability level at the moment. Every 5% that you push that up generates an extra £1 million for the Executive.

The Chairperson (Mr O'Toole): Every 5% that you push it up from 50% generates an extra £1 million?

Mr McAvoy: Yes. If you push it up to 55% liability, it brings in an extra million; 60% brings in £2 million. It extrapolates up from there.

The Chairperson (Mr O'Toole): OK.

Ms Magee: Every 5% is another £1 million.

Mr McAvoy: If you put it up to 75%, it would bring in £5 million.

The Chairperson (Mr O'Toole): OK. That makes sense. That is helpful. Cheers.

There are no further questions, so we will release you for now. Thank you. You have a lot of work to do. I appreciate your time.