Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): We will go straight into our briefing from Andrew McAvoy, who has just joined us. We are now going to talk about one, two, three — five SL1s relating to rates.

First, we agree that Hansard will record the session, I presume.

The Chairperson (Mr O'Toole): OK. For the purposes of the record, we are talking about the following agenda items: SL1, the Rates (Regional Rates) Order (Northern Ireland) 2026; SL1, the Rates (Small Business Hereditament Relief) (Amendment) Regulations (Northern Ireland) 2026; SL1, the Rates (Making and Levying of Different Rates) Regulations (Northern Ireland) 2026; SL1, the Rates (Temporary Rebate) (Amendment) Order (Northern Ireland) 2026; and finally SL1, the Rates (Exemption for Automatic Telling Machines in Rural Areas) Order (Northern Ireland) 2026 — a compendium of all our favourites. I did not make a single trip-up there.

Members, the Department proposes to make all those statutory rules (SRs) relating to rating policy. We will have visited all of them in different guises in the past, but we are doing them all in one session now, which is probably an act of mercy for Mr McAvoy.

Mr Andrew McAvoy (Department of Finance): Maybe for you.

The Chairperson (Mr O'Toole): Members, as I say, the proposed statutory rules are those that I have mentioned. I will explain what they do.

The Rates (Regional Rates) Order is subject to affirmative resolution. It is the main mechanism by which we set the regional rate. It sets out in legislation the amount of domestic and non-domestic regional rates for the year ending 31 March 2027. It stipulates the regional rate for domestic and non-domestic properties, expressed in pence per pound, that will apply for the 2026-27 rating year. Members should note that the poundages laid out in the rule will reflect the Budget decisions taken by the Executive, the detail of which will follow in the SR itself. To be clear, we do not yet have that. We are not talking about the level of the poundage today.

The next one is the small business hereditament relief, which is subject to negative resolution. It extends the existing small business rate relief scheme until the end of the 2026-27 financial year.

Thirdly, we have the Rates (Making and Levying of Different Rates) Regulations (Northern Ireland) 2026. It is subject to negative resolution and will allow one rate-setting decision to be made by a district council in relation to both parts of its tax base. I presume that that happens every year so that councils can do that.

Fourthly —.

The Committee Clerk: That is based on Reval, Chair.

The Chairperson (Mr O'Toole): OK. Sorry, that is a different thing.

The Committee Clerk: That is the one that we have not seen.

The Chairperson (Mr O'Toole): That is the one that we have not seen before.

The Committee Clerk: Is it 2022?

Mr McAvoy: 2023.

The Chairperson (Mr O'Toole): You can explain the difference to us as we go along.

The next one is the Rates (Temporary Rebate) (Amendment) Order (NI) 2026, which is subject to affirmative resolution and will continue the Back in Business scheme until the end of the 2026-27 financial year.

Finally, we have the Rates (Exemption for Automatic Telling Machines in Rural Areas) Order (NI) 2026, which is subject to affirmative resolution and will retain a rates exemption for ATMs in rural areas. We are well used to that one.

Members, we have the director of rating policy with us to talk us through the SL1s. Andrew, you can make a brief opening statement, with particular emphasis on areas that are new or novel. Thank you.

Mr McAvoy: As you said, Chair, I will talk you through each one briefly, but you have covered most of it. Bringing the five together, I am conscious of the fact that we are entering a particularly busy period as a Department, with a multi-year Budget. The Committee will be busy with that as well. The regional rate does not yet reflect any of the budgetary decisions, but it is required to be moved at this stage to allow the subordinate legislation to be brought in the new year and debated in the Assembly as soon as that Budget decision is taken. There is nothing particularly new or novel about that at this point.

The legislation on small business rate relief will extend the duration of the scheme until the 2026-27 rating year. Currently, 30,000 businesses are supported by the scheme at a cost of £22 million, and that is paid for by the Executive. On that one, the Finance Minister made a statement on taking forward the consultation on that measure at the start of this month. The SL1 does not reflect those changes.

The Chairperson (Mr O'Toole): It could reflect them if the Executive decided so.

Mr McAvoy: It could. My team is proofing the consultation document at the moment, so it is almost ready to go. The letter for an advance copy to the Committee is with the private office for issue. It is likely to be issued this week.

The Chairperson (Mr O'Toole): Has that one not yet been discussed by the Executive?

Mr McAvoy: No.

The Chairperson (Mr O'Toole): So you will need to draft it in a particular way.

Mr McAvoy: The consultation document will lay out options for adjustments to the scheme, and, once the consultation process is over, we will go to the Executive with that.

The Chairperson (Mr O'Toole): Grand. Are you confident that you can do what you need to do in regard to redrafting, should the Executive decide to proceed with the Minister's policy?

Mr McAvoy: Yes, it is being brought forward at this stage to continue to be able to facilitate anything being implemented for April.

The Chairperson (Mr O'Toole): Go ahead. Sorry. Thank you.

Mr McAvoy: I just wanted to flag that in the context. It is not really to do with the SL1 as drafted.

The making and levying of rates SR is one that the Committee will not have seen before, as the Clerk said. Effectively, district councils often make one rate-setting decision that is then applied across both parts of the tax base: the non-domestic side and the domestic side. The rule enables that decision to be taken as one rate-setting decision by linking the two parts of a council's tax base. The legislation does not implement a policy change in any way. The domestic tax base is sitting as it is, and, as a result of Reval2026, the non-domestic valuations will grow. Effectively, it recalculates that conversion factor so that district councils can still take that as one decision if they wish. It is really just a consequence of the list growth. There is no policy change in that regard, but, if councils still want to make just one rate-setting decision across both parts of their tax base, it is necessary.

The fourth one extends Back in Business for a year. That is now up to 79 new businesses. I think that, when we first brought this in last year, I mentioned to the Committee that it would take a little while for momentum to grow. We are starting to see that now, as awareness grows. A new forum is being established with the Society of Local Authority Chief Executives (SOLACE) in January to look at how we can work across the council areas to really drive that. It helps with the vacant property situation.

The one on rural ATMs is a repeat of last year's provision; it extends it for one year. It is more about managing the machines that are currently in receipt of it. The court decision took a lot of those machines out of the valuation listing entirely, so it is just to keep it in place for the ones that are there at the moment. I do not think that we envisage doing that through an affirmative resolution requiring a debate now for the machines that are left, but the process was put in place when it applied to more rural ATMs.

There is nothing in this batch of measures that implements new policies; I just talked you through them to facilitate your consideration.

The Chairperson (Mr O'Toole): Thank you very much. As always, members should indicate if they wish to ask a question. Just a few from me first of all.

Some of the SL1s are routine; in a sense, they are all routine in that we have seen versions of them before. However, on a couple of them, we have indications that the Minister would like to do different things with the policy, specifically in relation to, first, small businesses, which we have discussed, and, secondly, the domestic cap. Will it be possible to —?

Mr McAvoy: The cap is not covered in the SL1s.

The Chairperson (Mr O'Toole): Does it not have to be reflected in the regional rates order?

Mr McAvoy: No. A separate statutory rule will be brought forward for the cap.

The Chairperson (Mr O'Toole): OK. From your perspective on the Civil Service side, are you anticipating drafting or making such a rule?

Mr McAvoy: It is a fairly straightforward rule. We have done it before. The drafting is not the complex part of it; the political agreement is the issue. I think that the Minister said in the House the other day that wider discussions about that are going on at a political level. The cap legislation is a statutory rule that is subject to affirmative resolution. Three of the measures that we are looking at today are subject to a similar control, so it could be done within the time frame.

The Chairperson (Mr O'Toole): When is the latest that you would need to do it?

Mr McAvoy: Where there is a will, there is a way, but the bills need to go out in April.

The Chairperson (Mr O'Toole): Bills need to go out in April, but, obviously, it is good practice to give people fair warning. You might say that they had fair warning last autumn, when it was widely reported that this was happening.

Mr McAvoy: It has been consulted on.

The Chairperson (Mr O'Toole): OK. Just so that we are clear on the policy changes that have been — I am not sure of the right verb — proposed or mooted, perhaps, by the Minister and his predecessor, increasing the domestic cap from £400,000 to £485,000 —.

Mr McAvoy: Yes, that was in the consultation document.

The Chairperson (Mr O'Toole): What about ending the early repayment discount?

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): These are things that, the Ministers have indicated, they would like to do, and papers have gone to the Executive recommending them, but they have never been discussed. Is that right?

Mr McAvoy: It was tabled for discussion.

The Chairperson (Mr O'Toole): Was a decision recommended?

Mr McAvoy: It was tabled as a paper for discussion. There were recommendations in the paper.

The Chairperson (Mr O'Toole): Are you not able to say whether the specific recommendation of the Finance Minister was to accept them?

Mr McAvoy: I do not know to be able to tell you. However, I know that it is tied up with a lot of other budgetary decisions that are in the mix.

The Chairperson (Mr O'Toole): The paper on the change to the domestic cap and early repayment was first submitted in June 2025.

Mr McAvoy: On 23 June, yes.

The Chairperson (Mr O'Toole): And it has never been discussed by the Executive: is that right?

Mr McAvoy: It has been tabled for discussion.

The Chairperson (Mr O'Toole): It was tabled in June 2025, but it has never been on the agenda.

The other two papers are on the policies from the Minister's statement a few weeks ago to make vacant property relief less generous in order to make small business rate relief more generous.

Mr McAvoy: He has instructed us to start the work to take that forward now. That is a longer-term piece. It will be introduced, but, typically, there is a lengthy lead-in time to increase the empty property rate. For example, with the —.

The Chairperson (Mr O'Toole): Are you saying that it could be done by 2026, if needs be?

Mr McAvoy: No, we will not bring that in by 2026.

The Chairperson (Mr O'Toole): You definitely could not do it by 2026, but you could do the domestic cap.

Mr McAvoy: The domestic cap has already been subject to public consultation and is with the Executive for agreement.

The Chairperson (Mr O'Toole): The Minister has indicated that he wants to make non-domestic vacant rating relief less generous. Effectively, the policy that he wants, to describe it as simply as possible, is about making one bit less generous in other to make the other bit more generous.

Mr McAvoy: The point of the strategic review process is to look at savings in one part to make additional support in another or to make savings for the Executive, for example.

The Chairperson (Mr O'Toole): Has a paper on the non-domestic stuff gone to the Executive?

Mr McAvoy: No. There has been no paper on that. The Minister has signalled his intent to do it.

The Chairperson (Mr O'Toole): Is there a timeline for when a paper will be submitted?

Mr McAvoy: The Minister is interested in getting up to 100% liability by the start of the next mandate. We want to do an incremental step to 75% before then. Quite a bit of work is ongoing across —.

The Chairperson (Mr O'Toole): Sorry, 100% on the small —?

Mr McAvoy: No, 100% liability on the non-domestic vacant rating.

The Chairperson (Mr O'Toole): Yes, sorry, moving it from 50% up to 100%.

Mr McAvoy: A bit of work needs to be done cross-departmentally, because, obviously, work on the regeneration side is taken forward by the Department for Communities. Likewise, DAERA is moving forward with the Dilapidation Bill. There is quite a bit of interconnection between all those things if DAERA is taking steps to address dilapidation. Dilapidated or derelict properties are not covered in the rating valuation system, because a property needs to be capable of beneficial occupation in order to fall within it.

The Chairperson (Mr O'Toole): This is not really one for you, but were we not told by the Department that the Dilapidation Bill was, "Nothing to do with us, guv"?

Mr McAvoy: The Dilapidation Bill is not.

The Chairperson (Mr O'Toole): I know that it is not, but clearly there is a linkage, as you have just said.

Mr McAvoy: Yes, we are working with the officials who are involved with that. If the Dilapidation Bill has its intended effect of bringing properties back into use or addressing the issue in some other way, those properties will naturally fall back within the rating system. That is the interplay between the two areas.

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

Let us cover the policy innovations or changes that the Minister has indicated. We are in a holding pattern as to when one of those will get on to the Executive's agenda, and a paper on the other will go to the Executive before the end of the year.

Mr McAvoy: On non-domestic vacant rating?

The Chairperson (Mr O'Toole): Yes.

Mr McAvoy: No, not before the end of the year. In the Minister's statement, there were three things on which we are working in sequence. There is the small business rate relief, which we want to go out to consultation this week.

The Chairperson (Mr O'Toole): It does not need Executive agreement.

Mr McAvoy: No, but, when it comes to the Executive in the new year, it will be for a decision point.

We want to take the business growth accelerator policy forward to consultation around March. That policy is in place in Scotland, and there is a scheme with a much reduced scope in England that does something similar. We want to take views on that as part of our public consultation. That is the next step in the Minister's statement.

The third thing, in parallel with that, will be to take forward work on the non-domestic vacant rating and how we get the liability level increased in a managed way. We do not want to flick a switch and put the liability level up overnight, because that has different impacts across Northern Ireland. You see that when political parties will have one person write to us to say, "Could you do this and bring it in?" and other people saying, "Could you put the brakes on that?". There is a need. We have seen that through the strategic review process, and it is about managing it properly.

The Chairperson (Mr O'Toole): In terms of some of the other SL1s that we are looking at today, there is the main regional rates order for next year. Have you been asked to work up options or a trajectory for rates over the period of the spending review?

Mr McAvoy: Not at the moment. That is still being discussed. We can work out how much will be produced in rating revenue post Reval, but that is also a factor this year in that, because the non-domestic list is shifting, we will need to know the final results of that before we can project forward.

The Chairperson (Mr O'Toole): For the purposes of creating a multi-year Budget, is it not important to know that, considering that we basically have only one local revenue-raiser, other than the like of parking charges, which is rates?

Mr McAvoy: Yes, but, without us having to model it, they can work out what that will be.

The Chairperson (Mr O'Toole): They do not come to you and say —.

Mr McAvoy: They will, once they have refined it down, but not at this point.

The Chairperson (Mr O'Toole): They have not asked you, "What would it look like if, for the sake of argument, we did x with rates? This is not, by the way, to do with reliefs. This is just what it would look like if we increased or decreased the regional rate".

Mr McAvoy: It will be a major part of their thinking.

The Chairperson (Mr O'Toole): They have not asked you to do it.

Mr McAvoy: They have not asked me, but I am a policy and legislation official, not an accountant.

The Chairperson (Mr O'Toole): You are policy, but —.

Mr McAvoy: We will come in once they start to refine their thinking on that, and we will let them know about the potential implications of going too high in one area and too low in another.

The Chairperson (Mr O'Toole): You say you "will come in": do you mean that you expect to come in before they publish a multi-year Budget?

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): That would appear to be quite a way off, if you have not been consulted yet, and it is 3 December.

Mr McAvoy: They will have worked out their figures. They have the figures on what the regional rates take is at present, and they can extrapolate from that.

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

Ms Forsythe: Thank you, Andrew, for being with us.

My attention went straight to the making and levying of different rates, because I had not seen that come through before. I appreciate your explanation of it. I will ask about a process point. We have this coming to us now to pass by negative resolution in advance of seeing what the outcome of Reval2026 will be. Ultimately, the outcomes of Reval2026 could be surprising; they could be substantial. When we do not yet know that, why are we being asked to pass this now through negative resolution? We might see the results of Reval2026 and be concerned. Would it not be better in terms of process for us to see that first?

Mr McAvoy: Whilst the statutory rule reflects the outcomes of the Reval process, it is there to protect another policy, which is to allow district councils to have the option of making one rate-setting decision if they wish. Once they know what that conversion factor is, it will allow them to do that. The only thing that this does in terms of reflecting the Reval outcomes is provide a mathematical exercise to adjust the calculation; it does not vary policy per se as a result of the Reval process. It will be for councils to realise how it is affecting their overall tax base. They can use the conversion factor to allow them to do that assessment. The rule with the conversion factor will come forward separately in the new year, once the Reval process is finished.

I should also say that, since 2021, conversion factors have been optional. District councils do not need to use them, and they are not beholden to them. If they want to make a separate rate-setting decision on both sides of the tax base, they can. This is just to facilitate them continuing to do what they have done in the past if they wish.

Ms Forsythe: You appreciate where I am coming from with this?

Mr McAvoy: Yes.

Ms Forsythe: It is my first time on the Finance Committee, seeing it come through. I am just trying to think through what it is that is going through by negative resolution. We do not have a chance to pull back on it. If something were to come forward in Reval2026 and we were concerned about scrutiny, we would have already passed this by negative resolution. It is just a process point.

Mr McAvoy: The actual statutory rule will not come forward to the Committee until the findings.

Ms Forsythe: When will that be?

Mr McAvoy: January.

Ms Forsythe: OK. Thank you.

Dr Aiken: I have just a quick one. Most of my questions have been answered.

Andrew, looking at the timelines, we will not necessarily be able to pass the Budget with the speed and in the time required. When are your drop-dead times for getting most of this through?

Mr McAvoy: Well —.

Dr Aiken: We went through this a couple of years ago. Just give me the rough timelines.

Mr McAvoy: With COVID, we went way past the April date at that point, so it is possible to set regional rates afterwards. However, the reason why we come now with the SL1 is so that that part is cleared. It allows us to move quickly to the legislation stage. We will get the legislation cleared through the solicitors prior to the Budget being agreed as well, and then, as soon as that happens, we will be —.

There is a dependency there. In the last two years we decoupled it from the wider Budget process. It was treated as a fixture within the multi-year Budget that would no longer vary, and we got the Executive decision through a separate process so that regional rates would pass and the bills could go out.

Dr Aiken: Basically, this is giving you the vires to do it, once the Assembly has passed the Budget.

Mr McAvoy: Yes, exactly. Therefore, as I say, if we need to decouple from the Budget process, we will, but we are not at that decision point.

Dr Aiken: You do not need separate legislation to do that, do you?

Mr McAvoy: For the regional rate, yes. We will take forward a separate statutory rule, and there is a debate in the Assembly on that.

Dr Aiken: Thank you.

Mr Kingston: You were talking about councils setting their district rates. Are you saying that they could set different rates of increase for —.

Mr McAvoy: Yes, a couple of them have done that in the past.

Mr Kingston: I wanted to ask whether that happened. I was not aware that councils were doing that.

Mr McAvoy: Mid and East Antrim Borough Council has done it twice. I cannot remember which way round it happened, but there was once when it set a higher domestic rate to allow for a reduction on the business rate side. Then, maybe last year, it reversed that and set a slightly higher business rate to offset the domestic. It was part of the issue after the 2019 review of business rates, when there was quite a lot of feedback on how high the rate poundage was here. The Executive reduced it at that point, at the regional rate end of things, and gave councils the option of setting two separate rates so that, if they wanted to reduce the burden further for businesses by reducing the poundage on the business rate side and increasing it on the domestic side, they could.

Mr Kingston: Was that the only council that did that?

Mr McAvoy: I think it was the only council. I can double-check that for you, if you wish, and get back to you.

Mr Kingston: I was not aware that there was that option.

Mr McAvoy: Yes.

Mr Kingston: OK, thank you.

The Chairperson (Mr O'Toole): OK. No other members have indicated that they wish to ask questions. I will ask a couple of further questions, Andrew, before we release you.

I am aware of what you said about the multi-year Budget and the fact that the people primarily responsible for drafting the multi-year Budget will be able to construct a plausible trajectory for rates income without asking you for it in detail and then you can double-check it before it finally goes out. Is that what you said?

Mr McAvoy: It is a wee bit more than double-checking it.

The Chairperson (Mr O'Toole): Right, OK. We have heard this many times since we have been here. First of all, you had to do a lot of the work on the Chris Heaton-Harris-ordered consultations on what we might do in terms of changing the rates system — making them more generous or, largely, less generous, which is what he was trying to do or was suggesting for political reasons. Then you have the various consultations that Finance Ministers have ordered since we returned. Have you been asked to offer any, say, three-year trajectories of specific policy changes and what that would mean in terms of, for example, greater or lesser revenue, in a big structural sense, to feed into the three-year Budget work? I guess what people out there are wondering is —.

Mr McAvoy: Generating a higher level of revenues?

The Chairperson (Mr O'Toole): Generating a higher level of revenues — the big discussion. The Minister has said that he wants higher levels of revenue raising. That would require the devolution of new fiscal powers, which would take a significant time. It would have to be agreed by the Executive, negotiated with London and legislated for. That would take years, and so it will not happen before the end of the mandate. There is also using existing tools to raise revenue, which, the Minister has indicated, he wishes to look at. That is not unreasonable, but it basically means using the rating system. Has the Minister or anybody asked you to look at or provide worked examples or models of what that might look like over the three-year period so that it can be matched against other options for the Executive to discuss when it comes to agreeing the multi-year Budget? People will wonder about that.

Mr McAvoy: That is integral to taking forward the strategic review process of all the policies. The second element that we are trying to do across a range of policies and where we are coming from with things such as the Back in Business scheme and the small business rate relief scheme — a consultation is going out to try to make changes in that area, as well as to the business growth accelerator — is to look at increasing the span of rateable properties in the system, because the more properties that pay rates, the bigger the overall take. There is the potential to increase the take in that way or, if you wish, reduce the burden on everybody while bringing in the same amount of money. There are two elements to what we are thinking. The first is on what can be done to recalibrate savings or expenditure in the rating system or to bring in savings that can be used elsewhere. The second is the tax-based growth angle that we have really been trying to push in the past couple of years.

The Chairperson (Mr O'Toole): If I understood correctly, the answer is yes, but it is not necessarily directed specifically at this multi-year Budget; rather, it is work that you have already done. The officials who are writing it can go and look at it and draw from it, if they want to, but they have not come to you and said, "Give us" —.

Mr McAvoy: Yes. There will be a section in the multi-year Budget on how the rating system contributes. That will be reflected in it.

The Chairperson (Mr O'Toole): There is a section in most annual Budgets that says, "We get this amount" — one point whatever billion pounds — "from our rating system. If it goes up by a few per cent each year, it will be about this amount in cash by the end of a period". That is anticipated but is not — thus far, anyway — a big revenue-raising exercise or an exercise in saying, "We want to reduce the burden of rates, because that is one of the few direct levers that we have to ease burdens on families and to ease the cost of living". You could say, "Well, we will cut rates, and that will save them a few quid". Either of those things would presumably require you to feed in.

Mr McAvoy: Yes. That happens.

The Chairperson (Mr O'Toole): But it has not happened yet.

Mr McAvoy: No, that happens. We work in the same Department, and the people who are on the side that relates to that in particular are the same people who are working with me on the business rates side. The two feed in automatically.

The Chairperson (Mr O'Toole): OK. You managed that carefully. It is fair to say that the work is done already, and so it is there, should they wish to make use of it. You are not doing any specific big bit of work for the multi-year Budget, but the work is done, should they wish to use it.

Mr McAvoy: I know that the officials who are responsible for the multi-year Budget are working around the clock at the minute.

The Chairperson (Mr O'Toole): I am glad to hear that, too. I hope to hear from them soon.

No one else has indicated that they wish to ask a question on the regulations.

It is worth saying that the domestic and non-domestic regional rates one does not set the poundage. You are kind of agreeing that it will happen, but not the level of it.

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): It is the same with the others, although I think that most people would be relatively keen that the rural ATM relief scheme and the Back in Business scheme continue.

If there are no further questions, I will move on to address the Question on each SL1. I remind you, members, that you are not agreeing a specific policy here; you are agreeing that this will be laid, not the level at which it will be laid. I do not want to commit to supporting a level, and I am sure that others do not. I will go through them now.

The Chairperson (Mr O'Toole): Are members content with the proposed statutory rule to set out in legislation the amount of the domestic and non-domestic regional rates for year ending 31 March 2027? You are agreeing that the legislation is made; you are not agreeing the level of the rates. I would not commit myself to supporting the level at this point, and I am sure that other members may not wish to. Are members content?

The Chairperson (Mr O'Toole): Are members content with the proposed statutory rule to extend the small business rate relief scheme to the end of financial year 2026-27?

The Chairperson (Mr O'Toole): Are members content with the proposed statutory rule to allow one rate-setting decision to be made by a district council in relation to both parts of their tax base, domestic and non-domestic?

The Chairperson (Mr O'Toole): Are members content with the proposed statutory rule to continue the Back in Business scheme until the end of financial year 2026-27?

The Chairperson (Mr O'Toole): Are members content with the proposed statutory rule to retain a rates exemption for ATMs in rural areas?

The Chairperson (Mr O'Toole): OK. Great.

Thank you, Andrew. We look forward to hearing from you soon, and well done for carefully answering our questions but not committing too much, much though I tried to get you to.