Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): If Members are agreed, we will get Hansard to provide a retrospective transcript.

The Chairperson (Mr O'Toole): We are hearing from Andrew McAvoy, who is director of rating policy. Thank you, Andrew; you are very welcome back. We are always pleased to see you and appreciate your time. Will you give us an opening statement?

Mr Andrew McAvoy (Department of Finance): Thank you, Chair, for the Committee's time. This will mainly be a process update on a number of pieces of work since the end of the summer mandate. The Committee will be aware that the Minister made a statement at the end of June, just prior to the summer recess. The statement focused on two areas. I will highlight briefly what those are, and then I will go on to explain what work has been done on them.

The first area is a public consultation exercise that came out of last year's strategic review work. The consultation was on two policy proposals to aid policy development. The first proposal was on the introduction of a business growth accelerator. The second was on phasing in increased liability for non-domestic vacant rating (NDVR). In the statement, the Minister also announced that, for 2026-27, the strategic review process will focus on the rating of empty homes policy and the exclusions that apply. It will look at two additional areas: the rating of second homes, and the rating of holiday homes. I will update the Committee on each area and set out what has been done since the ministerial statement.

At the start of the summer, we proceeded to consultation on the business growth accelerator and the non-domestic vacant rating liability. There were a number of public events, including with Belfast Chamber and other interested groups, as well as visits to Newry. As we expected, the responses to the consultation came from those at an organisational level. It is not an area that individual ratepayers or businesses tend to comment on. Therefore, the responses were structural and strategic. The consultation closed on 23 September, but as a number of stakeholders requested a short extension, we took receipt of consultation responses until last week. We granted an extension to anybody who asked us for one before the cut-off date.

The business growth accelerator and non-domestic vacant rating are complex areas, and the two interact. The responses were therefore detailed. In the consultation document, we deliberately solicited responses to key questions to inform the policy development. Those who responded to the consultation engaged with it seriously, and the responses were of a high quality. A report is now being prepared for the Minister. I am putting some finishing touches to it, while taking into account the final few responses.

If the Chair wishes, I can give the Committee a high-level overview of some of the issues raised, or I can come back to it at the end.

The Chairperson (Mr O'Toole): It would be good if you could give that to us now.

Mr McAvoy: OK. As I say, the Minister has not had sight of the detail of what people said, but some of the commentary has been in the public sphere, so it is fine to share it at this point. On the business growth accelerator, the evidence that came back strengthened the mandate to proceed with a policy in that area. There was cross-sectoral support from councils, local government representatives, chambers of commerce, retailers, the hospitality sector, large and small businesses, rating professionals and heritage stakeholders.

Before I set out the principal challenges that we will face in the next steps, I remind the Committee of the way in which the business growth accelerator policy will work. It will provide rate relief for someone who has extended or expanded their business premises. The way in which the rating system works at the moment is that the liability kicks in straight away from the date on which the change is made. The proposal here is to provide a grace period. Part of the engagement and discussion that we had was about how long the grace period should be. Stakeholders said that there needs to be clearly identified eligibility criteria and protection from facing a cliff edge in liability. It is therefore about how we can create a glide path into higher liability as opposed to just making the change and the liability hitting straight away. Other issues that we discussed with stakeholders included the exact process for advance notification. As the Committee will appreciate, those are quite technical issues in relation to property development and its interaction with the rating system.

With regard to non-domestic vacant rating liability, the support was more qualified in relation to the increased liability. There was substantial support for an element of increased charging, but, as expected, there was support for that to be focused on tackling persistent and avoidable vacancies.

The Chairperson (Mr O'Toole): Is it fair to say that, predictably, business groups are happy with the thing that might reduce taxes but less happy with the thing that might put taxes up a bit?

Mr McAvoy: Not quite. I will get into some of the individual responses. The Institute of Revenues, Rating and Valuation, which advises the property tax systems across England, Scotland, Wales and here, highlighted the experience in England, Scotland and Wales when they went straight to 100% liability. It highlighted issues such as deliberate dereliction to bring a property right outside the rating system. Therefore, the increased charge has had a repercussive effect. While we would have preferred the policy to complement regeneration initiatives, it focused on pushing the liability up to revenue raise, which has led to avoidance behaviour plus deliberate dereliction. It is not quite as straightforward as saying that those who would be affected do not want it, and those who would not be affected are broadly in favour of it. It is quite a nuanced response.

We will share the detail of the findings with the Committee in due course. There was quite a bit of feedback in relation to phasing and interesting discourse around whether, instead of everybody going to the 75% level of liability in the first instance, some work could be done in relation to zoning or the geographical targeting of that higher rate so that it is focused on areas where it is felt that there has been land banking or where people have been deliberately keeping properties vacant for a purpose.

The Chairperson (Mr O'Toole): I presume that that would require primary legislative change.

Mr McAvoy: That would require primary legislative change, yes, but it was something that came out quite clearly in the consultation exercise. Again, alignment with other regeneration initiatives and complementary investment activity was highlighted.

There are two aspects to the policy. One is revenue raising. It brings in more money. The other is that it can be used as a regeneration incentive, but it is more stick than carrot. A prominent piece was written in one of the newspapers by one of the rating agents that highlighted that you need the carrot and the stick, potentially, with the policy change.

There was qualified support for the 75% in the consultation, and the Minister outlined that his initial take on the policy was that it would go to 75%, and then there would be an incremental increase up to 100%, again stressing the need to monitor the policy change before the 100% charge is brought in for the reasons that I noted.

Smaller bits of feedback suggested taking into account where there has been a genuine market failure, in that there is an inability to let properties in certain areas, and that there are issues to do with heritage properties and listed buildings. Those are all issues that we are going to take away as part of the consultation to inform the next steps.

Rating of empty homes was the other aspect of the Minister's statement. Exclusions apply in that, so we will look at that, but two interrelated areas are second homes and holiday homes. The Committee has highlighted that to me previously, and we had advised that we were keeping a watching brief on that because there had been some changes in England, Scotland and Wales to give people powers to increase the level above 100% for some of those two categories. That has happened in some places. We have been watching it, and now we are moving to take forward a strategic review of the area encompassing those two aspects.

The Chairperson (Mr O'Toole): That has happened in some places in England and Wales where people have gone to —.

Mr McAvoy: Yes, it has gone to 200% or 300% of the occupied liability for second homes or holiday homes. [Interruption.]

The Chairperson (Mr O'Toole): Will the Members who are remote mute their microphones?

Is that for council tax?

Mr McAvoy: Yes. In areas of Wales, where it had been brought in at 200% to 300%, there were reports that it had a swift adverse impact on the property market. We want to take care about that rather than jumping straight into doing something like that.

The Chairperson (Mr O'Toole): Is that in areas where there are a lot of second homes?

Mr McAvoy: The equivalent in Northern Ireland would be the Causeway coast, Fermanagh and Enniskillen. I spoke to the councils because there is a legitimate issue with a shortage of accommodation in some of those areas. The Minister has said that the work will be taken forward in tandem with the Executive’s housing supply strategy, and we will complement that work through this area of review. The exclusions on the rating of empty homes are not tremendously valuable in terms of revenue loss, but looking at what can be done in the area of second homes and holiday homes is the main focus of the exercise.

Finally, we developed and took forward the consultation on the small business rate relief (SBRR) enhancement last year. We also successfully made the case for £10 million of additional funding to be included in the draft multi-year Budget when it was published. I will not rehearse the issues with the Budget at present, but you know the situation from last week's briefing. The money was identified and ring-fenced as part of the Budget process. Again, that has not been decided, but it has been paused depending on what will happen with the Budget. The work is in a state of stasis.

Do you want me to go quickly through the statutory rules, Chair?

The Chairperson (Mr O'Toole): I might take some questions now and go back to the statutory rules because that might enable some important discussions.

Mr McAvoy: No problem.

The Chairperson (Mr O'Toole): Members, we should discuss the broad rating policy consultations. Was the business growth accelerator consultation first announced by the Minister just before the summer break?

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): The consultation began in July and finished a fortnight ago. The current position is that you are summarising and analysing the responses in order to provide the Minister with a summary of responses and potential next steps. It is very unlikely that we will get to any legislative change before the next election.

Mr McAvoy: I do not want to speak too soon about that because I do not know what the revenue will be.

The Chairperson (Mr O'Toole): I am not asking you to speculate about the political decisions, because that would be unfair. However, is it logistically possible to get to that point?

Mr McAvoy: It would be possible to do a straight increase in the level of the rating with the legislation, which is subject to affirmative procedure in the Assembly. The qualified implementation that requires geographical zoning, or the regeneration activity that sits alongside it quite neatly, will take more time because it requires at least primary legislation on our part. The accelerator will require primary legislation.

The Chairperson (Mr O'Toole): That will not be possible. It would be possible to increase the non-domestic vacant rating liability.

Mr McAvoy: You can do that through a statutory rule.

The Chairperson (Mr O'Toole): That would require affirmative procedure, and we would get to vote on that, but you could make it less generous and, therefore, raise £20 million.

Mr McAvoy: The loss associated with non-domestic vacant rating liability is £20 million for the 50% relief that is applied at the moment. If it was brought up to the 75%, the £10 million would be split between the councils and the Executive. We are not talking about tremendously large amounts of money.

The Chairperson (Mr O'Toole): It is not going to solve all the fiscal problems, but it would be £5 million for the Executive.

Mr McAvoy: There is a twin focus on the revenue raising aspect and the regeneration aspect, and it is trying to deal with both aspects of the policy drivers at once.

The Chairperson (Mr O'Toole): Changing the non-domestic vacant rating liability is, perhaps, more of a stick to disincentivise dereliction and make it less generous to businesses —.

Mr McAvoy: Dereliction is a difficult one, because the rating system deals only with properties that are capable of occupation.

The Chairperson (Mr O'Toole): It is a fine balance. You are trying to raise revenue while preventing buildings from becoming derelict and incentivising their use —

Mr McAvoy: Exactly.

The Chairperson (Mr O'Toole): — so that they become occupied by viable businesses.

Mr McAvoy: That is where the comments on zoning came from. You have local knowledge at council level. Councils can say, "That area is definitely one in which an increased charge would benefit the council and the area".

The Chairperson (Mr O'Toole): That would require a big consultation, because you would need to carefully design it. I could name streets in South Belfast about which I would say, "Absolutely, get in there and penalise the owners of buildings that have been lying unoccupied". I am sure that other members could also do that, because they know their constituencies. However, the complexity is writ large. That would inevitably be controversial, because people would say no.

Mr McAvoy: I do not know whether it would be more or less controversial than applying a blanket policy. There has simply been a market failure in the rental market in the tertiary stock of office and retail premises, particularly post COVID. Some people say that they cannot let out those premises: they are actively trying to let them but cannot get rid of them.

The Chairperson (Mr O'Toole): OK. Thank you. Before I bring in the Deputy Chair, I have a few more questions. We have talked to you many times about the strategic rating review. You may not remember, but how many consultations have there been since February 2024? There have been quite a number of them.

Mr McAvoy: There have not been that many public consultations. There have been two consultations. The strategic review process is different from the consultation process. We looked at policies in 2024 and 2025, which were the maximum capital value and the early payment discount. We consulted on those. The following year, we looked at small business rate relief and non-domestic vacant rating. Consultations came out of that process in relation to SBRR, which I talked about earlier. Where it sits depends on the funding. The NDVR process was consulted on as part of the latest work. We can review a policy, but we cannot take forward changes until we do a public consultation to inform its development.

The Chairperson (Mr O'Toole): For the record, none of the changes that were consulted on have happened.

Mr McAvoy: No.

The Chairperson (Mr O'Toole): OK.

Mr McAvoy: We have brought them as far as we can in terms of policy.

The Chairperson (Mr O'Toole): That is completely fair enough. Some of them require Executive decisions, which, for one reason or another, have not happened.

I turn to where consultations have happened but a policy change has not been made off the back of them. When it comes to rate revenue, there is an open question regarding legislation. I am trying to get to the bottom of this, and I may be asking the wrong person. Have you had any contact with other bits of the Department on the legalities of using the resources that we collect here? Ninety-odd per cent of what we raise locally comes from rates. There are also assorted charges from parking and things like that, but, broadly, it comes from commercial and domestic rates. There was an outstanding question about whether it is legal to spend those resources in the absence of a Budget Act. What is your read on that?

Mr McAvoy: I am not sighted on that issue. We design the policy —

The Chairperson (Mr O'Toole): You just collect it.

Mr McAvoy: — and it is collected.

The Chairperson (Mr O'Toole): You design and collect it. It is up to others to say whether it is legal to spend it.

I will bring in the Deputy Chair, and we will come back to the rates orders. I imagine that there will be other questions about various bits.

Ms Forsythe: Thank you, Chair, and thank you very much, Andrew, for being here. We have talked about such a range of things to do with policy. We all know about the paused Reval2026. A case is going forward, so I will not ask about that. Hospitality Ulster has put out correspondence and highlighted the fact that it is:

What is the rationale for that going ahead, given the fact that Reval2026 has been paused? Is that happening to any other sector, or is it just those hotels, pubs and bars?

Mr McAvoy: Those are two separate things. As you will know from the briefing earlier this year, the revaluation exercise will look at redistribution at a point in time. It will update the valuation date; it will say, "From now on, these properties, in the case of what would have been Reval2026, are dated from 1 April 2024 in terms of the valuation assessment that we use". That did not go ahead. However, where there have been physical changes to a property, there are other "business as usual" statutory duties on Land and Property Services and the Commissioner of Valuation in her statutory role to conduct routine list maintenance. To put it simply, if you build an extension on to your house, that will be reflected eventually in the valuation list — the valuation that is used for your property. That is the same throughout the system. While it might be happening in relation to hotels or pubs that have made extensions, it is not unique to that sector; it happens across all sectors.

Ms Forsythe: Has there been a sweeping exercise to do that from a point in time? Why is the number so significant just now? As a constituency representative, I know that homes and other premises are revalued after extensions and renovations. There are 114 properties in the hospitality sector that are highlighting this now. Has there been an exercise across the board to do those valuations that has been specifically targeted at the hospitality sector, or has it been for all sectors?

Mr McAvoy: No. All sectors will be subject to routine maintenance in terms of the valuation list. It may be the case that the hospitality sector would have been picked up at Reval in relation to expansion work and the Reval impact. Obviously, however, Reval is not going ahead, and some of those properties are still being valued in light of the substantive COVID discounts that still apply in relation to their value. Eventually, however, regardless of whether Reval2026 had gone ahead, the system would still have to pick up any properties that have changed physically.

Ms Forsythe: You appreciate the reaction, though —

Mr McAvoy: Oh yes.

Ms Forsythe: — given how strongly the hospitality sector felt under Reval2026. It feels as though this is another exercise in the interim. To be clear, however, you are saying that —.

Mr McAvoy: This is work that would have been happening anyway. It needs to happen to keep it fair for everybody in the rating system. It would have been picked up at Reval2026 with the new values but, in the absence of that, it needs to be done in relation to current values too.

Ms Forsythe: It is picking up extensions or changes to properties, but at the base rate of the pre-Reval2026 value.

Mr McAvoy: Yes. It is in the 2023 list; it is nothing to do with reopening the 2026 list.

Ms Forsythe: Do you know how many properties are currently under review? Obviously, 114 hospitality businesses have come forward, but I wondered about other sectors.

Mr McAvoy: I have had sight of a letter that we received today. I am not involved in the work of revaluing the pubs as part of ongoing list maintenance. If that is what they are saying, then that is potentially the number involved. I will need to check with my colleagues.

Ms Forsythe: Would it be possible for the Committee to know how many different business properties are under review at the moment? Might we have sight of that and what sectors are involved?

Mr McAvoy: Yes.

Ms Forsythe: It has been highlighted that quite a lot of businesses in one section of the economy are being reviewed. It would be helpful to understand, following Reval2026, whether a number of things have been picked up across a range of properties and a variety of sectors. It would be helpful to the Finance Committee, if members are agreed, to have sight of the number of properties that are currently under review.

The Chairperson (Mr O'Toole): Yes, OK.

Mr Kingston: I want to understand how the business growth accelerator works in practice. I get the rationale that if you invest in your property, you are effectively, for the first year, not going to be charged the increase in your rateable value. In practice, similar to what Diane was saying, how often is rateable value for non-domestic properties increased? Is it typically every three years, or is it done on some sort of rolling basis?

Mr McAvoy: If there are changes to property, we tend to be notified through the building control process or the planning process. The information comes through to us, and we pick those up on a routine basis. The three-year cycle pertains only to the general revaluation process of all properties at a point in time. Outside of that, rolling list maintenance occurs.

In the absence of a business growth accelerator policy, the liability kicks in from the date of the change. That came out through engagement with the hospitality sector. A couple of businesses were thinking of expanding but were saying that the cash flow models that they had done, which projected the likely additional income through the expansion, showed rates to be a significant factor in their failing to extend the premises. That came out of the strategic review work last year, and that was why the proposal was put forward for consultation. It does happen, and, where they were doing their modelling, that was seen to inhibit their ability to expand in some cases, not just for hospitality but for retail and other sectors.

Mr Kingston: There is real-time monitoring of valuation increases.

Mr McAvoy: Yes. We get feeds from the district councils.

Mr Kingston: How would it apply in practice? Presumably, the date of completion of the works would have to be agreed.

Mr McAvoy: That is part of what we were discussing through the consultation exercise, because a key aspect of this will be advance notification. We do not want people taking forward work, not getting picked up and then coming forward retrospectively. We want people to say, "Here is advance notification of the change". We would then get it into the system, they would undertake the work, and, when the adjustment of the valuation of the property kicks in, it would not become operative in terms of liability until, say, 1 April of the following year or 12 months down the line. That grace period has also been subject to the discussions in the consultation, as has, given, for example, the comments on the cliff edge, whether you should go to 100% liability or whether any additional increase should be phased in.

Mr Kingston: Part of that is agreeing when the 12-month period commences.

Mr McAvoy: Yes. That is correct.

Mr Kingston: Presumably, it is from when the works are completed.

Mr McAvoy: Typically, when work is completed on a property, a completion notice is served. That is part of what I was saying about the complexity. We almost need to intervene at various points in the process in relation to the policy

Mr Carroll: Thanks, Andrew. You mentioned the exemption around holiday homes and second homes. Maybe I missed it, but did you mention a domestic empty homes taxation or finance system?

Mr McAvoy: Yes.

Mr Carroll: You did mention that. I heard the term "exemptions", but I did not hear about the scheme itself.

Mr McAvoy: Currently, 100% rates are paid on empty homes. Whether a home is empty or occupied, you pay the same. That was taken forward following the Semple review of affordable housing in the early 2000s. This one is looking at holiday homes and second homes that are still paying rates at 100%. Part of what we are looking at is the potential for increasing the liability beyond that, in the same way as has been done in parts of England, Scotland and Wales. It is to deal with that issue. As I said, I had discussions last week with Causeway Coast and Glens Borough Council on that, and it finds that to be an issue in relation to housing supply for local people. We have committed to looking at it, and the Minister wants us to take it forward as part of this review and the work on the Executive's housing supply strategy.

Mr Carroll: Thanks. I remember from a previous conversation that you stated that the Department could increase the rates percentage on an empty domestic property to 120%, 130% or higher. It has the power to do that, and I know that there is a question around the political will to do so.

Mr McAvoy: We do not have the power to increase it currently. We would have to take primary legislation through to go above 100%.

Mr Carroll: There is no scope currently. Is any extra provision being looked at to charge or penalise financially empty domestic properties?

Mr McAvoy: We will look at that as part of the process. It is one of the potential options for rating. It might also take into account things such as levies or licensing arrangements for Airbnb.

Mr Carroll: Finally, according to the responses that I received to recent questions for written answer, there are around 40,000 or 45,000 empty domestic properties in the North. As far as I recall, however, there is no system in place for the LPS or the Department to allow those properties to be registered. Is that correct?

Mr McAvoy: We have a fairly clear line of sight on empty commercial space. As I said, with the liability rate sitting at 50%, the minute that a property becomes unoccupied and there is no lease on it, there tends to be a switch in who pays the rates. There is no real delay in people telling us, "That is not my bill to pay. It is somebody else's". When it comes to empty homes, if someone moves out of a house and still owns it or if it is a second home, because the liability sits at 100% for both, we do not have a line of sight on that. For the housing statistics that, I think, DFC puts out on empty homes, the information that comes from us has to be caveated on the basis that there could be additional empty homes that continue to be categorised as occupied, because it is of no material benefit for people to tell us that a property is vacant. That is probably what you were getting at.

Mr Carroll: That is OK. Thank you.

Ms Murphy: Andrew, my first point is more of an observation than a question. The Dilapidation Bill recently passed its Final Stage. That should complement the non-domestic vacant rating liability by disincentivising people from keeping vacant premises in a state of dilapidation or dereliction.

You mentioned holiday homes. I have a supplementary question to some of Gerry's questions. Does LPS have a breakdown by council area of the number of holiday homes?

Mr McAvoy: No. We do not know whether they are holiday homes or primary residences. There is no record of that. There may be a record elsewhere in the tax system, but taxes are managed at Westminster. The tax system will know that. People probably need to declare that in aspects of the wider tax framework. From our point of view, rates are based on the occupation of a property, which means that, in the main, the occupier is the person about whom we want to know. That information is all that we need to levy the bill and charge people. We are not sighted on whether properties are holiday homes.

Data-sharing provisions need to be built in for there to be any additional charge. Part of what made me hesitant to do too much on that in the past is that I wanted to see what was happening in England, Scotland and Wales on charges elevated beyond 100%. I always took the view that if, for example, a husband and wife have two properties, one of them will declare one property to be their principal residence and the other one will declare the other property to be their principal residence, so how will I enforce that? It is fine to bring that policy into place, but, if it will not apply in practice or its application will be inconsistent, there will be an issue of fairness.

Ms Murphy: Thank you, Andrew.

The Chairperson (Mr O'Toole): We will move on to have a briefing on various rates orders, if that is OK, members. We have covered rating policy and Reval. Andrew, we may ask you or a colleague to come back after November to talk to us about where Reval2026 is. It was useful that Diane covered those questions, because that has come up with Hospitality Ulster. As of now, you await the outcome of the court judgement before to provide more clarity on what will happen with Reval.

Mr McAvoy: Yes. I have been involved in the legal action, but I do not like to stray too much into the valuation side without valuation colleagues being here.

On why the three statutory rules are coming so comparatively early this year —.

The Chairperson (Mr O'Toole): That would be interesting to know.

Mr McAvoy: The first reason is that the new processes for SL1s, of which the Committee will be aware, involve building in additional time for the consultation period. Secondly, the mandate is coming to a close, so there is a slight curtailing of the window — the number of weeks — that we normally have in which to bring forward legislation. We will lose a few weeks at the back end of the process because of purdah. Also, from experience, I know that there is always a mad rush to pass legislation at the end of an Assembly mandate, and I do not want this to be part of the general mix that puts a demand on the Assembly's time. We issued the SL1s to the Committee at the earliest practical point in order to maximise everyone's time and slightly take pressure off the system.

I will talk about each SL1 in turn. The one on the regional rate is interesting in its relationship to the point that I just made. It is significant legislation that delivers the only real devolved tax each year by setting the poundage. The Committee will be aware that we bring the SL1 stage of this SR forward earlier than —. We are seeking consent on the statutory vehicle by which to deliver the poundage for the regional rate moving forward as opposed to consent on the decision as to what the actual poundage uplift will be.

The Chairperson (Mr O'Toole): You will need to put the poundage in at some point, though.

Mr McAvoy: We will. When the poundage goes in, it will be subject to a debate in the Assembly. The order will be laid with the Committee in advance.

I will touch on the Budget side of things. The Budget for 2026-27 and any years beyond is a live issue. Even last January, however, because of the issues with the Budget, we had a stand-alone paper on the regional rate. Rate bills need to be issued in April, no matter what, so, where it has previously looked like there were going to be issues with a Budget, we have decoupled the rates from that and gone with a separate Executive paper. That has happened since the Executive returned in 2024.

The Chairperson (Mr O'Toole): For clarity — the public may wish to know this — the Executive decided and the Assembly agreed to increase domestic rates by 5%.

Mr McAvoy: Yes. They agreed to increase domestic rates by 5% and business rates by 3%.

The Chairperson (Mr O'Toole): That is what people are paying now. Those bills started going out in April of this year.

Mr McAvoy: That is the uplift in the bills that went out.

The Chairperson (Mr O'Toole): So, that is —.

Mr McAvoy: That is on the regional rate aspect. Obviously, councils —.

The Chairperson (Mr O'Toole): It is regional; that is different from the district rate. As of now, in the absence of an Executive Budget, people are paying that. Hypothetically speaking, that money is being spent by Departments under the Budget contingency arrangements that we have talked about a lot. Those payments are not contingent on a Budget being agreed; people are already paying the extra regional rates that we legislated for and that the Executive agreed.

Mr McAvoy: Yes. We decoupled the two.

The Chairperson (Mr O'Toole): And that happened —.

Mr McAvoy: If we do not have a regional rate, we cannot issue bills at all; we cannot even go out with the council bit of it alone. They are levied as one rate.

The Chairperson (Mr O'Toole): Were the regional rates orders previously laid alongside the Budget document? Is that what happened in the past?

Mr McAvoy: It has happened both ways in the past. For example, when we were without an Executive, the Secretary of State took forward legislation at Westminster to set a regional rate. In the past, we have had multi-year Budgets to which what the regional rate was going to be was nailed on from the outset.

The Chairperson (Mr O'Toole): Three years

—.

Mr McAvoy: Even the draft multi-year Budget that went out in January envisaged a 5% and 3% uplift in each year of the multi-year Budget period.

The Chairperson (Mr O'Toole): What uplift was agreed? It was 5% each year —.

Mr McAvoy: It was 5% on the domestic —

The Chairperson (Mr O'Toole): It was 5% on domestic —

Mr McAvoy: — and 3% on non-domestic.

The Chairperson (Mr O'Toole): — and 3%.

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): I presume that that assumption is baked into the current Budget conversations.

Mr McAvoy: I assume so, but I am not sighted on that.

The procedure involved in making legislation means that we have to bring forward an SL1. If there is no progress on the Budget — as I said, I am not sighted on whether there will be — I assume that that will be to do with 2026-27 at a minimum. We need to look forward to the 2027-28 rate bills going out. If the situation remains the same, we will have to go to the Executive with a stand-alone paper on what the uplift will be.

The Chairperson (Mr O'Toole): Although I do not know the conditions and am not involved in those discussions, theoretically, if the Executive were pushed to agree to revenue raising of some kind, the most straightforward vehicle would be to increase the poundage by more than they have already pledged. I am not saying that the Executive will do that or should do that, but that is how it would happen.

Mr McAvoy: That would increase revenue through an existing mechanism.

The Chairperson (Mr O'Toole): OK. I will bring in other members now. Before we do that, will you cover the other two statutory rules? I do not want to spend much time on rural ATMs: it is an important but small policy.

Mr McAvoy: The rural ATM statutory rule is a continuation of the existing policy. It is a micromeasure, but it is there to retain the very small number of machines. It will not incentivise the banks to put new ATMs in place, but it will very much help to retain the ATMs that are already there.

The Chairperson (Mr O'Toole): Does it help? Do you collect any data on that? Presumably, you can see the numbers.

Mr McAvoy: The numbers have remained fairly static since the Supreme Court decision. A lot of the ATMs will be moved into the valuation of the general property, but the numbers have remained fairly static for stand-alone ATMs in the last couple of years.
When the Executive returned, I advised the Committee that the Back in Business policy would take a while to gain momentum, but it is starting to build. About 140 new businesses have started since 2024 under the scheme, and awareness continues to grow. There has been collaborative work with the councils on the initiatives that they are putting in place to provide grant mechanisms to bring empty properties back into use. The ATMs and the Back in Business statutory rules are complementary, and they will extend the schemes until 31 March 2028.

The Chairperson (Mr O'Toole): The rates order that you have brought us has "x" where the poundage should be. For the record, the poundage is about 30·79p, and that would increase to over 31p.

Mr McAvoy: We do not want to build that in yet. It would be premature for me to say what it will be. As part of the SL1 process, the draft SR goes out.

The Chairperson (Mr O'Toole): A draft Budget published by the Finance Minister assumes that it will be 5% a year on non-domestic rates.

Mr McAvoy: It is 3% for non-domestic rates and 5% for domestic rates.

The Chairperson (Mr O'Toole): That is what I meant. Sorry. It is 5% for domestic rates and 3% for non-domestic rates for the regional rate, not the district rate. However, as yet, there is no Executive agreement on that. You have brought us the order in a very draft form.

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): At some point, there might be political agreement on the rates increase.

Mr McAvoy: It is the same process that we have used for the past two years.

The Chairperson (Mr O'Toole): The Executive are in a live discussion about the Budget. However, unlike a Budget, if a regional rates order is not passed by next March, the bills cannot be issued in April.

Mr McAvoy: Bills cannot be issued until both poundages have been set.

The Chairperson (Mr O'Toole): There is no fallback, in that you would not collect the money.

Mr McAvoy: They are both levied as one poundage rate in the bills, and the legislation says that the regional rate and the district rate have to be applied to the value to get the rates bill.

The Chairperson (Mr O'Toole): When do you hope to get that paper to the Executive for discussion?

Mr McAvoy: I have not discussed it with the Minister yet, but, at official level, there will be an intent to prepare it for in and around November, bearing in mind that there may be some movement on the Budget.

The Chairperson (Mr O'Toole): The paper will be presented in November for discussion.

Mr McAvoy: Yes. Last year, we got the decision in January, but I would be a little nervous about leaving it as late as that this year, given that we will be running out of road at the end of the mandate.

The Chairperson (Mr O'Toole): The figure of 5% is an assumption. It is in the draft Budget, which has not been agreed by any of the Executive parties. If it were to go to 6%, how much would that raise? What are the numbers percentage-wise?

Mr McAvoy: I can come back and confirm that with you, but, generally, a 1% increase on both sides of the tax base brings in about £8 million. It depends on the exact split between domestic and non-domestic, but you are talking about in the region of £4 million for each side of the tax base.

The Chairperson (Mr O'Toole): So, £4 million for domestic and £4 million for non-domestic.

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): That is based on one percentage point

Mr McAvoy: Yes, 1% above —.

The Chairperson (Mr O'Toole): A percentage point increase on rates.

Mr McAvoy: As I said, that is very crude, but —.

The Chairperson (Mr O'Toole): And that is regional, not district, obviously. OK. That is helpful.

Ms Forsythe: Having done a wee bit of work on that point, I would like to caveat that, Chair. Although that increase is the top line, it does not necessarily increase the cash in, because you will have an increase in proportionate benefit-related payments that are paying the rates moving around in the system. It is not all new cash in from the public.

Mr McAvoy: Yes. That additional amount would be net of their relief. That is how much we actually realise out of it. As you increase the amount of liability, you jettison that out through increased relief costs and such things.

The Chairperson (Mr O'Toole): Is the £8 million that you talked about net of the rebates and all that?

Mr McAvoy: Yes.

The Chairperson (Mr O'Toole): OK. That is good to know. We look forward to hearing from you. Maybe, at that stage, there will be a Budget and a rates order. At the minute, none of us would have to pay rates, and nor would our constituents if we had not passed a rates order last year, so, theoretically, that can be separate from the Budget process. There is a question about whether it is —.

Mr McAvoy: A couple of mandates ago, when I was briefing the Finance Committee, it was a bit worried because there was no Executive. It said, "How are we going to get small business rate relief next year?", and I said, "We've a bigger problem than that. We haven't set a regional rate yet". It is not uncharted territory.

I met the chief executives of the councils last Friday. They stressed to me that, even for their planning purposes and to inform their rate setting at council level, they like to be aware early of at least the general direction of the regional rate.

The Chairperson (Mr O'Toole): One final thing on the Budget discussions: theoretically, you could get quick agreement on some of the changes that we have been talking about, such as the max cap, the business accelerator —.

Mr McAvoy: And early payment discount. Yes, if you gathered all that up.

The Chairperson (Mr O'Toole): If you could get quick agreement, you could do all that. If the Executive were willing to agree those, you could get all of that done. I am not saying that that will happen, but that could all be done and be legislated for in advance to go alongside some of the Budget stuff.

Mr McAvoy: The max cap could be done through affirmative resolution, as could early payment discount and, potentially, the NDVR. It is just —.

The Chairperson (Mr O'Toole): Political will.

Mr McAvoy: There may not be an appetite for saying to people at this point in the year, "From next April", although that happens with other taxes, obviously.

The Chairperson (Mr O'Toole): If the Executive were willing, they could do those things.

Mr McAvoy: There are revenue-raising options.

The Chairperson (Mr O'Toole): They would not need new or extra consultations or a new drafting of legislation.

Mr McAvoy: No, that was the purpose of doing the consultations.

The Chairperson (Mr O'Toole): Sure. At least we are ready. As with lots of things, your bit is ready to go on Reval and all the various consultations that you have done. There has definitely been a lot of preparatory work, Andrew. No one could fault you on that. You have definitely done all your homework for an exam that you continue to want to take.

On that note, we will let you go. Members, I do not think that we have anything else to ask. We have covered quite a bit. We will liaise with the Department, as always. We will note receipt of the three proposed statutory rules. We will do all the usual asking for views via surveys. Members of the public might have views about a regional rates order in the absence of a Budget, but that is up to them. Maybe they will make their voice heard. Committee staff will also liaise with the Department as necessary to inform a decision on the SL1. We will consider the SL1s, but, in all likelihood, the regional rates order will still have an "x" rather than a poundage on 4 November.

Mr McAvoy: I imagine so.

The Chairperson (Mr O'Toole): In that case, we will await that. Thank you, Andrew.