Debate contribution: Rating Policy: Strategic Road Map

Debate contribution by Mr John O'Dowd on 18 November 2025.

MLA

Mr John O'Dowd

Party at the time

Sinn Féin

Date

18 November 2025

Type

Debate contribution (made as a minister)

Business

Ministerial Statements

Heading

Rating Policy: Strategic Road Map

Assembly identifier

Official Report component 5243969

Read the official Assembly record

Text

I wish to provide Members with an update on the progress made on the review of the rating system and my intended steps over the coming weeks.

Less than a year ago, it was announced that my Department would undertake a systematic review of all rates supports. Substantial progress has been made to date, with four policy reviews completed. I am accelerating the review process and can confirm today that every rate support will have been reviewed by the end of the 2027-28 rating year. The remaining policy areas will be front-loaded in order of strategic importance within the remaining time frame. The aim of the process has been and remains to secure positive and progressive changes to the rating system. That need has been echoed strongly by interested parties through the course of significant engagement with my officials. Today, I will outline how I intend to bring about change that will see enhanced support for small businesses, which are the backbone of our local economy; change that tackles the high level of vacancies in our town and city centres; change that supports businesses that are starting out; and change that helps accelerate business growth. I cannot do that in isolation, and I have spoken many times in the House and around the Executive table of the constrained financial environment within which we operate. In terms of how we deliver rating change in such a context, the interlinked nature of rating policy, both domestic and non-domestic, is critical. That is particularly the case as we aim to improve the system with limited resources. Where changes to make the system more progressive can act to deliver change in one area, those savings can then allow us to ease the tax burden on others. Following the public consultation on increasing the maximum capital value and reducing the early payment discount, which concluded in April, responses were assessed and proposals put forward to the Executive in June for a decision. Those proposals have the potential to unlock £9 million of government spending power. To illustrate the significance of that in rating terms, that £9 million being diverted to the small business rate scheme enhances an existing scheme that costs £22 million and already supports 30,000 ratepayers. Many in the Chamber have called for additional support for small businesses since the Executive returned last year. The proposals that I am bringing forward pave the way for that while recognising the financial realities within which we are operating. It would be easy for me to set out my policy aims and seek additional funding to support them: that is not what I am doing. Operating a responsive and progressive rating system cannot mean layering additional supports at the cost of other Executive priorities. Instead, we must carefully consider how best the limited support levers available can be applied in the current operating context to best effect. I am not seeking additional funding to enhance support for businesses; instead, I am asking for support to deliver changes in one part of the rating system that allow additional support in another, with the two adjustments operating on a cost-neutral basis. I want to see extra help going to small business properties that provide vital employment and support workers, families and communities. Today's proposals, which stem from the discussions with businesses, align with my desire to deliver positive change for businesses and boost economic growth. First, I will talk about the small business rate relief scheme. It was clear from the strategic review of that area that there was an appetite among representative bodies, industry and local government for enhanced support to be delivered to small businesses. Our local economy is overwhelmingly made up of SME businesses, and around 90% of them are classified as microbusinesses with fewer than 10 employees. I fully endorse such an approach. A sustainable small business sector is at the heart of a thriving economy. It comes as no surprise that other jurisdictions are also supporting that ambition through their own policy proposals. The analysis from my Department concurred that there was a need to enhance support aimed at bolstering businesses in smaller properties. While the approach taken in other jurisdictions has been to cherry-pick specific sectors, that is often done on the basis of legacy support put in place during the pandemic. I have listened to the views provided and am instead in favour of taking a sector-neutral approach to any enhancement of small business rate support. I want to create an environment that brings businesses into town and city centres. However, I want that to be an environment that creates a level playing field for all types of businesses by enhancing support across business types. I see no hierarchy in need. I want to encourage business start-ups of any type and to do what we can by lowering operating costs for businesses in that category. There are two methods by which I can deliver an enhancement to the current small business rate relief scheme. The first method is to increase the amount of reductions delivered under the scheme. The current reduction levels of 20%, 25% and 50% have remained static since the scheme was last reviewed in 2012. It is my preference to increase those reduction levels. The second method of enhancement is to increase the upper valuation threshold that applies in the scheme. Again, that upper valuation level has not been increased since 2012 and needs adjusted to modern rental values.

Given that Reval2026 will be the fourth revaluation process in 11 years, it is my preference to raise the rental value thresholds so that they are broadly in line with valuation list growth. I will consult in the next few weeks on both methods in order to continue to allow changes to be made for the next rating year. The scalability pertaining to both forms of enhancement is critical and forms a key part of the discussion. It is no secret that the Executive's finances are under significant pressure at present. I have brought forward proposals on two policy areas that would raise £9 million. Likewise, lowering operating costs through rate support will in itself have the potential to grow the tax base by bringing more businesses into the rating system and generating more revenue in overall terms. Those two factors, plus the fact that changes can be made alongside doing the revaluation exercise, give us an opportunity to make important changes while maintaining the overall level of rating revenue generated through the broader rating system. I am also willing to consider all ideas on co-funding models from Departments and councils to enhance small business rate relief support. Supporting small businesses should be high on all our agendas, and working in partnership to optimise joint efforts is my preferred approach. My officials are working at pace to put out proposals for consultation between now and the new year in order to get the views of businesses before final proposals are submitted to Executive colleagues for decision. The progress made on taking forward policy considerations on rate relief demonstrates my commitment to delivering positive change. To be clear, in order to translate policy into action, Members must understand that progressive rating does not mean considering policy proposals in isolation but as a whole. On the second area for review, I have already stated in the Chamber and at the Finance Committee that I want to increase the level of liability for non-domestic vacant rating. Admittedly, the views on that policy varied in the review feedback. The case for increasing liability was clear-cut for commercially attractive areas and for areas where there is clear regeneration potential. Support for increasing liability was understandably weaker for less commercially viable areas, where owners can struggle to let properties, despite taking active steps to do so. On balance, however, I take the view that, in order to tackle the high prevalence of vacant units, I now need to move the non-domestic vacant rate from 50% to 75% and then to 100%. When fully implemented, it is estimated that the changes have the potential to unlock a further £20 million of revenue between central and local government. Given the Executive's Programme for Government (PFG) commitments on housing and regeneration and the work being done on preventing dilapidation, there is a unique window of opportunity to maximise the impact of the changes through working actively across Departments. It is, however, a significant change, connecting so many strands of Executive policy, so Executive agreement will be required before the change can be implemented. I have instructed my officials to take forward the policy work that is required to secure Executive agreement. I also appreciate that, in order to respond to the concerns expressed during the review, there will need to be sufficient lead-in time for any change to allow owners to respond to that future shift in policy direction. As I have stated, engagement with stakeholders over the summer was extensive. One of the discussion points was this: what can be done through the rating system to encourage business expansion? When a business makes a decision to expand, its rates liability will usually increase immediately after the work is completed. In turn, that additional rates liability creates more revenue for public services. I recognise, however, that the initial outlay, coupled with the associated increased rates liability, can be off-putting for some businesses that are waiting to take steps towards expansion. To that end, I want to progress rating policy so that the additional rates liability incurred is staggered. That may mean the difference between a business deciding to expand and deciding not to. I am happy to announce that my Department will undertake a consultation process in the new year to progress development of the business growth accelerator policy. The consultation will seek views on policy options for using the rating system to aid business expansion rather than inhibit it, while also unlocking future increased rates income for local and central government. That unlocking of future tax-base growth will operate alongside initiatives that have been brought in since the restoration of the Executive last year, such as the Back in Business scheme.

As part of the review, we worked closely with the hospitality sector. Since the Executive returned, a central ask from that sector has been for an assessment of the valuation methodology for the receipts and expenditure method of valuation, where that is used for pubs and hospitality. Similar sentiments have been expressed in Scotland and England, and both jurisdictions have announced that they will review how the methodology is used there. I am pleased to confirm that we will take account of any findings of those review processes in order to assess any implications that they may have for our local valuation processes. My Department has done significant work over a period of less than a year since the strategic review of rates was announced. We remain on track to facilitate changes for businesses by April 2026, provided that political agreement can be achieved to do so. I recognise that change is hard, but, if we keep doing the same thing, we will keep getting the same outcomes. People elected us to serve and deliver, and I want to deliver positive change, but that will require buy-in and partnership working.

1,884 words. Text as published by the Northern Ireland Assembly.

Assessment

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Assessed 21 October 2026 at 13:50 UTC by jev-1.13.0 (requested as typesafe/jev) under rubric 2026.10-r9, methodology 1.9.

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