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15 October 2019

The View from the Chair, Tina McKenzie - October 2019

Here comes the rates again…

As part of the ongoing review into business rates in Northern Ireland, FSB recently engaged with officials in the Department of Finance, bringing a delegation of small business owners representing retail; professional services; construction; hospitality and care, and coming from right across NI. The clear message from businesses is that this review must ensure that the rates system is reformed in a way that really puts business and the economy as the highest priority for the Assembly, Executive and Civil Service. To perpetuate an antiquated system that ignores the fact that Northern Ireland has the lowest business start-up rate in the UK is to miss an opportunity. To continue to levy rates on so many of our small businesses, at such a level that it is one of their single highest overheads risks a ruinous approach that will drive many to downsize, relocate or close.

We will be making a substantive response to the consultation where we will make our views known, however, at an absolute minimum, the outcome of this review should seek to embed the current Small Business Rate Relief Scheme permanently. FSB led the campaign to have the scheme introduced in 2010, and lobbied successfully for its continuation each year ever since. It has saved small businesses approximately £20 million each year, which has allowed them to invest more in their business and continue to create and sustain employment.  Any failure to continue the scheme would lead to a doubling of the rates bill for some of the smallest businesses and therefore the current levels should be recognised as the baseline protection for firms.

Beyond this we should also look to trends in GB where the level of relief exceeds that which is available in Northern Ireland, particularly so following the spending announced by the previous Chancellor of the Exchequer, Philip Hammond to rejuvenate high streets at last year’s budget. There may also be scope for sectoral specific rates relief which would have economic benefit, such as for childcare businesses. Reducing the cost and increasing the accessibility of childcare would not only provide more parental choice and help boost female entrepreneurship, but would serve to address Northern Ireland’s high economic inactivity rate, which research has shown is impacted by the lack of affordable childcare. However, the rates system must recognise the diversity of businesses which make up our high streets and nothing should be done which damages the delicate eco-system of businesses which help sustain each other.   

It is welcome that the Department of Finance Permanent Secretary, Sue Gray, has decided to undertake this review. Since her appointment she has brought a fresh approach which has been welcomed by business as well as community and voluntary organisations. Her understanding of the weakness of much of our local economy should help ensure no negative impact on our smaller businesses arises as a result of this review. Civil Servants should use the opportunity of the absence of Ministers to explore more creative options, such as ‘start-up’ reliefs followed by an easing in the rates bill over a three year period, allowing new businesses to get on their feet in those first formative years. Research shows that the chances of a business still trading in five years’ time are heavily influenced by the economic conditions experienced in the year it begins trading. In this spirit, we should identify how use of available data can ensure that the rates bill is appropriate for the financial circumstances of a business, without necessarily acting as a disincentive for growth. We should also consider how to use rates to reward positive action by small businesses, particularly in recognition of increased awareness around issues such as climate change. Using the rates system to encourage positive action could also reduce administration, serving as an alternative to government grants which can be cumbersome and difficult for the smallest businesses to navigate and access.

While the priority of government is often to raise revenue from households and businesses, the primary focus should be to increase business activity, encouraging entrepreneurship, creating jobs and increasing prosperity in local communities. A more prosperous economy can also help alleviate some of our social issues, particularly in places which have a long tail of economic inactivity and incidences of poor mental health, typically in areas most impacted by the Troubles. We should all have an ambition for the business birth rate in Northern Ireland to become the highest in the UK. If we encourage more ‘start-ups’ by easing the rates burden, we can ‘grow the cake’ which would help achieve those first-class public services, something to which we all aspire.