COMMITTEE FOR FINANCE AND PERSONNEL
OFFICIAL REPORT
(Hansard)
Domestic Rating System
8 October 2008
Members present for all or part of the proceedings:
Mr Simon Hamilton (Deputy Chairperson)
Dr Stephen Farry
Ms Jennifer McCann
Mr David McNarry
Mr Adrian McQuillan
Mr Declan O’Loan
Mr Peter Weir
Witnesses:
Mr Keith Barker )
Mr Brian McClure ) Department of Finance and Personnel
Mr Patrick Neeson )
The Deputy Chairperson (Mr Hamilton):
The purpose of today’s briefing is to allow the Department of Finance and Personnel to update the Committee on the outcome of the remaining recent public consultation on amendments to the domestic-rating system, with regard to data sharing, green rebates and the rate-relief scheme for people who are in full-time education and training, young people who are leaving care, and ratepayers under 18.
Before the session gets under way, I want to remind witnesses and those in the public gallery that the meeting is being recorded by Hansard; therefore, any mobile phones should be switched off completely.
I welcome our old friend and constant companion Mr Brian McClure; he is joined by Mr Keith Barker and Mr Patrick Neeson. Gentlemen, you are all welcome. I invite Brian to kick off.
Mr Brian McClure (Department of Finance and Personnel):
Thank you, Mr Deputy Chairperson. Once again, I appreciate the opportunity to engage with the Committee on these important issues. Most of the discussion will focus on remaining issues that have arisen from the Executive’s further review of the domestic-rating system. Before I discuss green rebates and data sharing, I would like to ask members whether any follow-up matters have arisen from the information that we provided at the previous meeting. The Committee sought clarification and further information. I am more than happy to discuss any further points.
Mr Weir:
The information that you provided is useful, but I do not want to get drawn into a debate that is for another day. However, percentage reductions with regard to the penny product on the rates cap highlight the effect that that will have on North Down Borough Council and certain others, such as Belfast City Council and Ards Borough Council. That must be re-examined with a view to providing relief for those councils. I want to make that point, although I appreciate that it is not the subject of today’s meeting.
Mr McClure:
The matter is on the Ministers desk, and he is considering it; he has the same information as the Committee.
Mr McNarry:
I wish to ask a question. I beg your indulgence because I am new to the Committee.
Mr Weir:
That will work for only so long, David.
Mr McNarry:
I will try it for as long as I can get away with it.
I have not absorbed all the work that the Committee has been doing. Have you addressed the issue of rebates for carers?
The Deputy Chairperson:
We will come to that; one of the papers before us covers that issue. It was raised in a previous session on other consultation documents.
Mr McNarry:
Therefore you have raised the issue before.
The Deputy Chairperson:
Yes; and we may discuss it when we talk about the rate-relief scheme for young people.
Mr McClure:
We can discuss it now, if the Committee is happy to do so. The issue of carers is examined in relation to the disregard that is associated with the lone-pensioner allowance. In other words, provision was made for the lone-pensioner allowance, under which people over the age of 70 are entitled to a 20% discount in their rates. A carer living with a pensioner would, under certain circumstances, be disregarded for the purposes of determining eligibility for lone-pensioner allowance. A stand-alone discount for carers has not been considered, but that issue was dealt with by the regulations that were passed on the lone-pensioner allowance.
Mr McNarry:
It would be a serious omission not to consider a stand-alone provision for carers. I do not want to open a discussion on carers, but there is no limit on how old a carer might be, over the age of 16. I do not want the issue to be confused by talking about carers who are over 70 — a carer is a carer. Can a stand-alone provision for a rebate for carers be readdressed?
Mr McClure:
The provisions associated with lone-pensioner allowance mean that a carer of whatever age is, in certain circumstances, disregarded for deciding entitlement. A resident carer — one who lives with the person for whom he or she cares — can be of any age. We report to the Minister the outcome of Committee meetings that we attend, so I shall bring to his attention the issue of how a different type of discount for carers can be taken forward.
Mr McNarry:
I understand that. Carers are disregarded as carers when they become pensioners. One is not viewed as a carer when one reaches pension age because one does not get a carer’s allowance. In real terms, those people are disregarded.
Mr McClure:
I understand your point, which refers to pensioner couples. One person looks after the other and both are of pension age —
Mr McNarry:
Not necessarily. You said that you will address the issue with the Minister.
The Deputy Chairperson:
I am happy if you want to come back to the Committee on that in future.
Mr McClure:
I will go straight into the outcome of the consultation on data sharing, which concluded a couple of weeks ago. We received 19 responses. That sounds like a low response rate, but 17 of those were from major organisations, including seven councils; two responses were from individuals. It is important to note that no respondents opposed the general concepts that were put forward on data sharing. More than half the respondents favoured the proposals in their current form, and 10 respondents were in favour of the proposals with amendments to some elements. Concerns were expressed about data security, given some of the lapses over the past year and a half.
Belfast City Council, the Consumer Council and one of the ratepayers expressed a desire to restrict the data to designated trained staff members. Other issues were raised in relation to that matter, which we will consider very carefully when we formulate proposals.
On a similar theme, issues were raised in relation to establishing good audit trails for the use of data. Ballymena Borough Council, the Institute of Revenues Rating and Valuation and one of the ratepayers suggested that the data-sharing procedures of the Land and Property Services Agency should be subject to independent scrutiny. That is something that we will consider as we take the policy forward.
Other respondents to the consultation made general points about other ways to improve take-up. Members will recall that the aim of this policy is to assist with improving take-up of reliefs through data sharing. Some respondents, such as Age Concern and Help the Aged, suggested simplifying the application processes. That is a quick snapshot of the responses. None opposed the general concepts, and some made suggestions on the administration of policy.
Mr O’Loan:
I absolutely support the direction of travel in the findings of A2B, as summarised in paragraph 5 of appendix A to the ‘Review of Domestic Rating — Outcome of the Consultation on Data Sharing’. Payments should be automated, or those who are eligible should be informed in a more targeted way. Security protection is also a worry.
Mr McClure:
As I said to the Committee before, automated payments are a long-term aim. In the short term, we hope greatly to improve targeting and greatly simplify verification processes and the administration of reliefs.
The Deputy Chairperson:
I agree with Declan: the direction in which this issue is travelling is one that we all welcome. Where do we go from here? Will the changes be incorporated into legislation with other amendments, or will they be contained in a separate piece altogether?
Mr McClure:
We will report to the Minister on the Committee’s deliberations regarding the issue, and he will decide whether to proceed with amendments. That will form part of the forthcoming primary legislation on which we are working — the rates amendment Order. That will pass through the Assembly, and it will take primary legislation powers to allow that to happen.
The Deputy Chairperson:
We will now move on to green rebates.
Mr McClure:
That is an element of the primary legislation that will be presented by the Minister to the Assembly. The vast majority of consultation respondents were in favour of the proposals or in favour of them with some amendments. All the organisations that responded to the proposals in relation to energy efficiency — the insulation of existing houses — were in favour. The Northern Ireland Federation of Housing Associations was opposed to the proposals because it felt that it was inappropriate to use the rating system in that way.
It is worth mentioning that most individuals responded positively to the consultation, although one or two opposed it because they felt that there is limited scope for improvements. Some felt that the existing initiatives on incentivising people to insulate their homes were sufficient. Another person was quite dismissive of the proposals and thought that they were a waste of public funds.
Those were not representative views, as most were in favour. However, it is worth giving the contrary view sometimes.
One of the main issues raised related to the funding of the scheme and, to return to a theme, whether local government should contribute. That has not been decided yet, but I imagine that it will be funded centrally. The revenue will be forgone, and we will not seek funding for it from the district rate. Decisions have not been made, but officials in the Department do not expect that the funding will come from the district rate.
The Consumer Council supported the scheme in principle, and was of the view that the scheme should be funded centrally. Furthermore, the Consumer Council said that other ratepayers should not be asked to make up the difference but that we should simply forego the revenue.
Belfast City Council and the Institute of Revenues Rating and Valuation asked whether there was a better vehicle to provide green incentives than through the rating system. They suggested that they could be provided more effectively by way of credits against energy bills than by credits against rates bills. If only we could. We can do only what is within our remit; that is why the proposals are restrained in that way.
It was also asked whether the scheme should be a stand-alone scheme or a partnership with the Northern Ireland Electricity (NIE) cashback scheme. Members might recall that we had intended to use much of the administration set-up that had been established for the NIE cashback scheme. It is not our intention to have a direct partnership with NIE, and that was reinforced in some of the responses. One such response was from the energy regulator, significantly, who said that we should not have too close a relationship with NIE on this. We agree. We hope to operate in parallel with NIE, perhaps through the Energy Saving Trust or similar body. The Energy Saving Trust administers the NIE cashback scheme, and we expect to have a similar arrangement if the proposal is approved.
With regard to what energy-efficiency measures should attract a rebate, many thought that the scheme should be extended to include energy-efficient boilers, double glazing, solar panels, wood-burning stoves, wind turbines and space heating. However, those are perhaps for phase 2. To develop a well-defined and workable scheme that will incorporate those additional elements will take more time than we have. We should consider incorporating those, but we should see how phase 1 progresses on insulation measures.
The present proposal states that the rebate should be confined to owner occupiers. That received general support, because there is existing provision for upgrading stock in the social-rented sector. That is the rationale behind this policy: it is not an energy poverty issue; it is about improving the energy efficiency of Northern Ireland’s housing stock.
The other element of the proposal relates to new homes that are assessed as zero-carbon. Most respondents were positive about that. Some people thought that eligibility should apply to the first residents of zero-carbon homes rather than the first purchasers. We will consider that carefully.
Fermanagh District Council and Down District Council thought that the rebate should attach to the property rather than to the individual. The rationale behind attaching it to the individual was to incentivise the building of houses.
If a new property has been bought and sold on, the benefit of the rates exemption would already have been realised. The Department’s view is that the exemption should apply to first residents or to first purchasers. Nevertheless, we will consider that matter before making any changes.
All respondents agreed that we should follow the UK’s new definition of a zero-carbon home — which is due to be finalised by the end of this calendar year — and that we should use and refer to those regulations when drafting our regulations.
The use of tapers was also raised. Respondents wondered whether we could devise a scheme to take account of houses that, although not quite zero-carbon rated are, nevertheless, highly energy-efficient. These are early days, and our initial assessment is that we should consider how the scheme is working before we tweak it. However, provisions could be included in the legislation that would allow changes to be made to the scheme as it becomes established.
That was a very quick run-through of the outcomes from the consultation on green rebates.
Mr McNarry:
Having read your submission, I find the proposals to be exciting and necessary. How will your proposals be linked to grants?
Mr McClure:
We envisage members of the public phoning an agency such as the Energy Saving Trust, which would act as a filter, whereby people who are on low incomes or eligible for grants would be directed towards appropriate schemes. The proposed scheme would not be means-tested. After going through various filters to establish eligibility for a direct grant or for the full payment of costs, people would be directed towards either the NIE cash-back scheme or the new rates-rebate scheme. Therefore applicants would have one point of contact, and the new scheme would be one of a series that might be available.
Mr McNarry:
I take your point that the scheme to improve the energy efficiency of the housing stock would benefit home owners most; however, I am concerned that it would exclude a substantial number of home occupiers.
There are no grants available to home owners for improving their homes’ energy efficiency. The proposed scheme to encourage zero-carbon emissions appears to be a good idea; however — setting aside current financial circumstances, budgets and home owners’ budgeting difficulties — given the attractiveness of improving energy efficiency in order to gain a rates rebate and the fact that there are no incentives for grants, how do you envisage uptake rates for the scheme?
Mr McClure:
Perhaps Patrick will talk about some of the schemes to which Mr McNarry referred.
Mr Patrick Neeson (Department of Finance and Personnel):
Other schemes are available to home owners. For instance, the proposed scheme will replicate the NIE cash-back scheme, whereby owner occupiers, regardless of income, can get cash back: people who carry out work on their homes receive part of the cost of that work. There are other schemes for people on low incomes.
Mr McNarry:
That is fair enough, Patrick; such schemes could be developed. Nevertheless, energy-efficiency measures that attract rate relief must be economically sustainable.
Wise people are saying that it is OK to put layers of insulation in the roofspace, which is fine if one has a roofspace; it is a cost, but not a major cost. However, using the energy-efficiency systems recommended by Government can incur massive costs. People have stopped going down that route because there are no benefits or grants available. Have you had the scheme costed?
Mr McClure:
It has all been costed, and those costs have been provided —
Mr McNarry:
Do the costs that you have identified make it attractive for someone to incur expenditure to get an NIE rebate? Are you backing that?
Mr McClure:
The NIE helps about 1,000 homes each year by providing a cash-back scheme; we think that by running in parallel with that we can at least double that number. Those are modest measures and they do not cover the full cost of providing insulation. A non-means-tested rebate would be provided.
Mr McNarry:
This document needs explaining for people reading it — like me — for the first time. It is good, it is exciting, and people would feel that they could go with it. However, the numbers are insignificant. They may be significant for the process and the project, but they are, nevertheless, insignificant. Could there be some cross-departmental thinking on a link to grants? I will leave that suggestion with you.
Do you have a ballpark figure? How much money will go to the schemes?
Mr P Neeson:
Our best estimate is about £250,000 annually.
Mr McNarry:
That is small fry.
Mr McClure:
It is. We are taking fairly modest measures. However, the Minister has taken the view that this is a first step on the use of a local taxation system to incentivise people to be more energy-efficient and that there would be scope to extend the scheme later if it proved successful. It is all about value for money. As the Committee knows, a balance must be struck with the Government’s other spending priorities.
Mr McNarry:
I appreciate that. I regret that your ambition — although not yours personally — is pitched so low, as you could be on to something that could benefit communities. It is a pity that you are not going higher up the scale with bigger ambition, even if only step by step. I do not think that this scheme will work.
Mr McClure:
I would be happy to provide a one-page briefing note on what schemes are available and where this scheme fits in, if you would find that helpful.
Mr McNarry:
I would; thank you.
The Deputy Chairperson:
There is no restriction on the number of people who can access this rebate, provided that they meet the criteria.
Mr McClure:
That is correct.
The Deputy Chairperson:
One thousand people may be in the NIE’s cash-back scheme, but, theoretically, 10,000 people could avail of this scheme.
Mr McClure:
Absolutely. There would be no cut-off point once —
Mr McNarry:
It is self-restricting.
Mr McClure:
There is no cap. The restriction relates to the promotional effort put into it. If a huge promotional effort were put into the scheme, 10,000 people might avail of it.
The Deputy Chairperson:
There is nothing to restrict the level of uptake.
Mr McClure:
No; there is not, and no cap would be applied.
Mr McNarry:
It is the same problem and, therefore, the same argument: energy providers know that no grants are available in Northern Ireland to incentivise people to improve their homes. There was a large take-up of grants, but once they stopped so did the take-up.
Mr McClure:
There are various schemes. I am happy to provide you with a separate briefing note. I will need to consult in more detail with the Department of Enterprise, Trade and Investment and others —
Mr McNarry:
If you do that for me, I will provide you with the Minister’s answer to my question about grants. Perhaps you will read that as well.
Mr McClure:
I will.
Mr Weir:
I will try to contain my excitement. I have a small quibble, but it peeves me as it is a very common mistake: in your submission, an apostrophe appears in “MLA’s”, even though it is a plural. I notice that mistake time and time again, as it is a pet hate of mine.
As I have exorcised my angst, I will address the potential take-up of qualifications. There are schemes available, although there are not the grants that there used to be. Can the Committee get a list of those schemes? Saving money on energy bills is an incentive for people who can afford to make their homes energy-efficient. Although there may be a capital cost at the start, that is still an incentive. I assume that many people who have taken action to make their homes energy-efficient did not do it through a scheme or a grant — although my colleague, Mr McNarry, would say that that is because no grants are available. People in private houses may have availed of certain action that qualifies them for a scheme. Has there been any assessment of how many people are in that position, excluding those who have just gone through an incentive scheme?
Mr McClure:
Do you mean people who have already invested in making their homes energy-efficient?
Mr Weir:
Yes; but they may not have invested via a scheme or a grant. For example, I assume that many people have insulated their loft off their own bat without approaching the Government.
Mr McClure:
More than three quarters of houses in Northern Ireland have roof insulation, of which only half is up to the current standard of energy efficiency. The issue is about bringing energy efficiency in houses up to the new standards, on which we have liaised with the Energy Saving Trust. The trust holds information on that, which we will send to the Committee.
Mr Weir:
Does the Energy Saving Trust know about every house that has been brought up to the required standard? If people have not gone through the Energy Saving Trust —
Mr McClure:
— they are off the radar. The figures are based on survey sampling that the trust did.
Mr P Neeson:
We have information from the 2006 Northern Ireland house condition survey by the Housing Executive.
Mr McClure:
I will provide the Committee with a table that shows the figures that I mentioned.
Mr Weir:
You mentioned a cost of £250,000; is that from the rates rebate?
Mr McClure:
Yes.
Mr Weir:
You also said that, because we are still at the consultation stage, no decision had been made on whether that cost would be absorbed centrally or taken from the rates. Although the effect could be small, a chunk of that cost could be taken from the rates income of councils. However, that may not be a significant figure compared to the penny product.
The Department is likely to recommend that it be funded centrally rather than affect the district rate.
Mr McNarry:
Even if 10,000 people qualified?
Mr McClure:
Yes.
Mr Weir:
That is good news.
Mr McClure:
The Minister has yet to decide on that. However, the likely outcome is that the scheme will be funded centrally, given that the Consumer Council, Belfast City Council and various other organisations support that approach.
Mr Weir:
The availability of the scheme has been criticised. It is unlikely that much of the work will be fully funded; some will either be part-funded or paid for by private householders or owner-occupiers. Is the relief, therefore, skewed towards the better off? Someone with a reasonable disposable income can afford energy-efficiency schemes more than people at the lower end of the scale. Are you providing a rebate that disadvantages people on lower incomes?
Mr McClure:
In the first instance, people in those circumstances are directed towards existing low-income schemes administered by the Department for Social Development. Only people who do not qualify for low-income schemes are considered for NIE cash-back or rate-rebate schemes.
Mr Weir:
Tescos has worked with the equivalent of the DSD in England on schemes to encourage energy-efficiency in houses. We hope that Tescos representatives will soon meet the Minister for Social Development to discuss such issues. New schemes could come on stream.
Mr McClure:
That is a possibility. The scheme is not directly linked to fuel poverty: it is aimed at improving the energy-efficiency standard of Northern Ireland’s housing stock. There are other schemes that address fuel poverty; although whether they are sufficient may emerge from the work being done here.
Mr Weir:
Since the scheme has cross-departmental connotations and involves improving all housing stock, including public housing, has there been co-ordination with DSD?
Mr McClure:
There has. There has been correspondence on the relevant issues between our Minister and the Minister for Social Development.
The Deputy Chairperson:
To continue the pedantry of earlier, I am tempted to point out that the shop is Tesco not “Tescos”. [Laughter.]
Mr Weir:
I am sure that various members of the Committee could tell us both where to shove our apostrophes. [Laughter.]
Mr McQuillan:
I am disappointed with paragraph 12 “What energy efficiency measures should attract a rebate?” of the review, which you said would be phase 2. Surely, every income bracket could afford measures such as energy-efficient light bulbs. I do not understand how the zero-carbon exemption on houses operates. If I build a zero-carbon house, I get a rates exemption; however, if I sell it, the buyer does not?
Mr McClure:
That is the proposal, the aim of which is to incentivise the building of zero-carbon houses. Once a house has been built as zero-carbon, the policy has served its function. The policy is not meant to reward individuals who build or live in zero-carbon houses; it is to improve Northern Ireland’s housing stock and to increase the number of zero-carbon houses in Northern Ireland.
That is the rationale. It is all a matter of balance: a policy could be developed in order to do that, but it would be more expensive and would have to be judged against other spending priorities. Nevertheless, it is possible. Fermanagh and Down district councils thought that the exemption should attach to the property for five years.
Mr McQuillan:
Given their cost, should there not be an incentive to build carbon-free houses?
Mr McClure:
Carbon-free houses cost a great deal to build; therefore, their cost new is high. The second-hand cost would be determined, in a way, by the second-hand market. Therefore, there would not be the same differential. The second-hand market price would be determined by the price of comparable second-hand homes rather than by any major premium associated with the property being zero-carbon.
Mr McQuillan:
You said that the rate exemption was intended to improve the housing stock. However, could it not also be used to tackle fuel poverty if the right schemes were available?
Mr McClure:
It could. The Executive have agreed to implement this policy; however, it is not within the Department’s remit at present to attend to the issue of fuel poverty. However, phase 2 or phase 3 of the scheme could be directed at fuel poverty if Ministers felt it necessary.
Mr McQuillan:
How many years will it take to implement phase 2?
Mr McClure:
Flexibility could be built into legislation that so that if the scheme proves effective after, say, a year, it could be easily enlarged through subordinate legislation. The Department intends to draft the legislation so that there will not be a further two-year wait before phase 2. However, an evaluation period would be necessary; the scheme would have to operate for about a year in order for its success to be properly evaluated.
Ms J McCann:
You said that fuel poverty is not within the remit of the Department of Finance and Personnel and that it is a different issue from domestic rating. However, lack of energy efficiency is one of the main reasons that people are in fuel poverty. It is good that your Department is working with the Department for Social Development on the issue.
I have two questions. First, you said that this scheme is not skewed, as it were, towards the affluent. Would you not, therefore, consider including other groups? People on low incomes or in low-income households might already have double glazing, but they probably cannot afford loft and cavity wall insulation; however, they could afford energy-efficient light bulbs and draught-proofing. If you really are trying not to skew this scheme towards the affluent, it might be better to include a few less-well-off groups.
Secondly, did you say that the social-housing sector is excluded from the scheme?
Mr McClure:
Yes, because the Housing Executive already has energy-efficiency targets for its stock. This scheme is an attempt to incentivise ratepayers in the owner-occupied sector to take the initiative; whereas in the social-rented sector the Housing Executive has a target for energy efficiency and is upgrading its stock. That is not happening to the same extent in the owner-occupied sector.
Ms J McCann:
However, even if someone who rents a house that they do not own from the Housing Executive fits the criteria, they will still not be eligible for the rebate.
Mr McClure:
That is the proposal. The Housing Executive, as a social landlord, is already taking steps to upgrade its stock; that is why the rebate is not extended to Housing Executive properties.
Ms J McCann:
I realise that the Housing Executive is upgrading its stock, but a rates rebate is a different issue. How would Housing Executive tenants not be eligible if they met the criteria?
Mr P Neeson:
It is worth remembering that because it is a rates rebate, it will be of value only to people who pay rates. A high proportion of people on low incomes claim housing benefit; therefore rate rebates will be of no value to them.
Ms J McCann:
I do not agree. I know many people living in social housing who pay rent and rates.
Mr McClure:
Yes. At least 25% to 30% of those people are in social-rented accommodation. The rationale for the policy is to improve the quality and energy efficiency of Northern Ireland’s housing stock. The Housing Executive had already made funding available to improve the quality of its stock in various ways, including energy efficiency. Therefore, there is a question over the need to extend the scheme to the social-rented sector. The Department proposes in the consultation paper that we do not do that, and most people agreed. However, the scheme could be extended to the social-rented sector if it was considered necessary and appropriate to do so.
The low-income scheme was put forward as a complementary measure. There are already more, comparatively, generous schemes in existence for low-income households than this scheme would provide for. That is why this is not considered to be a fuel poverty issue. This is a complementary measure, which is not means-tested in any way. The adequacy or inadequacy of the other low-income schemes is another issue entirely. This particular measure is not intended to be a means-tested scheme, because it is intended for people who do not qualify for the other schemes and to give them an incentive to improve the standard of their house.
Mr McNarry:
I am sympathetic to Jennifer’s view. Are you saying that people who live in rented accommodation and who bring their homes up to standard are excluded from the rate rebate that home owners can avail of? Are you saying that people who live in rented accommodation are not entitled to that rebate?
Mr McClure:
We are proposing that people in the social-rented sector be excluded from the scheme for the reasons that I have given. The owner-occupier and private-rented sectors are included.
Mr McNarry:
If you were in those circumstances, you would be pretty miffed, even angry —
Mr Weir:
You say that the private-rented sector is included.
Mr McClure:
Yes.
Mr McNarry:
What is the definition of the private-rented sector? We should talk about the whole rented sector and take account of everyone who is motivated to improve the energy-efficiency standards of their home.
Mr McClure:
May I go back —
Mr McNarry:
There is a substantial housing stock of rented accommodation.
Mr Weir:
There is some misunderstanding. When you are talking about the social-rented sector, you mean people who rent from the Housing Executive.
Mr McClure:
Those who rent their houses from the Housing Executive and the 40 housing associations are excluded from the scheme.
Mr Weir:
With the best will in the world, people cannot make changes to Housing Executive or housing association property; on the other hand, a tenant in a privately rented house would be entitled to the proposed rebate.
Mr McNarry:
Tenants who rent Housing Executive houses can make improvements that are stipulated in the scheme in order to avail themselves of it. There is no way that the rent book will say that they cannot do that.
Ms J McCann:
Are you saying that the Housing Executive would object if someone wanted to do that?
Mr Weir:
The point is that the Housing Executive and the housing associations have obligations in that regard.
Mr McNarry:
Housing Executive houses that were built 10 years ago to a very high specification do not meet today’s specifications, which are even higher: roof insulation that used to be 4in deep must now be 10in deep. If a tenant wants to do that, or make any other improvement, that is great.
Mr McClure:
The Housing Executive and the housing associations are funded to upgrade the quality of their stock against various measures, one of which is energy efficiency. The provision of further incentives to those organisations to upgrade is a double payment. This policy is not intended to disadvantage anyone.
This is a complementary measure designed to fill a gap. The rates system can be used as an incentive for people who own their properties or who are in the private-rented sector. The point was raised in the public consultation document:
“A further issue with the tenanted sector is the question of who should be incentivised to carry out energy efficiency improvements through a rate rebate since liability may not always rest with the owner.”
There are tax incentives for landlords to upgrade properly, so this is primarily directed at the owner-occupied sector.
Ms J McCann:
In the present climate, with rising energy costs, people will take their own measures to insulate their homes, simply because they cannot afford to heat them. In that respect, you are excluding a group of people who should not be excluded: those who rent Housing Executive accommodation but use their own money to insulate the property. If they use wall-cavity insulation that fits the criteria, I cannot see how you can exclude them from the rebate. I understand that there are other schemes that should extend to such cases. Because energy bills are so high, it is not fair to exclude from the scheme people who install energy-efficient measures.
Mr McClure:
That could cause all sorts of difficulties when individuals carry out alterations to houses that they do not own. However, I take your point and we will consider it carefully when putting final proposals to the Minister.
Mr O’Loan:
I note that energy-performance certificates are required when the sale of houses is transacted. I mention it because of your earlier statement that the energy-efficiency quality of a house would not be a relevant factor in second-hand transactions. However, another section of your Department argues that it would be. You need to be careful that both sections sing from the same hymn sheet. In general, the scheme is well founded as a further encouragement to people to move in the right direction.
You said that the Federation of Housing Associations was, to say the least, unenthusiastic about the scheme, but I saw no reference to it in your text. I am surprised that the federation takes that view and would like to know more about its thinking.
Mr McClure:
I am happy to send a full text of the federation’s submission. My understanding is that the submission was made late and arrived only in the last couple of days. That is why the Committee has no copy of it.
The scheme for energy-saving certificates to be required on the selling of a new house is in its infancy, and it is worth looking at in relation to the second phase of this scheme; although we have not been given Executive approval for that policy, it is something for the future. It would be no bad thing to allow the energy-saving certificate process to run for a year or two before considering whether it is appropriate for the rates system.
The Deputy Chairperson:
In the Committee’s recent evidence session on the Building Regulations Bill, we discussed the possibility of amendments to the Bill to have all new-built homes producing zero-carbon by 2016.
Will the zero-carbon homes scheme be time-limited up to 2016? I imagine that there could be a substantial cost beyond that.
Mr McClure:
That is a valid point that we have discussed. We think that the scheme needs a time limit.
The Deputy Chairperson:
I am playing devil’s advocate, but given that that the proposed target for zero-carbon homes is to be reached by 2016, is there an argument for placing more emphasis on existing housing stock that does not qualify under those building regulations? Most homes in Northern Ireland will fall outside the new regulations.
Mr McClure:
As need changes and is satisfied, the zero-carbon element is meant to give a kick start to the process; by its very nature a kick start will not be here for ever and a day. The standards of insulation and energy efficiency for existing homes will become more important as, and if, that target is achieved.
The Deputy Chairperson:
Admirable as zero-carbon homes may be, I imagine that it will be a very small element of this scheme, even up to 2016.
Mr McClure:
Yes.
The Deputy Chairperson:
The final element is the rate relief scheme for those in full-time education and training. It is obviously at a different stage from the previous one.
Mr McClure:
McClure and Waters were commissioned by the Department to undertake an evaluation of the scheme, and they have presented us with a preliminary report, which the Minister has not yet seen. However, we hope to get the report to him in the next day or two. In sending it to the Minister, we are seeking his agreement to send a copy to the Committee for its view. The report is based on work that was undertaken throughout June, July, August and September and we have just taken delivery of this preliminary report. It is an extensive preliminary report, if that is not a contradiction in terms. We feel that it is sufficient to assist consideration of the issue, which emerged as part of the consultation on the Executive’s further review of the domestic-rating system in 2007. Many people raised doubts about the effectiveness of the scheme, and in particular that the relief was being “pocketed”, as some termed it, by landlords. I will report to the Committee after the Minister has had sight of the report and agrees to release it.
The Deputy Chairperson:
I am sure that we will have questions then.
Mr McClure:
I am sure that the Minister would be happy for me to give evidence, and for McClure and Waters, and the Economic Research Institute of Northern Ireland, which also did some work on the report, to give evidence.
There are a couple of other updates that I would like to mention; one is on the issue of second homes, in which Mr McQuillan was particularly interested. We are still working on that. We agreed to provide the Committee with the cost either of introducing a rate levy for second homes or a discount for permanent residents. We have just received information about the number of second homes from Professor Paris, who worked for the Housing Executive on the issue. We quickly put a report together for the Minister, and we hope to provide it to the Committee with some indicative costings. That was left for us to do from last year’s review.
There are other issues concerning the non-domestic sector. The Minister has taken account of the Committee’s views on small-business rate relief, and he has some proposals on his desk at the moment. Either the Minister or I will brief the Committee on that in this session or the next.
Mr McNarry:
Is that ongoing? I realise that that is like asking how long is a piece of string. Nevertheless, given the effect that the present financial situation has had on small businesses, are you likely to review a review or some such?
Mr McClure:
There was a review of the review by the Economic Research Institute, which the Committee has considered, and it agreed with the Department’s assessment that there was no strong economic case for a small-business rate-relief scheme. However, the Committee suggested that consideration be given to a scheme that is based more on social grounds. The Department has examined that option and hopes to report its finding to the Committee shortly.
As the Committee is aware, there is to be a revaluation of non-domestic property in 2010, and we are considering some issues associated with that. One issue is the valuation of former and existing public utilities; the method by which they are assessed is to change in line with the rest of the UK — at least that is the proposal. We are consulting the docks on that matter because the proposed changes might increase assessments significantly.
Another issue on which we are due to consult shortly is the decapitalisation rate, which is applied to specialised properties — for example, properties used for healthcare and education and those used by the Ministry of Defence and airports. That involves converting a cost-based assessment into a rental assessment, and that must be prescribed in legislation. It sounds very techy, but it has a significant effect on rates bills. The rest of the UK is either in the middle of a consultation on that rate or has just concluded one. We are more than happy to provide evidence to the Committee once the Minister has cleared the consultation paper.
The Deputy Chairperson:
That is very helpful, Brian. Thank you very much for that run-through and for answering our questions. As this process is ongoing, we will see you again soon to discuss some of the other issues.
Mr McClure:
I am happy to provide the Committee with a briefing on existing energy-efficiency schemes and how the proposed scheme fits with them.
The Deputy Chairperson:
Thank you.