Northern Ireland (Regional Rates and Energy) Bill

Karen Bradley Excerpts

2nd reading: House of Commons & 3rd reading: House of Commons
Wednesday 21st March 2018 Commons Chamber

[The Secretary of State for Northern Ireland (Karen Bradley)]

I beg to move, That the Bill be now read a Second time.

I start by wishing my hon. Friend the Member for Tewkesbury (Mr Robertson) an early happy birthday because I know that it is coming up. I am afraid that I will not be able to celebrate with him, but I wanted to wish him a happy birthday in the Chamber. I am sure that we will all join in wishing the former Chair of the Northern Ireland Affairs Committee a happy birthday.

As with the Northern Ireland Budget (Anticipation and Adjustments) Bill that we introduced yesterday, I stand today to ask the House to give a Second Reading to legislation that is a necessary intervention to safeguard public services and finances in the ongoing absence of a Northern Ireland Executive and sitting Assembly. I covered the broader political situation in my statement last week, but it will be helpful to remind the House of the context in which we are taking forward this Bill today.

During the past 14 months, in the absence of an Executive and Assembly in Northern Ireland, the UK Government have worked tirelessly to facilitate the restoration of devolved government. It had been my firm hope that a new Executive would be in place to complete its own 2017-18 estimates process and to set their own budget for 2018-19, as well as to extend the current cost capping on the renewable heat incentive scheme. It was therefore with disappointment that I had to bring forward yesterday’s Bill to put 2017-18 public spending on a legal footing.

As I set out in my statement on 8 March, there are acute pressures across public services to be addressed in 2018-19, which is why I took steps that day to provide clarity and certainty on Northern Ireland’s finances for 2018-19. The Northern Ireland (Regional Rates and Energy) Bill seeks to build on that certainty, delivering on this Government’s commitment to protect public services and to ensure good governance in Northern Ireland. Today, the focus is on taking forward key steps to provide support for public services and sustainable finances in Northern Ireland as we move into the next financial year.

[Mrs Anne Main (St Albans) (Con)]

Will my right hon. Friend elaborate on something that the public may not be aware of? There are key decisions that ought to be taken and priorities that ought to be set, but that cannot happen because there is no ministerial grouping in Northern Ireland to make such decisions.

[Karen Bradley]

My hon. Friend is absolutely right. There are decisions that ideally would be taken by Ministers sitting in Stormont as part of a devolved Government, but that has not been the case for 14 months. I am therefore taking steps today, reluctantly, and it is pressing that we are able to proceed. I hope that we can get devolved government in Stormont again in the near future, because that is the best thing for the people of Northern Ireland to be able to take advantage of the available opportunities.

Clause 1 addresses the collection of the regional rate, which represents more than 5% of the total revenue available to the Northern Ireland Executive. With a devolved Government in place, it would be set via an affirmative rates order in the Assembly, enabling bills to be issued in 10 instalments, providing certainty to ratepayers and allowing various payment reliefs to be applied. Last year, it fell to the UK Government to take that step in the absence of an Executive. When I took office as Secretary of State earlier this year, I had sorely hoped that it could be one of the first acts of a new devolved Government and Assembly and would not fall again to this Government and this Parliament to set the regional rates. That will not be possible before the next financial year, and it would be unacceptable to allow uncertainty to linger in the meantime until a new Executive are formed.

While we are clear that it is a devolved matter, we are also clear that only the UK Government and Parliament can take such action to secure the interests of individuals and businesses in Northern Ireland. This Bill therefore sets out rates, in pence-per-pound terms, for both domestic and non-domestic properties. For non-domestic properties, the rate reflects a 1.5% inflationary increase. For domestic properties, the rate would be raised by inflation—1.5%—plus 3%, as I set out in my budget statement on 8 March.

[Lady Hermon (North Down) (Ind)]

I am sure the Secretary of State would like to confirm that she is well aware that the general public in Northern Ireland will not be one bit pleased that, when rates are going up in Northern Ireland, it is expected that Members of the Legislative Assembly will get a salary increase from 1 April, unless the Secretary of State exercises the power that she will take later this afternoon. Will she confirm that she will cut their salaries and eliminate any increase before 1 April?

[Karen Bradley]

The hon. Lady is pre-empting the speech that I will make later—I hope not in six hours’ time—when I will be legislating to bring powers to this Parliament to vary the rates of MLA pay. I am doing so this week to ensure that it happens before the start of the new financial year, so that no pay increases go through. I well understand her strong feeling, which is one that has been expressed to me by many in Northern Ireland.

[Nigel Dodds (Belfast North) (DUP)]

The Secretary of State will know that the Assembly Commission, which comprises all the parties, recommended that she should take a power to ensure that the pay increase would not go ahead. That is the view of all the political parties in Northern Ireland. It is a sensible step, and we welcome what the Secretary of State is saying.

[Karen Bradley]

I thank the right hon. Gentleman. He is right that it was cross-party, cross-community view that the pay rise should not go ahead, which is why we are legislating today.

Returning to domestic rates, I well understand the concerns that people will have, but this important measure will address a hole in the budget for 2018-19, so that public services can still be delivered. In my view, the measure represents an important contribution to delivering a sustainable budget picture for 2018-19. As the budget consultation launched by the Northern Ireland civil service last year pointed out, there are important conversations to be had about the right balance in Northern Ireland between revenue raising and spending efficiencies, and that document discussed rises in regional rates of as much as 10% above inflation. Having reflected on conversations with the parties and stakeholders more broadly, and having understood the pressures on key services, I concluded that it was right that we ask households to pay a little more to help to protect and preserve public services.

However, I also considered that we had to balance that increase at the right level. That is why I propose a 3% on top of inflation rise—less than £1 a week for the average household—to help to address pressures in health, education and elsewhere. It is also why I have held business rates in line with inflation—within a broader budget envelope that allows the safeguarding of the small business rate relief—to keep a focus on the growth that Northern Ireland needs to see. That forms an important part, along with the flexibilities that we set out in last week’s budget statement, of helping Northern Ireland to live within its means at a challenging time, maintaining the UK Government’s responsibilities to uphold good governance in Northern Ireland.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Does the Secretary of State agree, in addition to the information that she is imparting to the House, that the onus falls on district councils as well because they set a district rate? If they are effective and efficient, the increase will be even less than she has indicated.

[Karen Bradley]

The hon. Gentleman makes an important point. We all know that local government finances operate at both district and regional levels, and he is absolutely right to make the point that some of the regional rates paid by households go to district councils. It is important that they reflect the efficiencies that we are asking the rest of the civil service to reflect. As the Bill makes clear, nothing that we do would cut across the continuing right of the Executive to set a rate by order in the usual way. Should a devolved Government be restored in Stormont, they would therefore be able to make an Executive decision about the regional rate.

Clause 2 deals with the administration of Northern Ireland’s renewable heat incentive scheme, which was established in 2012 to support efforts to increase uptake in the use of renewable energy. However, owing to incorrect assumptions about boiler size and usage, tariff levels and lack of cost controls led to substantial excess payments. Over the 20-year lifespan of the scheme, the projected overspends were well over £500 million, with £27 million of overspend in the 2016-17 year alone, putting the sustainable finances of the Northern Ireland Executive at significant risk.

As colleagues will be aware, the administration of the scheme and the circumstances that led to errors in its administration are subject to an ongoing public inquiry. One of the final acts of the last Executive was to introduce regulations in January last year that put in place robust cost controls. Those made sure that the costs were sustainable. They were put in place only for a year, to allow for longer-term consideration of the scheme as a whole.

[Lady Hermon]

Again, I am grateful to the Secretary of State for giving way. Will she confirm for the benefit of people in Northern Ireland in particular the savings to the public purse as a result of the Bill? How much would it cost without a cap on the RHI scheme for another 12 months, compared with the measures in the Bill?

[Karen Bradley]

As I have said, the estimated saving for 2016-17 was £27 million. I assume a similar sort of saving this year. The total saving as a result of the cost capping is in the region of £450 million.

[Nigel Dodds]

The Secretary of State rightly said that this was a continuation of measures that were put in place by Simon Hamilton, the DUP Economy Minister, and which saved money last year. Will the Secretary of State confirm that the Bill replicates the excellent legislation introduced by Mr Hamilton?

[Karen Bradley]

I can confirm that that is the case. We are following the same cost capping as was put in place by the Executive and Simon Hamilton as Economy Minister. The right hon. Gentleman will know the restrictions placed on this Parliament in terms of what we can do with changes, and we are very much guided by decisions taken in the last Executive. He will also know that since then there has not been an Executive to undertake that broader consideration of the right energy policy for Northern Ireland. We are now at the point where the existing cost controls are due to expire. If that happened, there would be no legal basis, not only for maintaining the current cost cap but for paying all those who receive payments under the scheme and whose installations were accredited before November 2015. Neither of these would be acceptable outcomes, nor would it be suitable for the Northern Ireland civil service to administer payments on an extra-statutory basis, which would create unnecessary legal uncertainty for all concerned.

That is why clause 2 ensures that the present cost controls, and the legal basis for payments, can continue for the 2018-19 financial year. As with the 2017 regulations, there is a sunset provision that expires after one year. This is a devolved policy matter, and it is right that the longer-term approach is one for a restored Executive to decide. In the meantime, I am assured that the Northern Ireland civil service will undertake detailed analysis to enable a new Executive to consider the right course for the future.

In summary, this is a modest Bill doing two discrete things. In setting a regional rate and extending the cost controls of the RHI scheme, it upholds our responsibilities to ensure good governance and to safeguard public services and finances in Northern Ireland. It does so in a way that continues our approach of intervening only as necessary to meet those aims, and only at a point at which it is critical that the measures are taken forward. I hope that colleagues across the House agree that it is important we now make progress to see these measures passed into law to put Northern Ireland on its strongest financial footing for the year ahead. The UK Government shall continue to meet our responsibilities to the people of Northern Ireland. To that end, I commend the Bill to the House.

[Owen Smith (Pontypridd) (Lab)]

The Secretary of State is right that this is a modest Bill with relatively few clauses and few substantive measures. I thank her and her office for providing me with a draft copy yesterday evening, but it is a pretty poor showing that the rest of the House had precisely 10 minutes to look at the Bill before debating its contents, however modest they are. That does not strike me as a terribly long time to look at a measure that increases taxes on 1.8 million people in this country.

We support the Bill. As the Secretary of State said, it is a necessary measure to allow councils to raise the regional rate. It legislates in an area of clearly devolved competence, and it sets the regional rate at about 4.5%, which is above inflation. My first question—I hope that the Under-Secretary will be able to answer it at the end of the debate—is, how did the Government arrive at that figure? Was it discussed with political parties or with the Northern Ireland civil service, or, indeed, with local councils in Northern Ireland? The Secretary of State could have set a lower or a higher rate. How did she reach that figure?

Will the Secretary of State explain the cash impact on households in Northern Ireland? The explanatory notes are scant, so we do not have an impact assessment, and I do not think that anyone in Northern Ireland knows the net effect on average households. It would be useful to learn that.

The RHI measure was a poorly drawn piece of legislation. It is right that we are extending the cap again today. As the Secretary of State said, the liabilities for the taxpayer were potentially £500 million—some people have even said £700 million—so it is absolutely right that we should legislate to mitigate that figure. We are amending the Renewable Heat Incentive Scheme Regulations (Northern Ireland) 2012, which were laid in the Northern Ireland Assembly, passed and amended there. It is Northern Ireland legislation, and we support its further amendment today. However, that raises an important question relating to yesterday’s debate that is vital in the halfway-house period—the limboland—for Northern Ireland. We have had 14 months without an Assembly or Executive, during which Ministers have not been accountable to people, either in Northern Ireland or in the House. We have legislation on issues that fall squarely within the devolved competence of the Northern Ireland Assembly when the Government choose to introduce them, but there are other issues on which the Government choose not to introduce measures. Yesterday, I mentioned the historical institutional abuse inquiry compensation scheme and the prospect of a pension for people who were severely disabled and injured in the troubles.

I was troubled by the answer that the Secretary of State gave to my question, in which she explained why she could not legislate on those things:

“Constitutionally, the inquiry”—

the HIA inquiry—

“was set up by the Executive and reported to the Executive. Unfortunately, the Executive were unable to take decisions on the recommendations before they collapsed…he”—

meaning me—

“will understand that the constitutional implications of the Westminster Parliament or Government taking a decision about something set up by a devolved institution mean that such decisions are not to be taken lightly.”—[Official Report, 20 March 2018; Vol. 638, c. 204.]

I completely accept that, but the Secretary of State is taking a decision—I presume not lightly—to legislate in other areas of devolved competence, including MLA pay, later today. We need to understand why it is deemed permissible to legislate in certain areas but not in others.

To that end, yesterday evening I commissioned the House of Commons Library and an independent Queen’s counsel to provide legal advice to the House, and I will happily place those items in the Library later today. I asked them to explain what the difference might be, constitutionally and legislatively, between those two areas. The Library agreed with what I assumed would be the fairly standard interpretation, which is that there is no constitutional reason why the Secretary of State cannot legislate on historical institutional abuse or on the victims’ pension—the pension for the severely injured and disabled. The Library says:

“As a matter of constitutional law, the UK Parliament can legislate with regard to any matter whatsoever in relation to Northern Ireland, relying on the principle of Parliamentary sovereignty.”

It goes on:

“If the Assembly is unable to introduce legislation, UK Government Ministers may decide that it is either necessary or expedient to ask Parliament to do so.”

Of course, they may decide it is not politically expedient to do so or not timely to introduce those things. That is what we are dealing with here—

[Karen Bradley]

rose—

[Owen Smith]

I hope that when the Secretary of State intervenes she will explain that.

[Karen Bradley]

I wanted to make the point that although, constitutionally, this Parliament can legislate on any matters regarding the United Kingdom, where a matter had been devolved we would be undermining the devolution settlement—that is the point. It would be extraordinary for this Parliament to decide to legislate, unilaterally, where, for example, such an inquiry was set up by the Welsh Assembly or the Scottish Government. We do not take these things lightly and we need to give them great consideration, although I have enormous sympathy with the victims, in both cases.

The hon. Gentleman will know that I was in the Home Office at the time we set up the inquiry on institutional abuse across England and Wales. We carefully considered, and had many debates in the House on, whether the issues in Northern Ireland and the existing Hart inquiry should be brought into that inquiry, but the decision was taken that they should not, because the Executive had already set up the Hart inquiry.

[Owen Smith]

I thank the Secretary of State for that intervention, but she cannot have her cake and eat it. She cannot argue that it would undermine the devolution settlement to intervene and legislate in areas of devolved competence—for example, on the HIA or the pension for those who have been severely disabled—and then do so. She is doing precisely that today on the renewable heat incentive scheme, which was introduced in the Assembly, by the Assembly, for Northern Ireland, and on the regional rates, which is an area to do with local government that is entirely devolved to the Assembly in Belfast. One cannot have one’s cake and eat it. One cannot speak out of both sides of one’s mouth on this issue, and I fear that that is what the Government are seeking to do.

--- Later in debate ---

[Owen Smith]

I will give way to the hon. Gentleman in a moment, because I want to complete this point. I sought some support from KRW Law, a firm of lawyers at the Bar in Belfast. Its view is:

“There are three significant points which would support a conclusion that Parliament should in fact legislate”

particularly in respect of the HIA. It continued:

“(i) The Sewel Convention is a…convention, not a rule of law, and can be departed from for good reasons;

(ii) The constitutional obligation to avoid a vacuum in governance clearly has more weight in the present constitutional circumstances”

where we do not have an Assembly.

The hon. Gentleman raised that second point. The third was that the HIAI made a clear case for intervention. Therefore, I put it to the Secretary of State that there is clear precedent and legal support for her intervening to support some of the most vulnerable and damaged people, either under the terms of the abuse inquiry or in respect of those who have been physically disabled.

I raise the pension for those who were disabled and injured because they are here today—some are in the Gallery for today’s debate and some are meeting hon. Members from across the House. I think they would want to hear from the Secretary of State that she understands the nature of the issues they face.

[Karen Bradley]

rose—

--- Later in debate ---

[Owen Smith]

I give way to the Secretary of State.

[Karen Bradley]

I want to clarify the difference between the two issues the hon. Gentleman is talking about. The HIAI—the Hart inquiry—was set up by the Executive and therefore, constitutionally, it is a matter for the members of the Executive to make a decision on its recommendations. The Hart inquiry reported to the Executive after they had collapsed and therefore they were unable to do that. That therefore gives a legal difficulty: what would the Executive have decided on those recommendations for this Parliament to try to second-guess?

On the victims of the troubles, the hon. Gentleman will know that I have made it clear that this Government are committed to setting up the institutions that were agreed under the Stormont House agreement. We are committed to consulting on how that is done, and as part of that, we will deal with all the issues regarding the victims of the troubles, because I agree with him that those people have been waiting far too long to see remedy for what they went through.

[Owen Smith]

I am grateful to the Secretary of State for the intervention, and let me answer it and the point made by the hon. Member for North Antrim (Ian Paisley). She makes my point for me. She asks what the Executive decided in respect of the HIAI and the answer is we do not know. We know that they said they thought they ought to implement its findings in full—they said that just before the Assembly went down—so we have some clarity on that. Crucially, we do not know what the Executive would have decided in respect of the regional rate and we do not know whether the Assembly would have decided to change the terms of the cap on the RHI, yet we are legislating in this place, in this Bill, to change those things, without any knowledge of what the Assembly would have done. So it precisely relevant to the business at hand—

--- Later in debate ---

[Dr Murrison]

I note that we voted earlier to allow six hours to debate these matters, so I am more than happy to hold forth at great length. The right hon. Gentleman will have to await my Select Committee’s report on this matter, which will deal partly with how, as an option for future-proofing governance in Northern Ireland, powers might be given to local government in future rather than to a body that I am afraid has shown itself to be unstable. It would clearly be inappropriate for any body to levy taxes for services for which that body was not responsible. That is the burden of the point that he was trying to make: the two clearly have to go together. I hope that my Select Committee report, which will be published in the next few weeks, will make that clear.

Although we have six hours to debate these matters, I am sure that we do not want to take that length of time.

[Karen Bradley]

indicated dissent.

[Dr Murrison]

Well, if the Secretary of State wants me to go on, I certainly will, but I think I would rapidly lose the House’s sympathy. I clearly support the Bill, which is completely uncontroversial, given the grave situation.