Northern Ireland (Regional Rates and Energy) (No. 2) Bill

Maria Caulfield Excerpts

2nd reading: House of Commons
Wednesday 6th March 2019 Commons Chamber

[Karen Bradley]

Throughout the whole budgetary process, we have ensured that we have liaised with the main parties in Northern Ireland and politicians to make sure that we reflect both the priorities of the programme for government that was in place before the Executive collapsed and the priorities of the politicians of Northern Ireland. Clearly, an increase in the regional rate was needed to meet the budget gap. It is quite right that, as well as the Treasury providing additional money to bridge the gap in the budget, the people of Northern Ireland should make a contribution towards the public services that they receive, and 3% was an appropriate number.

[Maria Caulfield (Lewes) (Con)]

The retailers organisation, Retail NI, has expressed disappointment at the rates, and has argued that Northern Ireland businesses would be paying the highest business rates in the UK. Will the Secretary of State give some words of sympathy or encouragement to them?

[Karen Bradley]

I understand the concerns that have been raised; I have met Retail NI and others. Clearly, we are only increasing business rates in line with inflation, but a number of measures are available to businesses in my constituency that are not available to businesses in Northern Ireland. That is as a result of Northern Ireland not having an Executive to deliver those. This comes back to the point that we discussed at length yesterday: what we need is an Executive to deliver on the programmes, incentives and support that are available, as is right and appropriate for Northern Ireland. It may be that what is needed in Northern Ireland is not the same as the incentives in Great Britain.

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[Karen Bradley]

There are differences in fuel costs and transport costs. There are differences between different parts of the UK. I am interested in making sure that the scheme in Northern Ireland remains legal so that people with boilers can continue to receive some subsidy. I know it is not at the levels they were receiving previously, but it is still some subsidy.

[Maria Caulfield]

I understand why there has to be a change, but for farmers who have borrowed £250,000 or £500,000 to install a boiler and went to the banks with a guarantee of 20 years of subsidy, a change from £13,000 to £2,000 a year per boiler is a real concern. Many will not be able to pay the money back and will go under.

[Karen Bradley]

That is why a buy-out scheme is available: so that boiler owners can choose individually. I cannot say exactly what the rate will be, because it will depend on, for instance, the subsidies that have been received to date. The calculations will be individual, but a buy-out will be available to boiler owners who do not believe that the subsidies now available will enable them to continue in business.

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[Tony Lloyd]

Like the hon. Gentleman, I very much welcome this piece of good news, but it has to be set against the fact that we do need to see renewal in many towns, and I want to return to a question I raised with Ministers yesterday about the stronger towns moneys. I did not get a response to the question I raised; there was no certainty on that. The Communities Secretary made it clear that the stronger towns moneys were available of course for England but also for Wales, Scotland and Northern Ireland. In Wales and Scotland, I assume those moneys will be diverted through the devolved Administrations there, but with Northern Ireland, we do need some certainty that there is political process and there will be political decision making that can ensure that, whether in Ballymena or any other town, there will be access to the stronger towns moneys. That is important in the context of the debate we are having; yes, we welcome the relative capping of the business rates but we want a recognition that there is still need for legitimate support for businesses across Northern Ireland.

I want to pick up the points made by my hon. Friend the Member for Ogmore (Chris Elmore). He made some interesting comments about the impact of the domestic rate increase. An increase of 3% plus inflation is perhaps supportable for many people, but it is interesting to compare with the Government’s proposed uprating for benefits: for universal credit, for example, that will be 2.4% in total. So 3% plus inflation is a bigger cost being imposed on the many families in Northern Ireland who struggle—for instance, low-income families or families on minimum wage. That kind of impact must be considered.

The Secretary of State says that the people of Northern Ireland should make a contribution as well as the Treasury, but let me make the obvious point that the people of Northern Ireland do make a contribution to Treasury moneys: they pay income tax, they pay VAT and they pay all the other taxes that are paid by people throughout the United Kingdom.

In those terms, this is effectively a redistribution from UK-wide taxation—which is perhaps not as progressive as I would like, but at least it has some sense of progression—to a more regressive form of taxation around regional rates. Nevertheless, the many sectors such as local authorities and, most importantly, education spend and health spend that depend on regional rates certainly need to see these resources coming in, so it would be hard to resist the case for this legislation being needed. It also has time import, in that the new financial year will not be long delayed.

However, that is not the case with the legislation relating to the renewable heat incentive. The consultation on the present scheme began last May and finished last September, and this legislation should have been brought before the House long before now if the intention was to implement it on the third parties on 1 April. It is unacceptable that we are now having to legislate at breakneck speed, just as we did yesterday. The legislation is being forced through the House without the opportunity for proper scrutiny. I have to say to the Secretary of State, although not unkindly, that I did not find her answers convincing when she responded to questions raised by previous speakers. I did not honestly feel that the House knew whether the legislation was necessary. I shall go into further detail on that in a moment.

Will the Secretary of State tell me when the Department for the Economy in Northern Ireland began to talk to the Northern Ireland Office about the need for an uprating? We know that there was an uprating last year, roughly 12 months ago, and it should have been obvious to everybody, particularly as this had gone out to consultation, that there would be a need for legislation, so why are we doing this so late on? Alternatively, why has it been necessary to do all this today? Could we not have had a Second Reading today, after which the Bill could have gone into Committee in the normal way and completed its progress later on, having had proper scrutiny throughout the process? This matters, for all the reasons that have already been given in exchanges with the Secretary of State. We have to be certain that the scrutiny is sufficient to reveal exactly what is happening.

On the specific details, I want to ask the Secretary of State some questions that are parallel to those already raised by hon. Members. An argument that is used to underline her case is that only by moving in this direction can we ensure state aid compliance and that this is the only legal basis, other than the complete abolition of the scheme, for reform of the RHI system. I do not know whether that is true. Nothing that has been presented to the House gives us any reason to believe that this is exactly what the European Union has said.

The hon. Member for North Antrim asked why the situation in Great Britain should be different from the situation in Northern Ireland. Why does one involve state aid compliance but not the other? Conversely, one of the proposals in the Ricardo review was to look at the introduction of the GB tariffs in Northern Ireland, and if those tariffs are legitimate for my constituents in Rochdale, why are they not legitimate for people in Northern Ireland?

[Maria Caulfield]

The shadow Secretary of State is making some good points. The financial difference is stark, because the amount in the rest of the UK will be £20,000 per year per boiler, whereas the amount that we will be moving to in Northern Ireland will be just £2,000 per year per boiler. That is not a small difference.

[Tony Lloyd]

The hon. Lady makes a valid point. Obviously, it is not a small difference; in fact, it is a huge difference to those on what could be described as the receiving end, those at the £20,000 level, or the non-receiving end for those at the £2,000 level. The details for a particular farm that I will come on to bear out exactly the point that she makes.

We need to know about state aid compliance, not only what lies behind it but how it has the system so circumscribed that we can do no other. I want to challenge Ministers on some of the things that they have told us. For example, the Secretary of State said that the cost of fuel might be different in Great Britain from Northern Ireland. I am told, however, that a lot of our non-home-grown fuel is imported from the Baltic states, where there is an awful lot of wood—I can assure the House of that, because I have seen it. Those pellets are shipped from the Baltic states to the UK generally, and I can recognise no enormous difference in the cost thresholds such as to produce a very different cost profile in Northern Ireland—a much cheaper one—from that in Great Britain. That we would have such different cost pressures does not seem logical. We need proper answers to such questions, although I fear that we will not get them today.

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[Tony Lloyd]

That is a fair point. There is nothing in this Bill that talks about post-legislative scrutiny. We need some capacity to measure the impact of the legislation after it leaves this House, because it will have an impact. The scheme was a disaster from its inception. That is most certainly true. It is also most certainly true that controlling the overall level of cost is and ought to be a matter of public policy, which is in the interests of people in Great Britain as well as in Northern Ireland. Coming up with legitimate control is not something that divides the House, but we need to make sure that we measure the impact on those affected, and that is simply not there.

[Maria Caulfield]

The clause 4 powers to instigate the buy-out arrangements are to be exercised only in the period while there is no Executive. So this place would have a duty to scrutinise that, because under this legislation once the Executive are back up and running, the job of scrutiny would return to the Northern Ireland Assembly.

[Tony Lloyd]

That has to be right. We have a duty to ensure not only that we dispatch the legislation where it is appropriate to do so, but that we monitor its impact to make sure that no injustice is caused by the clumsiness of the legislation.

I will draw my remarks to a conclusion, but the point I have sought to establish all the way through is that the Secretary of State has not given answers with the level of detail that this House ought to demand if we are to say that this scheme is legitimate in terms of protecting the wider public interest, as it rightly and properly should do, and does no injustice to people who, in reasonably good faith—some may have seen a large amount of pound coins rolling in their direction—invested in a scheme that we as a society wanted to promote: a more environmentally sound system of heating. We need to insist that we get that balance right, but I am not convinced that I can see that in the Bill, the explanatory notes or the Secretary of State’s opening remarks

I repeat what I said at the beginning: the way the House is being asked to dispatch this legislation today is incompetent and unreasonable. I hope the Secretary of State will reflect on that, because even at this stage it would be possible for the Government to take part of the legislation back and say that the capacity to scrutinise could be done very differently.

Finally, I wish to make a slightly wider point. Once again, the House is being asked to do something that the Secretary of State talked about as being limited but necessary. There are many limited but necessary schemes that she is refusing to do. In response to the hon. Member for Belfast East (Gavin Robinson), she made the point that she would be looking to legislate on providing the necessary support for housing associations in Northern Ireland. We would not want to oppose that, as it is necessary to have those housing associations working. Again, however, we come down to questions such as: who will make the decision on the medical school in the Derry and Strabane city deal; when will we see progress on Hart if we are still stalled on getting a devolved Assembly in Stormont; and what are we going to do about the important question of public sector workers, such as nurses, physiotherapists and others in the health service, who will not see the uprating in their pay that their counterparts will see in the rest of the UK? Such issues are within the Secretary of State’s capacity to address. It is difficult for us to see any longer when she will act. Yes, protecting public money and allowing public moneys to be spent by local authorities at the Northern Ireland level is important, but so are these issues. There is no clarity any more—

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[Maria Caulfield (Lewes) (Con)]

The reason we are here is that the Assembly has not been sitting for over two years now. There are many members of the Northern Ireland Affairs Committee here this afternoon. In our public evidence session this morning, the leader of the Green party in Northern Ireland said that she thought that the Assembly would not be up and running for the rest of this year. It is therefore likely that we will be returning here in the next few months, or maybe even this time next year, with similar Bills looking at the budget, as we did yesterday, and rates. I hope that is not the case.

Many of us are putting pressure on all political parties to get back around the table and get the Assembly up and running because, as we now start to scrutinise devolved issues, we hear week in, week out, about the impact that that is having. We have heard from headteachers in Northern Ireland about issues of procurement. Even simple, basic supplies are not being procured properly and effectively, and money is being wasted on them. We have heard from the Commissioner for Children and Young People that the Salisbury review of education has meant that some funding reforms that should be taking place to enable money to be better spent in small rural schools are not happening because there is no one to take that decision. It is not just about not getting the money to spend; scrutiny of the decisions on how it is spent is not happening either. Both are equally important. The RHI is a classic example of why we need that scrutiny. The RHI was a significant factor in the fall of the Assembly in the first place. The fact that we are now making decisions on it without any real scrutiny apart from a couple of hours in this Chamber is significantly worrying given the impact that it will have on small businesses in Northern Ireland, particularly in the farming community.

I have sympathy with the Secretary of State, and I agree that we have to make a decision this afternoon, or else any subsidies will stop completely, which would be a huge disservice to the people of Northern Ireland. However, the fact that it has been left to the last minute to make this decision will have a real impact. As a member of the Northern Ireland Affairs Committee, I have been contacted by Northern Ireland businesses telling me that many of them—some have 10 biomass facilities on their farms—have gone to the banks to borrow £250,000 or £500,000 in the expectation that they would get a guaranteed subsidy over a 20-year period. In any other walk of life, someone who breached that agreement would be in court having to defend that or having to pay compensation.

It is not the fault of anyone here in this Chamber that we are in this position, but neither is it the fault of farmers or businesses who took these decisions. Many will go under if we do not address this issue. To add insult to injury, people in the rest of the United Kingdom will be getting £20,000 per biomass incinerator, whereas farmers, or whoever else has installed them, in Northern Ireland will gain only £2,000. That is a real concern. The Ulster Farmers Union has rightly raised that issue; I know that the Secretary of State has met its representatives to listen to their concerns. They point out that this is happening at a particularly difficult time for Ulster farmers with Brexit day looming.

We should not be making these decisions, and that is a great reason why we need the Assembly back up and running. The decision was made to set up the scheme, and it should be the Assembly taking responsibility when the budget has spiralled out of control and tough decisions are required. It is frustrating that, once again, people in Northern Ireland have gone to the polls and elected representatives but have no representation in Stormont. Some communities have no representation here so are completely at the mercy of politicians such as me, who have an interest in Northern Ireland but are not at the coal face, experiencing the impact of the decisions. It is down to Northern Ireland politicians to get back round the table and sort this out.

I have a few questions for the Minister to respond to when he sums up. Can the Northern Ireland Affairs Committee have ongoing scrutiny of this issue, so that we can look at how the buy-out system is working and the impact of the reduction in subsidy and take quick action if it is having a devastating impact, as some fears suggest? What happens if the Executive are restored in the meantime? We heard this morning in the Select Committee that that is unlikely to happen soon, but if it did, there would be an impact on clause 4 in particular and how the budget would be set. We cannot set in place a system today that will be overturned in, say, six months. That would be really unfair on those affected.

Can we have clarity on why there is such a difference between Northern Ireland and the rest of the United Kingdom? A number of Members have raised that, and it would be helpful to understand it. Can we have further scrutiny of how buy-out payments will be achieved? I have grave concerns that it will be based on the cost of biomass installations, but far greater costs, such as interest payments on loans, will have to be taken into consideration.

I share Members’ concerns—we should not be in this position. It is not this Government’s fault that a scheme was set up that was never going to work financially, but we have a responsibility to the people of Northern Ireland to ensure that the solution put in place is fair and does not have a detrimental effect on those who invested in all good faith.

[Sammy Wilson (East Antrim) (DUP)]

It is a pleasure to follow the hon. Member for Lewes (Maria Caulfield). I thank her for her genuine interest in Northern Ireland affairs and for contributing to the debate.

As has been pointed out, this Bill contains two totally unrelated pieces of legislation. The reasons for that have been given, although I am not convinced that this is the best way of dealing with the issues at hand. Let me deal first with rates. I accept what the Secretary of State said; it is important that people in Northern Ireland contribute through their rates to some of the public expenditure required to keep services going in Northern Ireland. But when we impose those additional charges, whether on domestic or business rates, it is important that we bear in mind two things: the ability to pay and the impact that any taxation has on either the businesses or households concerned.

I have reservations about the level of the domestic rate increase, which is above the rate of inflation—it is the rate of inflation plus 3%. That will cause difficulty for households, as some people will not qualify for housing benefit on their rates but are still in low-paid employment and want to stay in employment. That will cause difficulty, but it is nothing compared with what was originally proposed. Let us not forget that the original proposal was 10% plus inflation. I am glad that the Secretary of State did not pursue that. The party of government, like my party, believes in leaving people with as much of their money to spend as possible. People know how to spend their money better than the Government. It would have been a travesty if the Government had proposed an 11.8% increase in the rates that people pay for their home, especially given the Government’s boast time and again—one they ought to be proud of—that they are seeking to bring down the level of taxation. I am pleased that my colleagues and I had a role to play in knocking that figure down.

On the issue of business rates, this is really a 0% increase in real terms. Nevertheless, business rates in Northern Ireland are, for a number of reasons, some of the highest in the United Kingdom. The Chancellor has announced some business rates relief schemes—incidentally, we did have a Barnett consequential for that in Northern Ireland—but because of the non-functioning of the Assembly, it was not possible to revise the small business rate relief scheme in Northern Ireland. While that money was made available to the general purse, it was not translated into reductions for businesses.

In the long term, I think we need to look at the whole issue of business rates. It is of course a tax that is not related in any way to the ability of a business to pay. It does not reflect the buoyancy of the business or, indeed, the income from the business; it simply reflects the size of the premises and the rateable value of the premises that businesses happen to be occupying. For some people, that will lead to under-taxation because they could afford to pay more, but for many businesses it leads to over-taxation because their overheads go up or stay the same even though their income and their ability to pay are going down, which affects so many.

I suppose it is not just an issue for Northern Ireland, but this is one of the reasons why we have so many vacant premises on so many of our high streets. As businesses have come under pressure from online retailing and from the changes in the way consumers spend their money, they find their revenues going down, but the overhead of rates still remains the same. In the longer term, I think we need to have a review of business rates. I am pleased that at least there has not been a real-terms increase in rates for businesses, although I know many of them will struggle even with the inflationary increase in this piece of legislation.

Let me turn to the second part of the Bill on the changes to the renewable heat incentive payments. I do not think anyone can say that this scheme has been a success by any means. In fact, it has been a disgrace, and the way in which it was set up and has been abused required there to be a change. However, I must say that when it comes to subsidies for renewable heat, I do not think that some of the practices instigated through this Parliament and in this part of the United Kingdom would stand up to scrutiny any more than the renewable heat incentive stood up to scrutiny in Northern Ireland.

We have a situation at present that makes the subsidy in Northern Ireland disappear into insignificance. At Drax B power station, the subsidy has climbed from £250 million a year when the Liberal Democrat Minister introduced it to £800 million this year, and it is going to go up to £1,000 million a year, when coal could be mined two miles down the road. And what do we do? We bring in wood pellets from America. We chop down trees in America, put them in a boat, bring them to England and burn them in a power station, and we pay a subsidy of £800 million a year for it. I wonder how many houses in the south of England are having their outdoor swimming pools heated with boilers for which people get a renewable heat incentive payment. Is that a good use of public money? The renewable heat incentive has not received the same level of scrutiny in other parts of the United Kingdom as in Northern Ireland, where it was seen to be abused. However, there are big questions to be asked about the scheme, not just in Northern Ireland but in any other part of the United Kingdom.

I have several points to make about the need for review. We have been told that the legislation has to pass today instead of being given the level of scrutiny required. Many hon. Members have asked detailed, probing and important questions, but we are told that if the Bill does not pass today, no subsidy regime at all will be available at the beginning of the next financial year, and that if we continue with the existing subsidies, we will be subject to infraction proceedings from the European Union.

Why was all this brought forward at the last minute? It is not that the review of the scheme has been forced on the Department in the past three or four months; it was initiated by the last Minister for the Economy before the Assembly fell, more than two years ago. What has happened in the meantime? Why has it taken two years, with a rush to pass the legislation at the very end? The joke in Northern Ireland is that evolution works quicker than some of our Departments. However, given that the review was initiated more than two years ago, I have to ask why, at the last minute, we are suddenly being presented with a piece of legislation that raises a lot of questions, instead of being given time to carry out the proper scrutiny, in Committee and so on, that the hon. Member for Lewes and the Chair of the Northern Ireland Affairs Committee have suggested.

[Maria Caulfield]

It strikes me, as an MP who is still fairly new in this place, that the attitude is often, “It’s only Northern Ireland, so we can whizz it through in a day.” It should not be right for any Bill to pass Second Reading, Committee and Third Reading in one day without any suitable scrutiny.

[Sammy Wilson]

The hon. Lady makes her point well, as she did in her speech.

Not everyone abused the scheme. Some did, and it is right that their subsidies were cut, but many people had the scheme sold to them by the then Sinn Féin Minister of Agriculture and by the Minister in the Department for the Economy. It was sold to farmers and many other businesses as a subsidy for heating their premises because they were using the kind of energy that was in vogue with the Department, which wanted to cut down on CO₂. I am not really sure how burning wood cuts down CO₂ emissions—I am told that it puts as much CO₂ into the air as coal, and some of the pellets are imported from miles and miles away—but that was the thinking at the time.

People undertook in good faith to install the boilers. They borrowed money, expecting a certain level of return and a flow of payments. They could have put in gas boilers and got cheaper energy, but because of the hysteria against fossil fuels, it was decided to subsidise wood burning, so people installed a more expensive boiler and expected to get money in return.

We are told that the sudden and very substantial reduction in the subsidy happened because the EU said that it was required to keep us to the average 12% level. There has been some dispute, in discussions with officials, about whether the rate of return can be between 8% and 22% so long as it averages out at 12%, or whether it is a maximum of 12%. If we had had the time or a mechanism to bring forward officials we could have probed into that, but we are told it is 12%.

In England, the subsidy per boiler is about five times higher than the subsidy per boiler in Northern Ireland. The scheme in the Irish Republic pays about six times more per boiler than in Northern Ireland. The question is this: how can you pay a subsidy five times more in England and still be within EU state aid limits? You can pay a subsidy that is six times more in the Republic of Ireland and still be within EU state aid limits. In Northern Ireland, however, it has to be at the level of £2,000 per boiler to stay within the state aid limits.

The explanation given—I cannot question it as I do not have enough information—is that, “Oh, the cost of boilers and the cost of fuel is different in Northern Ireland from the cost in England”. I could believe that if we were talking about, say, a 10% difference, but we are talking about a percentage difference in the hundreds here. Why does a boiler cost substantially more in England than it does in Northern Ireland? You might argue that it is because of transport costs, but then why does it not cost more in the Irish Republic? If a boiler has to come from England or another country, it has to be transported across the sea to the Republic of Ireland. Why should fuel cost substantially more in Northern Ireland than it does across the border in the Irish Republic? There might be some explanations as to why it costs less than in England, but why should there be such a huge difference between the two jurisdictions on the one island?

There could be perfectly good explanations for that, but given that the Department for the Economy got its figures so wrong for the initial scheme, you can understand, Madam Deputy Speaker, why people in Northern Ireland are sceptical about any figures that come out of the Department. The Department did not spot that the subsidy was substantially more than the cost of fuel and got its figures so wrong that there was a massive overspend. Figures for any scheme it brings forward need to be scrutinised properly. There is no opportunity to do that, despite whatever questions we ask Ministers today. A lot of these things come out through discussion, not through a question and a quick answer back from a Minister.

Those are the kinds of issues that need to be addressed. Unfortunately, I think we will have to vote for the Bill tonight, because there really is no alternative and it would be far worse to leave people with no scheme by voting against it. However, the Chairman of the Northern Ireland Affairs Committee suggested that there ought to be a commitment to allow the Committee, even after the Bill is passed, to have the opportunity to bring officials and anyone else necessary along, so that it can question them on the figures. If those figures are shown to be wrong, the scheme has to be amended to ensure that the level of subsidy paid reflects the true costs of the scheme. That is the one assurance we have to give to those who have been badly bitten.

I welcome the intervention and the fact that there was also some discussion on the budget, albeit late in the day. I think it was only two or three weeks ago that we were first given sight of what was proposed in the budget, but because the decision had to be made internally—purely by the Northern Ireland Office and the Department of Finance—there was time to revise the enormous increase that was being proposed initially for the rates. In the case of the renewables scheme, it had to go back to Europe. Thank goodness that after 29 March, we will not have to worry about state aid rules. We can make our own decisions. That is a good thing and another reason why the House should make sure that we get out on 29 March, so that we can decide on the kind of support that we want to give industry or the lack of support—

[Maria Caulfield]

rose—

[Sammy Wilson]

I knew that that would get the hon. Lady going.

[Maria Caulfield]

May we ask the Minister if—when we leave the EU on 29 March—we could look again at the subsidy issue, given that state aid rules will no longer apply?

[Sammy Wilson]

I agree with the hon. Lady. One of the reasons why we need scrutiny of the legislation, even after it has gone through, is so that we have a chance to revise it if we see that the figures are wrong. Since people have bought the boilers and had the infrastructure installed, would it be better to find a level of subsidy that enables people to continue to use them rather than just buying them out? The fact that we have a buy-out clause in the Bill shows that the Government and Department know that there will be hardship for people, although I suspect that the terms of the buy-out will be so draconian that it will not be worthwhile people doing that.

We will be supporting the legislation, albeit reluctantly, but on the basis that there will be an opportunity for the good questions that Members across the House have asked today to be looked at in more detail.