Hain under pressure to cap business rates?

Given how the manufacturing sector in Northern Ireland has taken a hammering in the last few years, unsurprisingly the Secretary of State is being heavily lobbied to cap local business rates by a cross party group drawing from a number of Northern Irish parties. “Group spokesperson Basil McCrea said the support of the parties was hugely significant and he hoped Mr Hain would take on board the suggestion that the industrial rates bills should be capped at 25%.”

Companies may not close down immediately but all future investment plans will be directed away from Northern Ireland. Over a relatively short period of time we will lose much of our manufacturing base. This disastrous state of affairs is not brought about by international competition but by the ill-considered actions of a government which has been misinformed. The ending of industrial de-rating is not inevitable. The situation can be reversed by changing government policy.

  • Crataegus

    Why stop at industrial, what about commercial and why on earth rate empty buildings, is the idea to encourage demolition? The rates are to pay for local services so why not make those who use them and can vote the councils, in or out, pay for them.

    It would be better to have a serious look at creating a fair local tax structure and see what can be done to reduce costs.

    I must confess I don’t see much opportunity for savings at council level and re-organisation is bound to push up expenditure (it always does).

  • Yokel

    Right let’s explain how businesses can afford to pay rates..by succeeding…

    Businesses face issues all the time. Those that are good enough weather them.

  • Businessman

    Yokel
    What business experience do you have? What is the increase in the cost of Oil, Gas, and Electricity in the last year?

    Why do you think the business community is turning out in strength to support this? Do you oppose the campaign to cap industrial rates? Do you believe that business have no option but to pay up?

    Very successful businesses are successful because they keep their costs under control and they will make their investments where they get the best return…

  • Yokel

    Businessman

    I run a small business, I also have active investments in a manufacturing & design concerns locally. I’ve launched other businesses into the local market on behalf of concerns outside Northen Ireland. I’ve helped local businesses sell across the UK, Europe & the USA. And I once did a paper round…..and before you ask no I will not name then because thats not what this forum is about.

    Successful businesses keep their costs in a proper ratio with their income to make profit. Since you are so keen to know, on two of those businesses, total costs ratio to turnover remained pretty much the same, result we made profit again. Margin against turnover was much the same, turnover growth but no extra margin. The final business did have a fall in cost/turnover ratio but considering its a young business its on track to break even in line with plans. My information is all very up to date because our trading years are line with government tax years for all 3 businesses.

    Now if you can’t manage your business to work your way out of the issues you face, have no doubt some of your competition will.

    If some businesses can weather such regulatory and cost issues and others can’t theres a likely reason why. One is a better run business than the other. Whether a particular business survives is a minor part of the issue. The question is will a viable market exist. If a viable market exists then a viable business can exist to meet the demand. If 5 businesses in a market space get trimmed to 3 because 2 can’t maange successfully against cost rises yet the market stays the same then we have 3 business taking the same total value of business as 5. Survival of the fittest..except in Northern Ireland, where its survival of those who are best at grabbing government grants..

  • Mick Fealty

    Guys, and Yokel in particular. Going for the man rather than playing the ball takes us precisely no where.

    There is a very important discussion to be had here: and your contributions are all the more welcome if you have experience of starting and running a business in a difficult climate.

  • Businessman

    Yokel
    Given your experience, I am surprised that you do not understand the damage that industrial derating will do. Northern Ireland has a small domestic market. If a business is to reach any size it must export.

    My company exports over 40% of its product, mostly to GB. We operate successfully in a highly competitive market, we invest in our products, equipment and people. In fact we do all the things that the government says we should do.

    In the last year, we have seen the price of oil, gas and electricity rise. We also have to pay more for water and environmental issues and finally we now have the prospect of paying rates.

    Our business requires alot of space, we employ a fair number of people, industrial de-rating hits businesses that need a lot of space particularly hard.

    We operate in markets where we cannot increase prices due to international competition. The result is that all cost increases fall straight to the bottom line.

    As a small business you may not have the same cost dynamics as we do, but ultimately we are all linked. Industry provides the added value that pays its suppliers, its employees, and by extension local retailers.

    We in industry are not asking for a handout, we know perfectly well how to run our businesses, and that knowledge currently tell us Northern Ireland is not the place to invest. We will not sit idly by and see our businesses destroyed.

    If other people can replace our businesses in the next years I wish them well.

  • Yokel

    Businessman,

    It’s coming, it has to be prepared for. If there is a break in terms of capping or whatever great but we have to work on the probability that its a reality. As harsh as my attitude seems I’ve spent plenty of time helping to sort out the unbelieveable incompetence of some local businesses, who’s management were busy farting about without a notion when hard times hit whilst a lot of jobs were on the line. If one of the businesses I’m currently involved with fails, the first place I’m going to look is the management and running of it.

    What riles me most is who is put up by NIMFG from within their own ranks to front and strategise this campaign and what attitude, capabilities and past that they bring to the table. Even Alistair Campbell would find it hard to make it an effective lobby with all his spinning skills.

    Sign of an error in approach? Cross party delegations. Without putting too fine a point on it it would have been better if business went and did the talking themselves. While local politicians will of course align themselves with this cause the NIMFG shouldn’t be using the politicians to do anything but open the door.

  • Crataegus

    Yokel

    The rating system is unfair as it is not based on ability to pay and falls heavy on various sectors. It should be replaced with a local income tax.

    To invest you need profit. If the costs in NI are high business will relocate. (I am) It is not a question of bad management, but simply accepting that I can employ skilled people elsewhere where costs are massively less. It would be bad management to stay.

    It is not the function of business to pass on every penny of tax that government imposes. The responsibility lies with government to ensure that there is a competitive business environment. That is in everyone’s interest.

    Agree with your comment about the role of local politicians.

    Businessman

    You have my sympathies. Costs in NI are rocketing and many in export (goods or service) cannot pass them on. NI is becoming increasingly expensive and uncompetitive and the local market small (be it NI or Ireland). There are in addition problems relating to the likes of the Planning Service which are more responsive elsewhere.

    If you follow Yokel’s logic the sane thing for all of us is simply relocate as frankly you can make a better return by so doing. Fancy India? Great weather. .

  • English

    Why would Hain use this potential bargaining tool now, when he can do so in the coming months. It is one of the many cards, in a very good hand that he holds.

  • Businessman

    Crataegus
    It is not the function of business to pass on every penny of tax that government imposes. The responsibility lies with government to ensure that there is a competitive business environment. That is in everyone’s interest.

    Absolutely agree. It is a point that I was trying to get over to Yokel. It is not my responsibility to run the country, but message for those who do is
    “If you continue to rack up the costs of doing business in Northern Ireland do not be surprised if even your most profitable, exciting and well run businesses leave for more attractive regions”.

    There are many things over which we have no control but the ending of industrial de-rating is not one of them. It is a self inflicted wound. It is Northern Irelands only unique competitive advantage and without it there is no reason to invest in Northern Ireland (unless Invest NI give you a large handout every year).

    As for the reason for involving the local politicians, perhaps it is because they brought it in. Presumably, if the Assembly is up and running they can cap itat current levels and if the direct rule ministers want someone to explain the facts of life to the local politicians and the people who vote for them who better than industry. Cross party support is better than cross party opposition.

  • Scotsman

    Back to the first point- the reason for rating empty buildings is to encourage them to be put to productive use, or to be sold to someone else who will do the same.

    However, it is the land value, rather than what is built on it, that should be taxed.

  • Crataegus

    Businessman

    I have a jaded view of local politicians; take water rates they agree to them when in the Executive and deny all knowledge and complain about their own decisions when out. They will use you to look positive and drop you when it suits them. Unprincipled opportunists.

    Perhaps it may assist Yokel if I list some of the advantages and disadvantages of operating a business in NI.

    DISADVANTAGES
    1Uncompetitive and high tax regime.
    2Uncompetitive and comparatively high interest rates.
    3High banking charges.
    4High transport costs.
    5Small peripheral economy. (Ireland or NI)
    6By international standards high labour costs.
    7High material costs.
    8High energy costs.
    9High property costs compared to other countries.
    10An Ethos in sections of the Civil Service that is ambivalent about the need for economic regeneration.
    11Political instability and internationally viewed with odium.
    ( I have probably left a few out)

    ADVANTAGES
    1English speaking.
    2Happen to have a home here, but that can soon change.

    On another thread I mentioned a development that I had an interest in where the projected lead in time for design & receiving statutory approvals was 3 years and a build period of 18 months. The money that was to be invested in that project is now being invested in Asia. The reason is we are investing in rising economies with increasing demand, the possibility of capital growth is greater and the risk and cost is lower. We can build several times over by the time we can even start here. This is a direct loss of employment to NI Architects, Quantity Surveyors, Engineers and Builders. It means not only one less building in NI but the economic activity that it could generate.

    Back to rates why should anyone build an office block in Belfast and risk having it lie empty for years because of an underlying uncompetitive economy? You would actually be ‘fined’ for taking the risk, because you will have to pay rates on the empty floor space. THIS IS INSANE.

    Investment and business is moving out of NI and I don’t believe that the local politicians, have any idea as to the seriousness of the situation. On another project it made more sense to invest in Swindon than here. Yes the South of England is more attractive! Why on earth should anyone invest here, wake up!!!

  • lib2016

    Given the fact that the new local areas where commercial growth is likely coincide with those which are nationalist this proposal will be seen as sectarian. Not a hope of it being passed.

    Nationalist areas losing their biggest sources of income and even worse – domestic rates in middleclass unionist areas to be abolished in favour of some undefined system of local income tax. You’ve got to be kidding!

    I’m not equipped or inclined to do the maths here – just stating the obvious suspicions which will be aroused.

  • Crataegus

    Lib2016

    There are five problems with rates, the first is they are not based on ability to pay, the second they fall on people who may not be represented by those setting the tax and thirdly they are for services and surely the user should pay. The fourth reason is they penalise improvement and investment in property and the fifth is the additional department required to collect this separate system of tax.

    Money has to be raised, but lets at least try and have a fair system based on ability to pay. As for the middle class I for one would prefer a tax based on my income than one based on the assumed rental value of my house. It simply is not right that an elderly person should be expected to pay the same as a house full of able bodied lads or someone be forced into bankruptcy by a rates bill they simply can’t pay. The current system makes no more sense than basing income tax on the payers shoe size or hair colour.

    Also rather than looking on business as some bottomless money pit which we can fleece at every turn, better to realise that business creates the employment that creates salaries that pay tax. Bleed business and you hit income tax receipts.

    In my experience an increasing number of people from NI are investing elsewhere, now it may not be a representative cross section, but I think there is reason to be concerned. It simply is no longer an attractive proposition to invest here, it can’t be justified outside pure sentiment.

  • Businessman

    Crataegus
    A man after my own heart. Understand your somewhat jaded view of local politicians, but surely it is better to have them on side than off side.

    There is a tendency for them to be on the side of “the Worker” rather than the fat cat businessman until they realise that without investment our businesses will decline and eventually dissappear and as you demonstrate with considerable clarity, nobody has any intention of investing in Northern Ireland.

    Perhaps yokel would care to comment

  • Northern Ireland should look to building an entrepreneurial culture to foster cutting edge technologies. You don’t have it so you’re going to have to entice it in.

    This means inequity in the tax base. The new technologies are going to be basking in a nearly tax-free environment while everybody else is stuck with business as usual.

    You won’t get anyone to move a biotech startup from Vancouver to Antrim with good intentions. Intel didn’t build a 300mm, 90 nano fab in Kildare because dancing in bunny suits in the rain is groovy, the Republic made it damn well worth their 2 billion or so bucks in the long run.

    “The Worker” is just as screwed in the new environment, maybe more so, than he was in the old one. All the paper hat jobs vaporize when capital can prance off to Sri Lanka to recruit an eager, cheap workforce. The winners are going to be trained techs.

    A lot of our kids in this valley didn’t get the jobs to afford to live here after assembly was shipped offshore in 1984. That’s just the way it is.

  • Crataegus

    Yokel

    My view of local politicians is they tell you whatever they think you want to hear to get a vote. Or if you are one and those against are two they will support the position with the greatest number of votes. I have reached a position where I doubt if democracy actually works.

    Oh of course better to have them on your side, but in NI what can they actually do?

    Smilin’ Jim

    In the present political setup I cannot see NI being able to offer a sufficiently attractive package to attract high tec business from Vancouver or anywhere else. Why locate here when you could locate around Cambridge or Bangalore? Give me one good reason why any outside investor would locate their business in NI. But the position is worse local people are investing elsewhere, a real vote of confidence that. We are forcing our own business people to look elsewhere.

    I slightly disagree with you on one point, there are quite a few capable, potential entrepreneurs in NI. However they are faced with an environment that is totally unfavourable and often they do not have access to adequate resources. New business doesn’t have to be at the cutting edge it could be filling a particular niche like dealing with waste. I know a couple of people building a business around slurry!

    We rely on massive subsidy from Britain and are living in an economy that is unstainable. The government sector needs to decline, not massively, but by about 15% – 20%.

  • lib2016

    Crataegus,

    I accept all your criticisms of the local rates system. They have all been made before and yet we still have rates because o one can think of a better way of raising local taxes.

    It is extremely unlikely that they will be removed under Direct Rule although they may well be increased to bring them up to British levels.

    Given that their removal would be seen by nationalists as yet another denial of British standards it is even more unlikely that they would be removed in Northern Ireland alone. This would have to be tackled at Westminster or alternatively at a functioning Assembly and there doesn’t seem to me to be any prospect of success in either forum.

    Its a lowcost tax to collect and one which central government can to a large extent blame on the local authorities. For both reasons central government has no incentive to remove it.

  • Crataegus

    lib2016

    I agree.

    Depressingly I really can’t see prospects for improvement or change as our politicians are utterly bereft of any rational sense judgement, priority or mutual self interest..

  • Give me one good reason why any outside investor would locate their business in NI

    Fifteen tax-free years. Other than a population that speaks English. Yes, it is a specious answer.

    There is a volume of fine print in my “entrepreneurial culture to foster cutting edge technologies”. The boiler plate is in three subheads: the development of capital, educational, technological and flack infrastructures.

    Capital: The ability to fund first-round financing to 20 start-ups a year. Of the 20 one will be viable in the long term. Thus the kitty has to have 50 million Stg. each year. Compared to the billions that the North flushes down the security hole, this is chump change. This you can do immediately.

    Educational: Science, science, feckin’ SCIENCE. This starts by attracting faculty. You get faculty if you build facilities. This will take more than ten years and many more millions.

    You will find that, once established, this educational infrastructure is capable of producing it’s own entrepreneurial cadre since there is nothing so rapacious as an associate professor whose students are pulling down three times what he makes.

    Technological: Let’s say that it is 20 years ago and you wanted to start up a hard disk plant in Derry. Where do you go to get your DEP chamber electropolished? This is the sort of technological blacksmithing infrastructure needed. It is the only one of the three that can be composed of one-lung operations and can utilize the entrepreneurial talent you mentioned was on hand.

    Flack-catchers and flacks: IDA has offices in New York, Boston, Chicago, Atlanta and….. uh….. Mountain View. Mountain What? It ain’t much of a mountain to view, just the 2000 foot ridge of the Santa Cruz mountains that contains the San Andreas fault and a whole bunch of pot farms. It is, however, the home of Apple and close neighbor to Intel, National Semiconductor, the Lockheed Blue Cube, NASA Ames Research and a few klicks south of Stanford University ….. you get the picture. It’s how Kildare got the Intel fab, amongst other things. You gotta do the same thing.

    Your Achilles heel is that all of this needs direction and I do not see Northern Ireland capable of choosing leadership worthy of these requirements. You need to clone that great son of county Down, T.K. Whitaker.

  • three subheads:

    Lets make that four subheads and add mathematics to that Science, science thing.

  • Crataegus

    Smilin’ Jim

    “the development of capital, educational, technological and flack infrastructures”

    I can’t disagree with that basic premise. Many people simple don’t have access to the necessary funds to start a business. If you go to a bank to borrow you need assets to borrow against. Fine (well sort of) if the venture is property. 10 years ago I had the experience of proposing an online auction site to a bank and needless to say it went no where, but only to happy to lend against property. So instead of ebay I do offices and houses.

    Technology; in my youth Belfast had real engineering skills, those have largely been lost with the passing of a generation. They have not been replaced with the modern equivalents and I would agree Science, Maths, Engineering and applied subjects. Even subjects like Medicine and Dentistry that are either in obvious demand or ones that are strategically important. But as you say someone needs to have an overview and sense of direction and you cannot leave this to the Universities with their conflicting self interests and in fighting.

    There is a limit to the number of degrees in English, Politics, and Geography one needs. Don’t get me wrong fine subjects for training the mind, but of little use designing a simple turbine or thrust bearing or even writing a simple programme. In fact I think Arts students fit cosily into a Quango environment with its proliferation of meaningless reports and finer points and nuances. An environment where the report is the end result for they have not the ability, experience or resources to implement. They may indeed be part of the problem.

    Unfortunately infrastructure tends to mean all things to all people. There is an amazing amount being spent here on infrastructure and its maintenance and yes I agree it does need ruthless direction. But like yourself I really cannot see our current ‘leaders’ having the ability or even the interest. I would go further, I think they are a collective disgrace. They stood for elections to govern this place and steadfastly refuse to get on with it. Need to reconsider the rules of engagement and need to draw up contracts for those putting their names forward so there is a very real personal downside for not doing your job. In business they would all be in court by now.