Politicians should not always be criticised for U-turns. As the Bible nearly says, there is more joy in heaven at one minister who repents than at 99 who plough on regardless.
So Sinn Féin’s John O’Dowd, Stormont’s Minister for Finance, deserves a fair hearing over his tax U-turn last week.
O’Dowd halted a revaluation of business rates, the equivalent of commercial rates in the Republic, following lobbying from the hospitality industry. Pubs and hotels had faced average increases of 47 per cent and 85 per cent respectively, threatening to put many out of business.
While the industry is delighted, few others are impressed by the Minister’s claims of having listened and acted. Other parties are naturally crowing at his discomfort, although he brought much of this on himself by haughtily dismissing their concerns in the weeks beforehand.
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The more serious criticism of O’Dowd’s change of heart is he did not so much revise his decision as belatedly interrupt an automatic process.
Rates for all businesses are revalued every three years by an agency under O’Dowd’s department to ensure they are fair and up to date. This exercise is revenue-neutral: all the adjustments cancel out.
Valuations are based on the rental value of premises, but pubs and hotels are among the handful of enterprises that also have their profits taken into consideration. This usually helps to ensure their rates bills are affordable. However, the last revaluation was based on profits during the pandemic. That meant bills for pubs and hotels dropped sharply from 2023 and were guaranteed to rise dramatically this year.
Devolution had collapsed during the last revaluation, so there were no Assembly members or ministers to point out and smooth out the bumps in the calculations.
But O’Dowd has been in charge for a year. His party colleague, Caoimhe Archibald, was minister for finance for a year before that. Either minister could have foreseen the mathematically inevitable problem on the horizon and started making proper plans to address it.
Instead, O’Dowd has halted the process at the final moment – adjusted bills were to be issued on April 1st. If pubs and hotels are not to pay more, all other businesses will have to make up the difference and it is hard to see how this can be arranged in time.
Brian Reid, chair of Royal Institution of Chartered Surveyors in Northern Ireland, summed up the concerns of the property industry in a Belfast Telegraph article on Tuesday.
He warned the late halt to revaluation has caused instability, inequitable outcomes for businesses and uncertainty that will damage investor confidence.
Reid acknowledged the difficulties faced by pubs and hotels, but noted these would normally be addressed through tax relief and other targeted assistance, providing sustainable support without undermining the principles and integrity of the rates system.
He also warned that “suspending a revaluation in response to sectoral pressure invites further political intervention into what should be a rules-based, evidence-led process”.
Northern Ireland’s business community has traditionally been cautious about wading into political arguments. It took Brexit to provoke mild criticism of the Democratic Unionist Party (DUP), for example.
Although the hospitality industry has been a little more assertive, its lobbying entered a new gear over the revaluation. The final straw for Sinn Féin appears to have been pubs promoting “John O’Dowd pints” at outrageous prices, a stunt widely reported in the media and circulated online. Other sectors will see this approach has worked.
The rates are Stormont’s only significant taxation power, raising about 5 per cent of its budget, plus most funding for councils. Businesses contribute roughly half the revenue and households the remainder.
Sinn Féin has ruled out any significant reforms or rises to household rates, most recently under a review conducted by Archibald. Now O’Dowd has risked business rates being picked apart by special pleading. This did not even involve a tax rise; merely a routine adjustment, with easily predictable winners and losers. The party still panicked when the losers complained.
Three days before O’Dowd’s U-turn, the Stormont Assembly passed a Sinn Féin motion calling for more “revenue-raising powers” to be devolved from Westminster to Stormont.
Republicans have an ideological interest in what they sometimes term “repatriating” powers from Britain. Apart from that, it is pointless to seek more control over taxes when Stormont will not uphold the powers it has, let alone use them. The only fiscal policy Sinn Féin and the DUP have to show for two decades in charge is keeping rates in line with inflation – frozen at an arbitrary point in time.
At least the DUP can claim an ideology of conservative rectitude. Supposedly socialist Sinn Féin is Northern Ireland’s largest party, it has no serious rivals and powersharing in effect guarantees it will be in office forever.
Why does it govern as if it is afraid of its own shadow?
