How Northern Ireland's finance minister could raise money?


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Northern Ireland’s finance minister is under pressure to raise an extra £1bn to meet Northern Ireland’s public services bill in 2020.

Conor Murphy said Northern Ireland would be stuck in an “austerity trap” unless Westminster’s proposed financial package was increased.

NI Secretary Julian Smith has rejected criticism of the package.

What are the fundraising options open to Stormont, and how could they improve the Executive’s financial position?

Rates

Rates are property taxes paid by households and businesses in Northern Ireland.

They are the executive’s main revenue raising power, bringing in about £740m a year.

Rates are based on the value of the property.

A review of rates by former Finance Minister Máirtín Ó Muilleoir suggested that people in the most valuable houses should pay more.

Currently, if a house has a rateable value above £400,000, its rates bill is assessed as though it is valued at £400,000.

It was proposed to change the system so that rates would be levied on the portion above £400,000.

That would have raised an additional £4.5m, but the measure was opposed by the DUP and so never became policy.

Another unimplemented proposal was to impose rates on a wider range of non-domestic properties, such as charity shops.

The Department of Finance is currently conducting another review of the business rates system.

Water charges

Unlike other parts of the UK, households in Northern Ireland do not pay directly for their water.

Instead a publicly-owned company, NI Water, is mostly funded out of the executive’s resources.

NI Water says this has led to a major shortfall in the money it needs to improve infrastructure.

In 2007, an independent review recommended that households should start paying for water.

It suggested a system based on the value of houses, rather than using metering.

That was never implemented and the executive parties remain opposed to household water charges.

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Student fees

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In Northern Ireland the executive partially funds each local university student

Local students studying at Northern Ireland’s universities pay fees of £4,275 per year.

That compares to £9,250 for students studying in England.

In practice, this means that students in England are entirely responsible for their own fees, but in Northern Ireland the executive partially funds each local student.

The executive caps the the number of students who can go to university in Northern Ireland as a cost-control measure.

DUP leader Arlene Foster said higher fees for students should be debated in a “positive way”.

However, Sinn Féin’s Michelle O’Neill said increasing fees was “not the right approach”.

Raising fees would be unlikely to improve the executive’s overall financial position, but would allow the cap on numbers to be raised.

Review other ‘giveaways’

As in Scotland and Wales, prescriptions written by GPs are dispensed free in Northern Ireland.

In England the standard prescription is £9 per item.

However, there are a range of exemptions for people on low incomes, pregnant women, some pensioners and others.

If Northern Ireland was to adopt a similar scheme it would probably not raise much due to those exemptions and the cost of administering them.

People in Northern Ireland are entitled to free public transport when they turn 60. At 65 this is extended to free transport across the island of Ireland.

Last year the executive paid Translink, the public transport company, £48m to cover the cost of concessionary fares.

However, that cost reflects compensation for a range of groups.

Taxes

In 2013 the voluntary organisation NICVA commissioned research on Stormont’s tax and spending powers.

It suggested that the only measure likely to raise a significant amount of money would be to devolve income tax and increase the basic rate.

That idea is unlikely to be politically popular.



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