Finance Minister's Dilemma: Cinema or Pub Rates
The decision between choosing the cinema or the pub might seem like a typical Friday night dilemma, but for Finance Minister John O'Dowd, it represents a difficult predicament. His recent reversal on business rates involved announcing a pause to the Reval 26 revaluation process, which had threatened significant rate increases for pubs and hotels.
This pause has since come under scrutiny, with a UK-wide business rates organization describing it as "a dangerous precedent" that could undermine the principle of a fair system.
Omniplex Challenges the Pause
Omniplex, Northern Ireland's largest cinema chain, stated that the minister's decision caused it to lose nearly half a million pounds in potential annual rates savings. The company is now pursuing legal action to compel the minister to proceed with the rate reforms.
Paul Anderson, Omniplex's head, noted that 13 of the company's 15 cinemas had experienced reductions in their rates bills according to the draft results of Reval 26.
He estimated that hotels and publicans constitute only 2% of ratepayers but have exerted a disproportionate influence in the discussions.
"The other 98% of businesses don't have a voice at the minute," Anderson said.
"I'm not taking swipes at anyone, they're doing what they need to do. It's just a disproportionate reaction to pause for all rate-paying businesses.
"Pausing the Reval is of benefit to a small number. The unintended consequence is ourselves."
Anderson's legal representatives have issued a pre-action letter to the Department of Finance, indicating their intent to initiate legal proceedings to overturn the minister's decision to pause Reval 26.
The Department of Finance acknowledged receipt of legal correspondence regarding the rates decision but declined further comment.
Previously, the finance minister stated that the pause aimed to ensure the rates system remained "fair and equitable for all businesses."
Understanding Revaluations
The revaluation process is revenue neutral; it does not aim to raise additional revenue but rather to determine each business's fair share of the total rates revenue.
While some businesses may face increased rates, others will see reductions.
Business rates are revalued every three years to ensure that the rateable value of properties is current.
The rateable value is calculated using the Net Annual Value (NAV), which assesses the annual rental value a property could reasonably command at a fixed point in time.
The NAV is then multiplied by the "rate in the pound" to determine the annual rates bill.
Projected Impact of Reval 26
Reval 26 indicated significant changes for certain sectors.
Hotels experienced an overall 84% increase in total valuations, while pubs saw a 47% rise.
Land and Property Services (LPS) explained that these substantial changes reflect improved conditions since the Covid-19 pandemic, as well as expansions and enhancements to premises.
Industrial and warehousing values increased by approximately 16%, attributed to strong demand from logistics and manufacturing sectors alongside limited supply.
LPS noted that without these increases, rates would continue to be unfairly generous to the hospitality sector, reflecting discounts granted during the Covid pandemic.
Reasons Behind the Minister's Reversal
The draft outcomes of Reval 26 were published at the end of January, revealing that some businesses, particularly in hospitality, faced substantial rate increases.
The backlash from these increases prompted the minister to pause the process.
He expressed a desire to support local businesses and acknowledged that some sectors perceived the revaluation as unfair.
Colin Neil, Chief Executive of Hospitality Ulster, stated that his members have "no confidence" in LPS following the draft results of Reval 26.
He said the increases threatened by the revaluation process would have been the "death knell" for the industry, with publicans warning that it would have led to higher pint prices.
Concerns from Cinemas and Other Businesses
Some businesses, including 13 of Omniplex's 15 cinemas, would have seen their rates decrease if Reval 26 had proceeded without interruption.
Sharon Gallagher, head of LPS, appeared before Stormont's finance committee the day before the minister's U-turn, stating that pausing Reval 26 would be "unfair to other businesses."
Following the announcement of the pause, John O'Dowd told NI that "the basis of the rates system has to be fairness," but he aimed to "dial down the atmosphere to allow constructive engagement to take place."
"In any rates delivery there are going to be people who feel they have lost and people who feel they win, and people in the middle."
Next Steps
Omniplex confirmed that its legal challenge is underway.
No court date has been scheduled yet, but the company hopes the proceedings will conclude in the coming weeks to clarify any potential effects on business rates bills expected at the beginning of April.
