Northern Ireland news

Senior economist warns of 10 per cent rates rise

Ulster University's Dr Esmond Birnie. Picture by John Harrison/Harrison Photography

A SENIOR economist has warned that the secretary of state could increase the regional rate by up to 10 per cent – piling further financial hardship on already struggling households and businesses.

Dr Esmond Birnie of Ulster University said a potential double-digit increase may be used as a "big stick or a big carrot" to help persuade the DUP back into government.

His remarks come as councils across the north begin striking their district rates amid mounting budgetary pressures. Belfast City Council is expected to approve a 7.99 per cent increase as recommended by its strategic policy and resources committee last week.

The council was asked to consider an increase in the district rate of up to 12.9 per cent.

Analysis: Hefty rates increase looks inevitable  Analysis: Hefty rates increase looks inevitable  

In the absence of a finance minister, Secretary of State Chris Heaton-Harris will set the regional rate in consultation with the Department of Finance before the beginning of April.

Mr Heaton-Harris last year raised the possibility of introducing new revenue-raising measures, such as domestic water charges, and also spoke of increasing the regional rate, which has been frozen for the past three years.

Dr Birnie said forecasts for next year indicated that inflation would slow to around 5 per cent but that the secretary of state may still set a higher figure to incentivise the DUP to return to Stormont and make up for a shortfall in spending.

"Stormont needs the extra resources," he said.

"We've had all sorts of gloomy predictions about the extent of underfunding in the next year of up to one billion pounds and the figures do seem to be pointing in that direction."

The UU senior economist and member of the Northern Ireland Fiscal Council said a 10 per cent increase in the regional rate would be "bold" but couldn't be ruled out.

He forecast an increase of "somewhere between 4-10 per cent".

"I doubt he'll go above 10 per cent because there's a psychological thing about double digit increases," he said.

"That said, in 2005 under similar circumstances the then secretary of state Peter Hain proposed an 19 per cent increase.

"Something of that magnitude plays into the politics, as if it's a big stick or a big carrot to persuade local politicians to return to serve – we've seen that sort of manoeuvre before."

Ulster Unionist finance spokesperson Steve Aiken said there were "significant financial pressures" but that households and businesses also faced hardship.

"We wouldn't be advocating any significant raise and would urge the secretary of state to be mindful of the difficult financial position many people are already in – a return to austerity is not the way ahead," he said.

An SDLP spokesperson said: “Any decision by the UK government on the regional rate which fails to shield households from the consequences of the economic and fiscal chaos that the Tory party has created, compounded by the DUP’s indefensible boycott of government, would be grossly irresponsible."