How the discount was calculated?
It is based on the difference between what the various District rates would have been in 2015-16 on a 11 Council structure (the ‘after convergence’) and a 26 council structure (the ‘before convergence’) it assumes expenditure levels are similar to what they were in 2014-15.
Where that figure is higher under an 11 Council structure, an automatic subsidy will be calculated and applied to rate bills.
The subsidy will cover 80 per cent of the difference in the financial year 2015-16 (then at 60 per cent, 40 per cent and 20 per cent for subsequent years).
Why were the various subsidies worked out in such a complicated way?
There are many factors that may affect the level of District Rates set by the new councils this year and this scheme is only to alleviate the impact of the regrouping of ratepayers within the new local government structure.
The scheme must disregard the effect of other changes, including:
- the impact of revaluation
- reductions to the Rate Support Grant
- general expenditure increases that Councils may have considered appropriate
This means that the difference in District Rates cannot be based on the actual published rates but instead are calculated using a simulation model. This model adopts the same rate setting process, subject to a series of assumptions that are necessary to isolate and calculate the convergence effect on its own for each affected area. These matters are explained in more detail below.
How was the 'before convergence' position calculated?
The before convergence position were calculated at the time of the scheme being finalised for each of the 26 legacy councils using:
- 2014-15 estimated expenditure levels (which was the last available full rating year)
- estimated penny product (EPP) figures based on latest information available to the Department on the new non domestic valuation list which will come into operation in April 2015
- the latest information that was available to the Department on how the Rates Support Grant would have been awarded on a 26 council basis
Why was the 'before convergence' not the same as the 2014-15 district rate?
The 'before position' had to resemble the various District rates for 2015-16 that would have existed if rates convergence had never occurred.
The 'before position' will not be the same as the 2014-15 district rate as it is had to be updated at the time of the scheme being finalised to reflect:
- the effects of revaluation on the non-domestic district rates
- the effects of revaluation on the award of the rates support grant
- any reduction in the rates support grant
All of these factors were caused by reasons other than the convergence of district councils and were screened out of the discounts calculated by the department's modelling.
How was the 'after convergence' position calculated?
The after convergence position was calculated for each of the 11 new councils using:
- the same expenditure data, ie estimated spend for the new council was the aggregate of the 2014-15 spend (which is the last available full rating year) of the legacy councils (there are therefore 11 domestic converged rates and 11 non-domestic converged rates)
- estimated penny product (EPP) figures based on latest information on the new non domestic valuation list which will come into operation in April 2015
- the latest information available to the department on how Rates Support Grant will be awarded
Wasn’t the 'after convergence' position calculated by the department simply the same as the 2015-16 district rate?
The after position was always unlikely to be the same as the 2015-16 district rate, as it doesn’t take into account any council increase in expenditure etc.
It would have been inappropriate to award convergence support for matters like future capital expenditure or other decisions which are entirely at the discretion of the new council.
How many ratepayers will benefit from the scheme?
Out of around 650,000 ratepayers in Northern Ireland around 350,000 domestic and non domestic ratepayers benefit from the scheme. It will be of most help to ratepayers in Castlereagh and Fermanagh over the four years.
This includes around 12,000 Castlereagh ratepayers falling within the new boundary of Belfast City Council, who will see a typical domestic bill (for a house assessed at £125,000 capital value) reduced by around £90 in 2015-16, and an average reduction of £50 for those Castlereagh rate payers joining Lisburn and Castlereagh. For around 30,000 rate payers in Fermanagh, served by the new Fermanagh and Omagh Council, the average reduction for domestic ratepayers was also £50.
The number of recipients in each area is estimated as follows:
|Legacy District Council||Domestic Recipients||Non Domestic recipients|
|Newry & Mourne||34700||3484|
*Figures based on existing property count by district council area in 2014-15 and excluding public bodies and social sector housing. Does not include recipients of provision to address boundary changes, just those recipients of the main convergence support.
Lisburn domestic count estimated on basis of boundary change.