Northern ireland assembly Tuesday 15 May 2007test Private Members’ Business The Assembly met at 10.30 am (Mr Deputy Speaker [Mr Molloy] in the Chair). Members observed two minutes’ silence. Private Members’ Business Mr Deputy Speaker: The Business Committee has agreed to allow up to one hour and 30 minutes for this debate. The proposer of the motion will have 10 minutes to propose and 10 minutes for the winding-up speech. All other Members who wish to speak will have five minutes. Two amendments have been received and published on the Marshalled List. The proposer of each amendment will have 10 minutes in which to do so and five minutes for the winding-up speech. Mr B Wilson: I beg to move That this Assembly notes the introduction of unfair changes to the rating system, and calls upon the Department of Finance and Personnel to conduct a full review of the new system, including in particular, consideration of further income-related reliefs and a full income-based system. I congratulate you on your appointment, Mr Deputy Speaker. Since the recent rates revaluation, I have been approached by a number of my constituents whose rates have increased dramatically, in some cases by more than £1,000. For some, their rates would have doubled had it not been for transitional rate relief. Most of those constituents live in an old family home and exist on a modest pension. The rates increase will cause extreme hardship in most cases, and in extreme cases it will result in people having to sell the family home. It is unacceptable that elderly people who have worked all their lives and have saved for their retirement are now being hammered by those excessive rate demands. The Executive must revisit the options for funding local government services. The present system, which is based on the regional rate, increasingly puts the burden on the elderly and those on a fixed income. It also hits low-income families. That cannot be acceptable in a civilised society. Rates are a regressive tax, and they bear little relation to a person’s ability to pay. They not only create hardship for those on fixed incomes but have a disproportionate impact on the low-paid. The Department of Finance and Personnel’s own figures, which are based on the 1999-2000 household survey, show that a house with a weekly income of £100 would pay 11·6% of that in rates, yet one with a weekly income of more than £400 would pay only 2·5% of that figure. The new valuations, which are based on capital values, that were introduced in April 2007 highlight the rating system’s unfairness. Any system, however, that is based on property values is inherently unfair, as it totally disregards a person’s ability to pay. The problems raised by that revaluation are not new, but they are fundamental to any system that is based on property values. For years, I have highlighted the plight of many elderly constituents who live on small pensions and who must pay more than 10% of their income on rates. The current proposals have emphasised and exacerbated their hardship. It is time for something to be done to reduce their burden. Rates are a regressive tax, and they bear no relationship to one’s ability to pay. How can one justify an old-age pensioner’s having to pay the same as a family of three wage earners, simply because they live in a similar house? Moreover, payment of rates does not relate to the use of facilities. Can it be argued that a pensioner makes more use of an ice rink or squash courts, creates more rubbish, or uses more water than a family of four? Is it right that a person who lives on a pension should pay full rates while a young person who earns a substantial wage and lives in the family home should contribute nothing to the cost of local services? Rates should be replaced by a tax that is based on ability to pay. The recent change from a rates system that is based on rental values to one that is based on capital values is merely tinkering with an unacceptable system that needs fundamental reform. I have long argued that rates are inherently unfair because they take no account of ability to pay. In 1982, I raised that issue with the then Secretary of State, Jim Prior, when we met him to propose the abolition of the regional rate. The problem has worsened significantly in recent years as successive Finance Ministers — both Executive and direct rule — have raised the regional rate disproportionately to pay for the upgrading of our economic infrastructure. Few people would dispute that we must raise additional revenue to upgrade that infrastructure, but that should not be done through an unfair rating system that places the burden heavily on the most vulnerable sections of our community. I therefore call on the Minister to carry out a full review of the means of funding local services. I recognise that, in 2000, the Executive set up a review of rating policy and began an extensive consultation process. However, the terms of reference for that review were extremely restrictive and the consultation was unable to consider options other than those that were based on property values. My submission, which proposed a local income tax, was dismissed as going beyond the terms of reference. Much has happened since then. The regional rate has almost doubled, and both the Lyons Inquiry and the Burt Review of local government, in England and Scotland respectively, have suggested changes to local government finance. There were more than 100 responses to the consultation in Northern Ireland, but the input from some political parties was limited by the terms of reference and, in other cases, was non-existent. I was the only elected representative to oppose the principle of the charges and to call for the replacement of rates by a tax that is based on ability to pay, such as a local income tax. Three of the political parties that were then represented in the Assembly did not submit any evidence, and the comments of the other four queried the details of the new system, rather than the principles behind it, which are fundamental to the achievement of a just system. Over the five-year consultation period, there was very little interest from most politicians until last year, when the new valuations were announced. Politicians then demanded that the proposals be withdrawn. The motion calls for a review of all the options, particularly income-based alternatives such as a local income tax. That would clearly be fair, as it would be based on one’s ability to pay; it would tax non-householders who do not pay at present, and it would not act as a disincentive to improve property. Other options include a local sales tax; a services tax; green taxes, which would help the environment as well as raising revenue, based on the principle that the polluter pays; and a land-value tax. The Green Party in the Scottish Parliament has proposed a land-value tax, which is being considered by the Scottish Parliament and Executive. The Assembly should examine that option, because such a tax would benefit people on low income and would encourage the development of derelict land. When land is derelict, no one pays tax on it, and no income comes from it. A land-value tax would stop speculators from building up land banks on which they pay no tax, but from which they benefit from almost daily rises in land prices. Many developers, particularly in the greater Belfast area, have land banks where affordable homes could be built. The values of those land banks have increased dramatically in recent years. It is wrong that developers rather than the public should benefit from the appreciation in land prices. We should examine all those options, and the Assembly should seek to acquire tax-raising powers so that all increases in public expenditure are not met solely from the property tax paid by the ratepayer but from a basket of taxes. I accept that such a review will take time; however, a great injustice could be resolved immediately. We should end the discrimination against single householders in Northern Ireland. Since 1993, single householders in the rest of the UK have benefited from a 25% rebate. That takes into account the fact that they make less use of public services than larger households. That rebate has helped millions of householders in Great Britain, the majority of whom are pensioners. In 1992, I wrote to the then Finance Minister, Michael Mates, to ask that he introduce a similar discount in Northern Ireland. He rejected my request, pointing out that local-government finance is different in Northern Ireland. I wrote to all subsequent Finance Ministers and have a file of their replies, which were pretty awful. Those Ministers did not understand the issue — for example, Paul Murphy pointed out that the Exchequer funding for Northern Ireland is much higher than in the rest of the UK. Mark Durkan replied that the issue would be considered in the course of the review of rating policy. The matter has been put off, year after year, since 1992. Why should Mrs Jones from Bangor in north Wales get a 25% discount, while Mrs Jones from Bangor in County Down does not? Such discrimination cannot be justified, particularly as the regional-rate burden has increased significantly in recent years. In North Down alone, 5,600 single pensioners would benefit from such a rebate. We call on the Minister of Finance and Personnel to introduce the 25% rates discount for the single householder and to end this discrimination. In conclusion, I ask the Minister to set up a review of the funding of local services and to consider moving from a property-based tax to a mainly income-based tax. That review should also examine all other options, such as a local sales tax, service tax, land-value tax and green taxes. If necessary, the legislation must be changed to give the Assembly tax-raising powers, which it should have anyway. It is essential that the burden of taxation be spread more evenly and does not continue to fall most heavily on the elderly and those on fixed incomes. In the meantime, I ask the Minister to introduce the 25% discount available in the rest of the UK, thereby reducing the hardship and concern experienced by tens of thousands of pensioners in Northern Ireland. Mr Beggs: I beg to move amendment No 1: Leave out all after “notes” and insert “the widespread public concern at the changes to the rating system and calls upon the Department of Finance and Personnel to conduct a full review of the new rating system, including consideration of a generous, non-means tested, rates relief scheme for pensioner households.” I tabled the amendment in the interests of avoiding the complex, highly expensive and bureaucratic system that would emerge. For “income-related reliefs” in the text of the motion, we should read “means-tested reliefs”. With regard to take-up of means-tested relief, a 2006 report from the Office for National Statistics indicated that benefit take-up was in the range of 62% to 68% by caseload and 65% to 71% by expenditure for 2004-05. In other words, a third of people entitled to those reliefs did not claim them, so any such scheme will miss one third of the most vulnerable. Pensioners’ groups have also examined the issue. Help the Aged found, similarly, that 37% of pensioners did not take up their benefit entitlement. We should not be surprised at that figure. 10.45 am In a 2006 policy statement, Help the Aged indicated that means testing much of this help has created a complex and bureaucratic system, resulting in the failure of millions of the poorest pensioners to benefit from the changes. Pensioner interest groups have expressed concern; therefore, my amendment includes the words “non-means tested”. Any form of relief should be universal; everyone should be free to apply for it or to receive it automatically. Help the Aged commented that: “Universal benefits tend to have the best rates of take-up as they are simple to understand, usually have clear eligibility criteria, and are not associated with any kind of stigma.” Many elderly people do not take up their entitlement because they believe that they must reveal all of their personal circumstances. It is an invasive process, and it is important that we realise that. Stigma, therefore, is a big issue to consider when determining how any new system should operate. The motion mentioned income-based systems. That means income tax, and I am pleased that the proposer of the motion mentioned that in his speech. However, he did not mention it in the motion itself, because he wants additional income tax for Northern Ireland. Will that help the economy or detract from it? We must encourage as many people as possible to return to employment and assist them to contribute to the economy. The fear that an increase in income tax effectively means an additional tax, a poll tax, for working families contributes to the problems. There is a choice. There can be a full income tax system for everything; for example, what was raised by property rates could be raised by income tax. However, that would remove any choice from local government. Each area would simply be handed a budget with central control over what could be done with it. That is a complex system to administer. We must remember that, apart from income tax and the Inland Revenue, there may be issues concerning national insurance, child tax credit, pensioner tax credit and working families tax credit. How would all of those things work together in a system? There is no doubt that any effect on someone’s income will impinge on other benefits. It is therefore foolish to introduce an income tax unless it is introduced in the whole of the UK. Instead of a huge administrative burden, it could be done more efficiently and should be considered only at a national level. To follow that route in replacing the rates system would create a complex system. I surmise that the 250 staff employed by Crystal Alliance to administer water charges is only a small number compared to the number of civil servants required to administer any new income tax system that is not fully integrated into the Inland Revenue. It is likely that we would have to pay many civil servants to run yet another bureaucratic system, thereby damaging the economy and without reaching the people we want to reach. The proposer of the motion referred to another choice involving an income tax-based system, and that is to raise the regional rate element from income tax and the remainder from property tax. Two systems would, therefore, have to be administered. Money that we want to spend on services in the community would be wasted. Those new Members who have yet to come into contact with issues involving the complex system will, I fear, do so before long. I refer in particular to the tax credit system. Some of the poorest families tried to take advantage of benefits to which they believed they were entitled, only to discover that, following an assessment by the Inland Revenue at the year end, and owing to administrative errors and miscommunication, they had to pay back several thousands of pounds. That exacerbates the situation. Therefore a move towards income tax would be done at our peril; it will be worthy of our consideration only when it is co-ordinated at the national, UK level. It is important that any new rates system should be universal so that everyone who is entitled to benefit from it will take it up. In particular, vulnerable pensioners should be able to make use of it without stigma. Incentives and entitlements should remain in such a system so that everyone can save and be prudent as they prepare for their later years. It is important not to create unreasonable administrative burdens. The Member who moved the motion talked about other taxes that he wishes to employ. Let us be careful with our economy; we should avoid administrative burdens, complex systems and layers of tax that create difficulties for small businesses and discourage people from becoming workers or employers. We must allow the economy to grow. I am aware that the current system must be reviewed for fairness and so that it can deal with additional reliefs, but that must be done carefully. I suggest that the grief that Members get currently from constituents about property tax is minimal compared to the complaints that we would receive if we were to consider introducing further income tax burdens on the working community. Remember that for “income tax”, I read “working family taxes”. Let us encourage everyone back into employment and to save, and let us be cautious as we administer tax burdens on our community. Some Members: Hear, hear. Mr O’Loan: I beg to move amendment No 2: Leave out all after the second “system” and insert “which fundamentally fails the essential test of ability to pay; and further calls for this review to give particular consideration to fair and transparent income-based protections, and suitable reliefs for pensioners and all disabled persons.” The SDLP supports the need for a review of the new rates system. This amendment is necessary to emphasise that the central task that faces the Minister of Finance and Personnel is the understanding that the current system significantly generates rate demands that are not in line with ability to pay. A property tax creates basic tensions about ability to pay. Houses do not pay the rates; occupants pay. Houses do not have incomes; occupants do. Houses do not have outgoings and varied circumstances; occupants do. Therefore the Minister faces quite a task in creating a property tax that truly reflects ability to pay. However, that should not be regarded as an argument for a local income tax; it is not that simple. Let me be clear that the SDLP is not calling into review — and I doubt that any other party will, either — the central change in the new system, which was the replacement of a rental-based valuation of property by a capital-based one. All the evidence is that the old, rental-based approach was regressive and placed a disproportionate burden on those with lower incomes. A property tax is better based on capital, rather than rental, values. It is proper that those who are in the political system recognise good administration, so, in passing, let me pay tribute to the staff in the Department of Finance and Personnel and the Rate Collection Agency who administered a complex changeover. Taken as a whole, they did it well. A capital-based system, however, brings its own problems. There may be some broad correlation between the value of a house and the ability of the occupant to pay. However, there are many exceptions and anomalies that the Minister must address. The SDLP wants income-based protection proposals for both water charges and rates, to include a guaranteed maximum payment as a percentage of a person’s income. There are particular problems for pensioners. In some cases they have valuable homes but low incomes. That happens frequently after people have been widowed. There are places along the north coast, for example, where even modest homes have been priced astronomically for some time. Pensioners who live in such situations are carrying an unfair burden and need relief. The Government’s well-established concept of a minimum income guarantee under the social security system is significant in this debate. Failure to allow proper relief for pensioners under the present rating system undermines and contradicts that guarantee. If Draft Planning Policy Statement 14 is not removed, many people will fear the next property revaluation exercise. Small cottages on rural sites are now worth fortunes, and would be rated accordingly. The SDLP amendment mentions “disabled persons”. There is 25% rates relief for disabled people whose property has been modified; the SDLP wants that relief to be extended to every person with a disability. Why should a person with mobility difficulties who lives in a bungalow that does not need modification be treated differently from other people with disabilities? The SDLP proposes that there should be a revenue regulator — an independent watchdog for all Government revenue proposals. The regulator would assess, comment on and have powers to regulate such proposals, including their cumulative effect. My party commends that proposal to other parties for consideration. There must be more transparency in the rating system. Members have seen the people’s anger during the argument over the water element in the regional rate. People want to know what they are paying for. Finally, the SDLP has no objection to a local income tax being studied, but there are many problems involved. The Assembly has no tax-raising powers; the Scottish Parliament has such powers but has never used them, and there must be good reasons for that. HM Revenue and Customs would have difficulty in building in such a scheme. If it were achieved, revenue would be collected across Northern Ireland uniformly, but local council revenue demands vary enormously, so there is no simple answer. There will be a property-based charge in Northern Ireland for the foreseeable future. The current system contains significant defects, which the Minister must rectify. Mr McLaughlin: Go raibh maith agat, a LeasCheann Comhairle. Congratulations on your appointment, Mr Deputy Speaker. I missed the opportunity to congratulate you yesterday. I support the motion, and I have no difficulties with the amendments, which extrapolate the issues that would have to be considered during a review. Sinn Féin’s preferred option is the removal of the rates and their replacement with a system of progressive direct taxation. However, that is work in progress, and a considerable amount of work needs to be done. Sinn Féin intends to pursue the matter with the Exchequer. Sinn Féin believes that equality and ability to pay must be at the heart of any rating system, and that such a system must be transparent and fair. There should be a clear relationship between rates revenue, value for money and the quality of services provided. Mr O’Loan referred to a prime example, which is the widespread public view that people are being asked to pay twice for the same service when it comes to water charges. Consequently, Sinn Féin believes that the rating system in the Six Counties is in urgent need of a radical overhaul, in the context of a review of the Barnett formula, and the negotiations, which we hope will be concluded successfully, on a meaningful peace dividend. I call on the other parties in the Assembly to consider and support Sinn Féin’s call for tax-varying powers for the Assembly. That would be a key element in bringing forward policies and measures that reflect local issues, expertise and accountability. 11.00 am The current rating system, which was introduced by a direct rule Minister, does not distribute the rates burden fairly and has achieved little or no buy-in from stakeholders in our community. Every party addressed the issue in the recent election. In particular, current rating policy does not address the fact that, in many cases, house values bear no relationship to income. Therefore, many people are in the unenviable position of being asset rich but income poor and are experiencing exceptional hardship because of this unfair system. In the absence of a progressive tax-gathering power to replace the present system, Sinn Féin argues that rates should be assessed through an income-related system, which is based on the ability to pay, and with specific exemptions for economically vulnerable groups such as older people, those with disabilities and other low-income households. Sinn Féin continues to raise public finance issues including tax-varying powers, the Barnett formula, and the legacy costs of many years of neglect and underinvestment by successive direct rule Ministers. Sinn Féin is raising those issues to give the new team of Executive Ministers the tools and the opportunity to deliver on an agreed Programme for Government. It is incumbent on MLAs, parties and party groupings to continue to provide support for that call and to continue to address those issues with the British and the Irish Governments. Sinn Féin supports the motion and the amendments. Go raibh maith agat. Mr Weir: The DUP has been consistent in its concerns about the proposed system. The party has highlighted its concerns from the start, and has raised them consistently with Ministers. Taking the capital value of houses on 1 January 2005 is not a reliable basis for determining rates. Therefore today’s debate is welcomed. People who fall just outside the benefits system and whose net income does not reflect their level of wealth will suffer most as a result of the review of rating policy. The DUP has pressed on a number of issues and it will continue to press for a financial package to alleviate the situation. Unlike other parties in the House, the DUP has not thrown in the towel on that issue. At St Andrews, the DUP stressed that any system that left Northern Ireland ratepayers without a cap on rates was inherently unfair. It was unacceptable to have a situation in which people in Northern Ireland were, potentially, paying a lot more than the Duke of Westminster. I am glad to say that the DUP achieved a cap on rates. However, the level of the rates cap is too high, and that needs to be taken into account in any review of rating policy. There should be a greater focus on the need for more generous relief for pensioners, and I welcome references to that matter in both amendments. Pensioners are the most vulnerable group who may be suffering because of changes to the rating system. A fundamental mistake was made during the reinvestment and reform initiative (RRI), when rates rises were linked to council tax in England and Wales. The result was that many of us who served in local government saw a massive increase of 19% in the regional rate, which meant that no matter how prudent local councils were, ratepayers were given an unacceptable burden. The DUP believes that the link between council tax levels in Great Britain and Northern Ireland should be broken. The DUP is content with both amendments as they focus on the key issues; rates relief, and the protection of vulnerable groups. The DUP will support the amendments because they improve the motion. Having listened to the proposer of the motion, I have a number of concerns with the issues he has raised. His solutions seem to be twofold — first, he proposes some kind of agrarian revolution in this country in which landowners are taxed. The landowners will not pick up the bill for that: when land is used for development it will simply become an additional tax passed on to property owners. We do not need further inflation of house prices in this country. However, the United Community group — and the Alliance Party, for whom I assume the proposer speaks also — has become the party that believes in taxation to the hilt, because that is what has been proposed. The other imaginative solution put forward by the group is that of a local income tax. Again, the effect of that would be to tax people to the hilt. When we are given an opportunity to vary income tax, the Treasury will inevitably look at our expenditure — whatever the block grant is in Northern Ireland — and advise that if we are looking for more money we should simply increase our taxation to the maximum level possible before they can consider any additional finance. The flawed thinking offered by Mr Wilson and others would not soak the rich, but rather drown the working man and women in a tidal wave of extra taxation. The DUP welcomes the opportunity to debate the subject and believes that there must be a fundamental review and examination of the rating system. However, a review must focus on what will benefit people and must not be counterproductive to the people and the economy of Northern Ireland. Mr Storey: Members would do well to ask why this debate is necessary. It is because of the failed political arrangements of the past, under both direct rule and the failed arrangements of the Belfast Agreement. However, we are in a new dispensation, and that dispensation has placed on us a responsibility to ensure that we get it right — Mr McClarty: The Belfast Agreement mark II. Mr Storey: — unlike the hon Members who are now reduced to a small number in the corner of the House, who cannot bring forward any proposals that command respect in the community, and whose election results were a clear indication of that. There are few recently elected Members who have not come to realise the importance of the rating system in Northern Ireland. They will also have realised how important it is for the Assembly to take real action to ensure that the current situation imposed by direct rule administrators is reviewed and a new system implemented that does not unfairly penalise Northern Ireland homeowners. In that I include homeowners on Rathlin Island, the most remote part of my constituency, some of whom I am delighted to welcome as guests in the visitors Gallery this morning. The DUP laid out its position clearly on the rating issue in the run-up to the election, and it does not believe that the capital value of someone’s home on 1 January 2005 is a sufficiently reliable indicator of a person’s ability to pay to be used as a sole basis for determining rates. It is therefore clear that a different system must be employed. The motion calls for consideration of a “full income-based system”. While I doubt strongly that an income-based system is the way forward, I welcome the call for a review to lay out all the different possibilities, so that the House — Mr Campbell: I thank the hon Member for giving way. He is touching on an important point. The amendments, along with the motion, concentrate on exemptions, and that is right and proper for people on a low income. However, should we not also look at increasing disposable income across society so that the take is not reduced because of the exemptions that must be introduced? Mr Storey: The hon Member for East Londonderry has made a good point. There is no doubt that we should look in detail at the level of relief given to vulnerable groups in our society. The DUP has already called for a 25% rate reduction for single pensioners living alone. Most often it is the older people, living in family homes for a long time, who find themselves in financial difficulty when faced with rate bills that continue to rise. This issue should not be looked at in isolation, as my hon Friend and colleague has said. The ongoing negotiations with the Chancellor can make a significant impact. The reinvestment and reform initiative, a hallmark of devolution under the Belfast Agreement, shackled householders to huge rates hikes simply to allow the then Northern Ireland Executive to access borrowing. That situation cannot and should not be allowed to continue. It will be a significant step forward if we can break the link between local tax levels in England and the regional rate in Northern Ireland. There is little point in claiming that there is going to be a simple solution to the problems of rating. However, it is an issue that this party has taken to the electorate, and we have clearly received an overwhelming mandate to take the issue seriously. That was demonstrated by our taking the Finance and Personnel portfolio as our first choice in Government. I have every confidence that the Minister who has been appointed to that position will ensure that delivery is a hallmark of the policies that we have set out. I look forward to working with the Minister and the Committee and hope that we will be able to bring to the House a review on terms that are acceptable and able to be implemented. Northern Ireland does not have unlimited resources. It is vital that the best efforts be made to make sure that those resources are distributed to the benefit of all in our community. I hope that a review of rating will be combined with a cutting back of much of the waste that has been a hallmark of devolution in the past. Mr Deputy Speaker: Time, please. It has been some time since we have had full-blown debates in the Chamber, but the convention has been that Members do not refer to the Public Gallery. We have been getting back into the habit very quickly. Mr F McCann: Go raibh maith agat, a LeasCheann Comhairle. I commend the two Members who have brought this motion. The introduction of the new rating system was universally criticised across the North of Ireland. The issue has been to the forefront of people’s concerns since the changes were announced last year against the wishes of the vast majority of the population, who see them as a way for the Government to force more money out of those who, in many cases, do not have the ability to pay. (Mr Deputy Speaker [Mr Dallat] in the Chair) We were told that the rates were being brought into line with payments in England and that we had had it easy for many years and were not paying our way. However, that does not take into consideration the facts that people here pay higher prices for fuel, both domestic and commercial, that food is more expensive in general, and that the cost of living is comparatively high here. Add in our low earnings and high unemployment and an altogether different picture is painted. Those in power — and their advisers — chose to ignore those very relevant issues. Why did they not leave the old system in place so that an incoming Assembly could deal with it? They chose to do that with other matters, but they knew that while local politicians may not agree on every element of what would be required, once at the helm the Assembly would at least have looked at the matter sympathetically. In fact, the last Executive commissioned a review of the rating system, but were unable to complete the job before the Assembly collapsed. Direct rule Ministers argued that the present system was fair and would benefit those most in need. Such nonsense! If it is that good, why did they not push to have it introduced in their own constituencies? Many of those responsible for its introduction here are the same people who came out strongly against the poll tax. Sinn Féin has consistently called for a radical review of the rating system. We would prefer to scrap the rates altogether and introduce a system of progressive direct taxation. Consequently, we believe that the rating system in the Six Counties needs a radical overhaul, in the context of a complete review of the Barnett formula. We also need a meaningful peace dividend and the granting of tax-varying powers to the Assembly and the Executive. In the meantime, equality and ability to pay must be at the heart of any continued rating system. Also, the system must be made transparent. It must be fair, with a clear relationship between rates, income, value for money and the quality of service provided. 11.15 am The current system does not distribute the rates burden fairly. In particular, the failure to address the correlation between house values and income means that many people will be in the unacceptable position of being asset rich but income poor, and will pay higher rates than they can afford. Rates relief should be addressed through an income-related system, which is based on ability to pay and has specific exemptions for economically vulnerable groups such as older people, those with disabilities and other low-income householders. Some people with disabilities are forced to adapt their homes to enable them to live with dignity — their circumstances should be taken into account in any rating system. The rating system must address disadvantaged and low-income groups in a meaningful way. The British Government’s scheme, in its present form, does not address those core issues, which are essential criteria and which must be at the heart of any review. Go raibh maith agat. Mr Hamilton: I take the opportunity to welcome you on your first occasion in the Chair, Mr Deputy Speaker. There is no doubt that a review of rating policy is required. Many objections to the capital value system have been well aired this morning. I will dwell on the concerns about local income tax that were overlooked, perhaps understandably, by the proposer. Having listened to him, one might be forgiven for thinking that local income tax is a panacea for all of our taxation ills. There is some popular support for an income-based system. Recently, the Lyons Inquiry, which examined local government finance in England, found that half of its respondents were in favour of some, or all, local taxation being raised through an income-based tax. However, four in ten people did not express a view, which suggests that there is a lack of knowledge about the implications of such a system. A local income-based tax system would result in significant rebalancing — from retired householders to the working-age population — and this is where a judgement is required. Do Members want retired householders to pay less, on average, than younger, working householders? It is often said during discussions about local income tax — and was repeated by the proposer — that any system should be based on ability to pay. However, Members must consider which definition of the phrase “ability to pay” should be applied. There are some attractions about a scheme that is purely based on income. However, should retired householders with modest incomes, but significant savings, or equity, pay less than a young family with a slightly larger income but no assets? Income-based tax has been a hot topic in the recent Scottish election. Professor David Bell of Stirling University has illustrated the “classic case” of a household comprising a fireman, a nurse and their young family. He found that that household would be £73 worse off under a Liberal Democrat plan for a local income-based tax system — a plan that has had some support from the Alliance Party Members. Are there implications for a local government that is financed through local income tax? Would resources rise and fall because income yields would create uncertainty for councils in bad times, with the risk, and temptation, of over-extension in good times? The ease with which such a scheme would be implemented should also be examined. Any new tax inevitably creates complex and often unforeseen problems. I am sure that Members agree that we want a simpler and fairer tax system. Taking that tax at source would inevitably lead to more stress for businesses, which are already burdened by bureaucracy. David Watt of the Scottish Institute of Directors has said that a local income-based tax would be an anti-business measure that could impact on competitiveness and add to the tax collection burden for businesses. My impression is that Members want to increase competitiveness in Northern Ireland, and that no one wants to see businesses burdened by more bureaucracy and red tape. A local income-based tax system is attractive on paper, especially because of the general view that ability to pay translates into fairness, but it is easy to overlook that such a system has serious limitations. There would be a substantial increase in tax for the working population, potentially less stable funding for local government than current streams, and an undoubted effect on business. Any change to any tax system will result in winners and losers, and a local income tax would simply create different winners and different losers. Mr Gardiner: Mr Deputy Speaker, I wish you well in your appointment as Deputy Speaker of this House. I will speak today on the amendment proposed by my hon Friend Roy Beggs. The changes introduced to the rating system by direct rule Ministers were one of the most distasteful aspects of the direct rule regime. They occasioned widespread public outcry and a deep sense of public unease at their unfairness. They became the cause of major public protest. It would be fair to say that outrage over the rates was a major factor in determining the public mood that ultimately led to the restoration of this Assembly. It was not just a matter of the substance of the rates proposals, but of the way the direct rule Ministers handled the public outcry — their attitude bordered on dismissiveness, if not actual contempt. At the very heart of my concern about the rates issue is the disproportionate impact it will have on many senior-citizen households. The ability to pay a tax has to be a major factor in how publicly acceptable that tax is. That is why a review of the ability of many senior-citizen households to pay the tax must be undertaken and why rates bills must include a significant rebate for older people living on fixed incomes. Many elderly people live on fixed incomes and pensions and are in no position to meet massively increased rates demands. They cannot increase their incomes and cannot reasonably be expected to sell their homes, their major asset, to pay their rates bills. Those homes are not just houses, but family homes. In many cases, older people have lived all their lives and brought up their families in those homes. There is something deeply personal about a home — especially as a person gets older. Those homes are filled with memories and have a real sense of place for their occupants. The distress caused by this issue cannot be overstated. Older people could not have predicted the massive boom in house prices recently. Could any of us have predicted that 10 years ago? Therefore they were in no position to plan for such an eventuality throughout their lives. Thus, significant rebate must be built into the system for older ratepayers on fixed incomes and that issue must become a basic focus of any review of the rating system that Ministers set up. The fact that older people’s homes are now worth a lot more makes no material difference to them. They will never see the value of their homes unless they sell them, which is unthinkable for many. They may be asset rich, but their income stream may be incapable of absorbing new rates bills and water charges. Societies change and older people often get left behind. There are 200,000 more people living here than there were decades ago, and large numbers of people are returning to Northern Ireland now that civil strife has ended and the political landscape has changed. Furthermore, people are living longer. It is small wonder, therefore, that house prices have risen with the pressure of demand. It is also true that they have risen because of planning restrictions. Both factors have impacted disproportionately on first-time buyers and older people. In the light of these arguments, I ask the House to advocate a review of the rating system that will give special consideration to generous rebates for older people living on fixed incomes. The eyes of the people are on us, and we must not fail them. The Minister of Finance and Personnel (Mr P Robinson): Mr Deputy Speaker, I congratulate you on your appointment as one of the Assembly’s Deputy Speakers and join other Members in welcoming you to the first sitting over which you have presided. Few issues are more important to householders in Northern Ireland than the level of local taxes that they have to pay. I congratulate the two Members from North Down on securing this debate at such an early opportunity and thank all the Members who have contributed. The return of devolution can make a real and meaningful difference on this issue. I welcome the opportunity to put my views on record and to set out how I intend to proceed. Although it will not be for the Minister of Finance and Personnel alone to determine the future arrangements for rating in Northern Ireland, I will ensure that any proposals that are brought to the Assembly and the Executive represent a fair deal for householders. As someone who fought for election on a manifesto commitment to review the present rating arrangements, I am glad that the motion and, indeed, the amendments are broadly consistent with that outlook. Today’s debate has helped to focus on many of the failings of the present arrangements. That is the easy bit; the real challenge is to devise arrangements that can command widespread support and be seen to be fair. Let me make it clear that I am committed to reviewing the arrangements for domestic rates in Northern Ireland. I intend, in the next few weeks, to bring a paper before the Executive setting out the steps that I propose to take. I agree with the Chairperson of the Finance and Personnel Committee that it is important that rating reform be viewed in the context of how the Executive intend to address the funding of water in Northern Ireland. In the past five years in Northern Ireland, extensive research and consultation has been conducted on the rating issue. In Great Britain, Sir Michael Lyons has recently conducted a lengthy review of local government finance. What is needed now in Northern Ireland is not a lengthy analysis but a short-term review that can deliver changes by next April and consider what further long-term steps should be taken. We must not only achieve as fair a rating system as possible; we must also ensure that the system does not place too great an overall burden on householders as a whole. Recent years have seen some unprecedented increases in the level of the regional rate, with an increase of 19% in 2006-07. Such increases are neither sustainable nor acceptable. In this financial year, the domestic regional rate is forecast to contribute £240 million to public spending in Northern Ireland. Put another way, that represents about 2·5% of planned departmental expenditure. Each 1% increase in the domestic regional rate provides a little over £2 million in additional spending power. Therefore, increases in the regional rate can have a big impact on householders but a limited impact on public spending. Mr Weir: Will the Minister give way? Mr P Robinson: I will give way on this occasion. However, if I am to respond to the remarks made by each Member who spoke, I cannot give way again. Mr Weir: Will the Minister confirm that if, as a result of his review of the rating system, domestic rates are revalued, the process will be carried out on a revenue-neutral basis and will not lead to an increase in the regional rate? Mr P Robinson: The mechanism for determining the regional rate is that the Executive determine what the Budget requires from the regional rate, which amount is then divided based on the valuation of all eligible properties. Therefore, the only distinction in a revaluation is the extent to which one person’s property is out of kilter with the other valuations. The overall intake is the same, and, therefore, the process is revenue neutral. As I was saying, a 1% increase in the domestic regional rate provides a little over £2 million in additional spending power. By comparison, the proposed efficiency targets of 3% per annum for each Department over the comprehensive spending review (CSR) period will free up £790 million of additional spending power by 2010-11. A modest increase in the current efficiency target to 3·5% a year would raise an extra £120 million. 11.30 am As well as mapping out the long-term options for raising revenue in the Province, it is essential that short-term measures be considered in any review. As I said, I intend to carry out an early review of the domestic rating system. As part of that review, the effectiveness of the new relief packages, which are already on offer, will be examined. There are better ways of delivering relief to those who are most deserving, and we need to examine the options for doing so. We also need to look at ways of encouraging the most vulnerable, particularly elderly people, to take up the reliefs that they are entitled to. I will be urgently seeking ways of making improvements in this area. Enhanced assistance for pensioners has recently been put in place; it provides additional relief for pensioners on lower incomes. I want to ensure that all those entitled to this relief are aware of it and take advantage of it. The motion includes a proposal that would require new legislation, which could not be completed in time for the next rate bills, even if the proposal were considered sound and approved by the Executive and Assembly. There are issues, then, that could only form part of a long-term review. Whatever the possibilities for change in the longer term, we must be able to make changes that can be in place for next April. There is scope for change within the existing legislation to deliver alternative or supplementary income-based reliefs. Options such as circuit-breakers, which would ensure that no household paid more than a certain percentage of its income on rates, must be examined as part of any review. Although there are many administrative difficulties with this approach, it could offer significant benefits, providing we can deliver it easily, which means within the scope of the existing legislation. Other changes that could be made quickly and without the need for new primary legislation include the introduction of a minimum payment or a change to the level of the cap. In addition, we have the power to introduce the rating of vacant homes or to bring in a deferment scheme for pensioners. Although I am uneasy about a number of these options, it is important that any review examine all of them. There are no easy answers. Difficult choices will have to be made. Rating is distinct from other forms of taxation because the amount of money to be raised is decided first each year as part of the Budget process of the Assembly and the district councils, and the individual bills are worked out accordingly. Therefore, providing more reliefs will either add to everyone else’s bills or lead to money being foregone. This will inevitably lead to difficult choices for the Executive to make, and, at a time when increases in public spending are at their lowest for a decade, there are significant spending pressures. People will not tolerate spiralling local taxes when they believe that there are significant inefficiencies in the public sector. That places a huge responsibility on the Executive to ensure that every pound of public expenditure is well spent. A complete overhaul of the system is within the power and reach of the Assembly. However, more significant change, such as bringing in a purely income-based system, would take longer to achieve, if it were thought to be appropriate. As an incoming Executive, we have an obligation to ensure that a fairer system is in place for next year’s rate bills. In the coming months, I will look at the evidence carefully and bring back proposals to my ministerial colleagues, the Finance and Personnel Committee and the Assembly. Members raised a number of points during the debate and, in the short time available, I want to respond to as many of them as possible. I have no doubt that, in the months ahead, we will return to this subject. Certainly we will do so before conclusions are reached. The option of a local income tax has been suggested as an alternative to a property tax. Although this cannot represent a short-term solution, it should be considered, if only to be rejected, as part of any review. I agree with the Member for Strangford Mr Hamilton that this option is not a panacea to the problem, as many have suggested it is. It could only be done with the agreement of Parliament and would require an amendment to the Northern Ireland Act 1998. Evidence suggests that a local income tax system would be expensive to introduce, difficult to administer and open to fraud. Research has demonstrated that people expect to benefit from a local income tax to a greater degree than would, in fact, be the case. It is estimated that to entirely replace the current regional rate in Northern Ireland, about 7p would have to be added to the basic rate of income tax. Despite that, I shall not rule out the option, but we must be realistic about the timescales and the likely costs, as well as other factors. All of those matters must be carefully considered. Nevertheless, without prejudice to the outcome of such an analysis, the existing system can be made more income sensitive. The Member for North Down Mr Brian Wilson mentioned the position of single pensioners. I understand that the assistance available through the enhanced relief scheme goes further than that provided for single pensioners in Great Britain. As Members consider the amendment that was tabled by the Member for East Antrim Mr Beggs, it should be noted that enhanced assistance has been recently introduced, which provides additional relief for pensioners on lower incomes. I want to ensure that all those who are entitled take advantage of that scheme. One way of doing that is to examine the case for applying a non-means-tested relief for pensioners, which can be provided automatically. I listened to those Members who spoke about non-means-tested reliefs; I will take their views seriously and consider them carefully as part of the early review. However, such an option would require new legislation, which could not be completed in time for the next set of rates bills, even if the proposal were approved. Mr O’Loan mentioned the mammoth task that was carried out by the staff and officials of the Department of Finance and Personnel. I welcome Mr O’Loan’s acknowledgement of the difficulty of valuing more than 700,000 properties. If those who criticised the Department had put their complaints in the context of the task confronted by those officials and staff, they would have reached the same conclusion as Mr O’Loan, and I welcome his remarks on that matter. The Chairman of the Committee for Finance and Personnel, Mr McLaughlin, said that the motion and all the amendments related to it were acceptable to him. Likewise, I do not have a problem with them. Although they laid a different emphasis on various aspects of any review, they all ask for a review. To that extent, the motion and the amendments are acceptable. The Member for North Down Mr Weir mentioned the RRI and the link with tax levels in Great Britain. He knows — and gave me the opportunity to say — that we were successful in our discussions with the Chancellor of the Exchequer in breaking the link between the RRI and local taxation, which was one of the causes of the massive rate rise in 2006. This debate has provided an early opportunity for the Assembly to consider this important matter. In the months to come, the way in which the Assembly addresses this issue will be regarded by many as a litmus test for the success of devolution. I am determined to ensure that we can make a difference in this crucial matter. Mrs Hanna: I appreciate the openness of the Minister of Finance and Personnel’s response and the various expressions of genuine concern about achieving a fairer system — albeit from different angles — during the debate on the motion and the amendments. Given our new situation, I hope that we can be reasonably confident that the Assembly will not be subject to suspension. We are now best placed to set up a review of the current unfair and unworkable rating system, which was introduced by direct rule Minister David Hanson MP. I support the introduction of further income-related reliefs, although I was somewhat puzzled by the phrase “a full income-based system”. All parties requested, or demanded, a rates review. A short time later, the Assembly was suspended. Now that we are back, it makes sense that we take control of the issue. It is a telling fact that the Assembly voted to replace the former system of basing rates on rental values, which was acknowledged to be outdated, unfair and discriminatory against those on lower incomes. Since 2002, the SDLP has been entirely consistent in calling for a system based on ability to pay. We opted for the capital valuation model, with caveats, purely because we considered it to be the least unfair of the options available. However, the effects of that model would still need to be mitigated by the introduction of a comprehensive relief package to take account of householders’ ability to pay: single householders; pensioners; those with disabilities; and, indeed, those just above the benefits threshold — the new poor. The criterion of ability to pay must be the cornerstone of rating policy. Soaring house values have had a distorting effect on house prices. The fair rates campaign must be mentioned. Whether we like it or not, the fair rates campaign maintained focus on the rating issue through the election period. The campaign’s website contains many well reasoned arguments. The fact is that Mr Hanson used Northern Ireland as a testing ground for rating policy, when the Government did not appear to have the courage to introduce the same system in Great Britain. Many people have felt that the rating issue was a north Down or south Belfast problem. However, the cold reality is that sharply increasing house prices throughout Northern Ireland, coupled with the introduction of Draft Planning Policy Statement 14, has led to rating policy becoming an issue in rural areas also. Many people will be in for a nasty shock in coming years unless there is serious rates reform. It is a debate for another day, but the issue of more social and affordable housing and the release of public land to that end, which could help burst the bubble, will have to be addressed. Many people who bought their houses for modest prices decades ago have seen the value of those houses go sky-high, often as a result of development and the building of apartments and town houses. Through no fault of their own, those people are now being penalised and face the threat of being forced from their homes by an inability to pay their rates bills. Those people do not want to move from their homes, but they cannot really take a few bricks out of the walls to pay their rates bills in Chichester Street. Itemised rates bills are required, because there is no clarity at present. The issue of itemised billing has come up time and time again. People want, and need, to know exactly what they are paying for. As well as considering the many options that have been mentioned, whether it is a pre-determined percentage of income, non-means-tested reliefs or the introduction of an independent rates regulator, we must get to grips with the issue and emerge from the review with a fairer system. I want to mention the full income-based system, which I now know to be a reference to a local Northern Ireland tax, and which is the preferred option of the Alliance Party. That is one option that is up for review but, as has been said, the fact that the Scottish Parliament has tax-raising powers — Mr Deputy Speaker: Will the Member draw her remarks to a close? Mrs Hanna: I shall finish now, Mr Deputy Speaker. I look forward to the review. Any rating system must be fair, equitable and based on ability to pay. Mr Deputy Speaker: Order. The Member’s time is up. There can be no latitude. 11.45 am Mr B McCrea: First, Mr Deputy Speaker, I offer you my congratulations. Only yesterday, when making my maiden speech, did I understand the importance of your role and the protection that you can offer Members who are making speeches. I offer my sincere congratulations on that. It is my privilege to make the winding-up speech on the amendment tabled by my colleague from East Antrim Mr Roy Beggs. In doing so, I will try to pick up on points that have been made. I was pleased that Mr Peter Weir, a Member for North Down, has clarified that his party has not thrown in the towel. No doubt he will be making a press statement, because his comment will be news to some people. I was a little disappointed in the comments of the Member for North Antrim Mr Storey, who has suggested that people such as me do not have a contribution to make on subjects such as the rates. Some people fundamentally misunderstand the relationship between capital and revenue, and the issue of being asset rich but cash poor lies at the heart of that. A very unfortunate situation can arise for pensioners, and it is no fault of their own. They can be living in a house with a high capital value but — as was pointed out earlier — they cannot remove bricks and take them down to the bank as payment. As an interim measure, we may have to find a way of giving such people substantial, non-means-tested support. I am grateful that the Minister of Finance and Personnel has stated that he will consider that issue. The time when a person can realise a capital valuation is when he sells the house, and that is a perfectly valid option. However, we have to consider a disgraceful situation that can arise — when people have to sell their house to pay for their healthcare. A person might have lived all his life making extra mortgage payments, extra rates payments and so on, but might then — just when he needs it most — have to sell his big asset. We will have to consider that in a review. It is especially important that we consider a rates cap. I can think of nothing more outrageous than the fact that some pensioners in south Belfast appear to have to pay more in rates than either David Beckham or the previous Prime Minister. It is fundamentally important that taxation should be fair, should be related to ability to pay and should offer value for money. There is another issue that we have to consider in our discussion of my hon Friend’s amendment, and it is one on which I fundamentally disagree with the position of the Alliance Party. It has to do with the difference between rates and income tax. Rates are supposed to be tied to local consumption; they are not a tax on income, which is a fundamentally different matter. Rates are for services such as collecting waste from the bins, putting in flowerbeds and regenerating local areas. Those services should be locally based, and people should buy into them. The fundamental problem that can arise is one of fairness, transparency and ease of administration. We talked earlier about whether we should be a low-tax or a high-tax environment. I believe that we should have a lower tax where possible and that that tax should be collected in a way that the people of this Province support. I support the first amendment to the motion. Mr Deputy Speaker: I now call on Dr Stephen Farry to wind up the debate on the substantive motion. Dr Farry: Thank you, Mr Deputy Speaker — and I too congratulate you on your new post. In essence, the motion is a call for a review of the new rating system that was introduced on 1 April 2007, a process that was begun by the previous devolved Executive before it was suspended. Although its result may not have been precisely what that Executive had in mind, the review was far too limited in scope. That point has been reflected in the Chamber today. Specifically, the review did not include consideration of sufficient income-based reliefs or of a full income-based system — as was pointed out by the Alliance Party at the time. It is notable that the Lyons Review into local government finance in England and Wales, and the Burt Review in Scotland, considered that option, as Brian Wilson pointed out. The minor tweaking of the creation of a £500,000 cap on bills is not sufficient to address the range of concerns with the current system. If anything, it introduces further unfairness. Politicians from all parties in the Assembly have pointed to dissatisfaction with the new system. That dissatisfaction needs to be followed up by supporting a full review that considers all of the options. The motion does not ask Members to endorse any particular reform, but rather to ensure that all options remain on the table. I am grateful to the Members who contributed to the debate, particularly the Minister. I am very pleased that he is prepared to launch a full review into the system, the terms of which we await with great interest. I am also pleased that he has, at least, accepted that the issue of a local income tax can be kept on the table. Although he may not feel that such a tax is appropriate, if it is on the agenda, we are prepared to argue the case. We shall await with interest the response from people of Northern Ireland. The difficulty with the amendment tabled by Roy Beggs from the Ulster Unionist Party is that it focuses solely on pensioners. Mr Beggs called for a non-means-tested review, whereas Mr Gardiner suggested that it should be means tested. Addressing the needs of pensioners alone will pass more of a burden back onto families — whom Mr Beggs was so keen to protect in his initial remarks. The amendment from the Ulster Unionists essentially rules out a local system. The SDLP has made great play of the issue of ability to pay, yet, once again, the idea of a local income tax or local income-based system was dismissed. The SDLP seems to think that we can edge towards such a system by introducing more reliefs. In effect, that would create more bureaucracy, whereas a full income-based system is much cleaner. If, in using the term “ability to pay”, the SDLP means taking into account someone’s assets, it is worth remembering that many pensioners deliberately put their savings aside to finance themselves for 20 or 30 years beyond retirement. In the absence of free personal care, paying for one’s old age is something that many people have to bear in mind. The problems with the rates system have been well aired. A property-based system is inherently unfair; the value of property is a very blunt measure of ability to pay. The system struggles to adequately reflect personal or household circumstances, with those on fixed incomes, such as pensioners, most affected. Ultimately, those who are asset rich but income poor face the greatest problems. Many people find themselves in the situation where the family home, in which they have lived for many years, has shot up in value due to a booming housing market while their income has not kept pace. Single people are also particularly affected in comparison to those in larger households who live in properties of similar value but inevitably place a greater strain on a range of services. Mr Basil McCrea made the point that rates are based on the services that people use. That is false: people living in the same street in similar-sized houses pay the same rates, irrespective of whether the council empties their bin or whether they use the entire range of council services, from leisure centres downwards. The regional rate is the only means through which the Northern Ireland Administration can raise additional funds and balance the books. Previously, the purpose of the regional rate was to reflect the services charged by councils to ratepayers in Great Britain. In Northern Ireland, however, those services were provided by central Government. Since 1999, the regional rate has been used to fund general services, particularly the reinvestment and reform initiative, which the Minister mentioned. Therefore, Northern Ireland is the only part of the UK where a property tax is used to fund central Government services. Over the past few years, the people of Northern Ireland have suffered considerable hikes in their rates; Mr Weir and Mr Robinson mentioned a figure of 19%. If the Executive continue to use that system, such unfairness will be magnified. The move from rental values to capital values essentially only tinkered with an already unfair system. Much more fundamental change is required. Simply capping the rates is not the solution. The Alliance Party is wary of caps, which are blunt instruments, and the impact of which tends to be regressive. It is worth noting that the Lyons Report suggests that council-tax capping be removed in England and Wales. The current £500,000 cap may help some people who are experiencing difficulties, but it provides no comfort for others. That cap also allows millionaires to escape paying their fair share of moneys. The cost of lost revenue from a cap will have to be found elsewhere in the system; that entails spreading the cost around other ratepayers. Simply lowering the cap to £300,000 will increase the system’s unfairness rather than dealing with the problems. Members have mentioned other relief schemes, which the Alliance Party is happy to consider. The idea of an income-based rating system has caused much controversy, but it could replace either the regional rate or both the regional and district rates. Both of those options are available. That may require legislation from Westminster. However, if the Assembly agrees that that is the way forward, it can approach Westminster for that measure. The claim that an income-based system inevitably means tax increases is a huge red herring. An income-based system would simply replace the property-based system. It would be a different, and fairer, way of redistributing the same tax burden; it is revenue neutral. The point is made that some people could be paying hundreds of additional pounds in income tax each year. It must be borne in mind that an income-based system would replace the hundreds or thousands of pounds that people currently pay in their rates bills. The decision on how much money to raise from the system would lie in politicians’ hands, and that is the case with the rates system today. The SDLP’s proposition for the appointment of a revenue regulator is interesting. That party would appear to suggest that the Assembly cannot be trusted to take decisions on taxation and expenditure, which is what Members were elected to do. It seems to be an admission that some parties in the Assembly are incapable of taking balanced decisions about money. In any redistribution of the tax burden, there will inevitably be winners and losers. Some people claim that families will be particularly hard hit. However, the income-tax system already takes account of family situations and whether people have children. An income-based system would pose new administrative challenges, but I doubt that a new system would be much more complex than the management of the current rates system. The introduction of an income-based system into Northern Ireland may even carry some opportunities. All citizens share the same BT postcode, and all taxpayers’ home addresses are available from Her Majesty’s Revenue and Customs. For Mr Beggs’s information, Her Majesty’s Revenue and Customs is the new name for the Inland Revenue; he was not aware of that fact in his earlier comments. Mr Kennedy: Thank you for that. Dr Farry: I am glad to keep Members up to date with developments. Tax codes can be modified geographically. The Lyons Report holds open the door for the introduction of a local income-based system in England and Wales. If that can be done in England and Wales, consideration should be given to it being done in Northern Ireland. As Mr Hamilton mentioned, the report found that there was strong support for that option. The Minister of Finance and Personnel said that the issue of how revenue is raised cannot be considered in isolation from public expenditure in Northern Ireland. I cannot stress how important those comments are. Northern Ireland depends hugely on the UK Treasury. That situation will not be allowed to be sustained in the long run, notwithstanding any financial package that the Assembly may receive in the short term. If the Assembly is to avoid passing further unsustainable burdens on to the people of Northern Ireland, it must promote economic growth and expand the local tax base. It must also address the inefficiencies and costs in the system. The Minister referred to the 3% efficiencies in the 2007 comprehensive spending review. The Alliance Party has also pointed to an annual cost of some £1 billion that is spent on trying to manage a divided society. That sum dwarfs the amount of money that is raised by the rates. The Office of the First Minister and the Deputy First Minister has commissioned a report from Deloitte, which will be published shortly. That report will set out the issues in detail. The Alliance Party believes that our motion reflects the wide range of available options. Both amendments are unnecessary and, if anything, contradict each other. Our motion represents the best way forward and keeps all the options on the table. I urge the Assembly to support the motion. Mr Deputy Speaker: I remind Members that if amendment No 1 is made, I will still put the Question on amendment No 2. 12.00 noon Question put, That amendment No 1 be made. The Assembly divided: Ayes 63; Noes 7. Ayes Martina Anderson, Billy Armstrong, Roy Beggs, Cathal Boylan, Mickey Brady, Allan Bresland, Francie Brolly, Lord Browne, Thomas Buchanan, Paul Butler, Gregory Campbell, Trevor Clarke, Willie Clarke, Fred Cobain, Rev Dr Robert Coulter, Jonathan Craig, Leslie Cree, Nigel Dodds, Jeffrey Donaldson, Alex Easton, Sir Reg Empey, Arlene Foster, Samuel Gardiner, Simon Hamilton, David Hilditch, William Irwin, Danny Kennedy, Fra McCann, Jennifer McCann, Raymond McCartney, David McClarty, Basil McCrea, Ian McCrea, Dr William McCrea, Alan McFarland, Claire McGill, Michael McGimpsey, Gerry McHugh, Michelle McIlveen, Daithí McKay, Mitchel McLaughlin, David McNarry, Adrian McQuillan, Stephen Moutray, Robin Newton, Carál Ní Chuilín, John O’Dowd, Michelle O’Neill, Rev Dr Ian Paisley, Ian Paisley Jnr, Edwin Poots, Sue Ramsey, George Robinson, Iris Robinson, Caitríona Ruane, George Savage, Jim Shannon, David Simpson, Jimmy Spratt, Mervyn Storey, Peter Weir, Jim Wells, Sammy Wilson. Tellers for the Ayes: Leslie Cree and George Savage. Noes Dr Kieran Deeny, Dr Stephen Farry, Anna Lo, Naomi Long, Kieran McCarthy, Sean Neeson, Brian Wilson. Tellers for the Noes: Naomi Long and Kieran McCarthy. Question accordingly agreed to. 12.15 pm Mr Deputy Speaker: The Question is that amendment No 2 standing on the Marshalled List be made. All those in favour say “Aye”. Mr McNarry: On a point of order, Mr Deputy Speaker. If the second amendment — Mr Deputy Speaker: You must wait until the vote is over, Mr McNarry. Mr McNarry: I will address the issue then. Thank you. Question, That amendment No 2 be made, put and agreed to. Main Question, as amended, put and agreed to. Resolved: That this Assembly notes the widespread public concern at the changes to the rating system and calls upon the Department of Finance and Personnel to conduct a full review of the new rating system, which fundamentally fails the essential test of ability to pay; and further calls for this review to give particular consideration to fair and transparent income-based protections, and suitable reliefs for pensioners and all disabled persons. Mr Deputy Speaker: As Members know, the Business Committee has arranged to meet at lunchtime today. I propose therefore, by leave of the Assembly, to suspend the sitting until 2.00 pm. The sitting was suspended at 12.17 pm. On resuming (Mr Deputy Speaker [Mr Molloy] in the Chair) — 2.00 pm Mr Deputy Speaker: The Business Committee has agreed to allow one and a half hours for the debate. The proposer of the motion will have 10 minutes to propose and 10 minutes to make the winding-up speech. Other Members will have five minutes each. One amendment has been received and has been published on the Marshalled List. The proposer of the amendment will have 10 minutes to propose and five minutes to make his winding-up speech. Mr McCarthy: I beg to move That this Assembly calls upon the Minister of Health, Social Services and Public Safety to establish a cost and benefit review for the purpose of abolishing health prescription charges as has been carried out in Wales. As the Alliance Party’s spokesman on health, social services and public safety, I wish to see the best possible health provision for everyone living in Northern Ireland, and I am sure that all Members agree with me. To that end, I hope that the Assembly will support my call to the new Minister of Health, Social Services and Public Safety, Michael McGimpsey, who I am glad to see in the Chamber, to initiate a cost-and-benefit review for all current prescription charges. In addition, I am happy to support the amendment. The Alliance Party’s policy on health provision continues to be that the service should be free to patients at the point of delivery; funded through general taxation; available to all on the basis of need; and universally and equally accessible by everyone. The National Health Service was introduced throughout the United Kingdom in 1946, and it was to be free from any charges. However, in 1949 a new Act was introduced to permit charges for prescriptions, and it came into force on 1 June 1952. Prescription charges were abolished in 1965, and prescriptions remained free until June 1968 when charges were reintroduced. Those charges remain throughout the UK to this day, with the exception of Wales where all prescription charges have been abolished from 1 April 2007. I congratulate the National Assembly for Wales on the planned and gradual way it abolished prescription charges. The Welsh Assembly’s main reason for abolishing the charges was that it wanted to ensure that people would not be put off going for their medication due to cost, and that patients would get the medication they required to improve their health and, ultimately, their quality of life. The Welsh Assembly also reckoned that people who were on modest incomes and who had chronic illnesses might not have been eligible for free prescriptions under the previous exemption system, which could be complicated. Research has shown that costs have prevented patients availing of healing drugs, and that the long-term costs to the NHS could end up being much greater through avoidable hospital treatment having to be carried out. UK regions have different opinions on prescription charges. Scotland has promised to reform its system and introduce more exceptions for chronic conditions, students and people on low incomes. England retains prescription charges, but its health Minister has pledged that increases will not go above the rate of inflation and that all proceeds from these charges will go straight back into front-line services. At present, we in Northern Ireland have to pay for prescriptions, although it is now estimated that some 90% of people get prescriptions free of charge for one reason or another. Our challenge today is to ensure equality of treatment for everyone in Northern Ireland. My information is that everyone in the Republic of Ireland is entitled to either free or subsidised approved prescription drugs and medicine and certain medical and surgical aids and appliances. In asking the Minister to instigate a cost-and-benefit review on prescription charges, there are many factors to be considered. For instance, how much does it cost the Health Service to administer the prescription system? What is the revenue from prescriptions in the context of the wider health budget? How can we reduce prescription fraud, which was estimated in 2005-06 to amount to almost £7·6 million? Should free prescriptions for Northern Ireland be introduced on a single date, or should we gradually reduce the cost of prescriptions as happened in Wales? What has to be done to ensure that patients comply and take their prescribed medication? The review must answer these and many more questions, taking into account the voices of local GPs. There is also a fear that if all prescriptions were free, patients would simply telephone surgeries and ask for medication that can be bought over the counter, thus giving our already hard-pressed GPs extra and unnecessary work. The review must consider, in addition, the overall benefit to the National Health Service and how to make a real and visible improvement in Health Service provision. In conclusion, we acknowledge the efforts of one of our leading newspapers, the ‘Belfast Telegraph’, to establish a level playing field for all patients by seeking the total abolition of these charges. Indeed, I warmly welcome the Minister’s published views on this important subject and his eagerness to have a review of it. Now he has the opportunity to respond positively to my proposals today. I ask Members to support the motion and the amendment. Mr Buchanan: I beg to move the following amendment: After “Wales” insert “; and to review the list of conditions that currently entitle patients to free prescriptions in order to reduce anomalies.” Prescription charges were first introduced in 1952 and, except for a three-year period between 1965 and 1968, they have been levied ever since. A person can qualify for exemption on three grounds: age, financial status or medical condition. It is estimated that around 50% of the population qualifies for free prescriptions under the current exemption arrangements. However, because this group includes children, the elderly and people with chronic health conditions, all of whom are high users of medicine, it is estimated that over 90% of items dispensed could be supplied to patients free of charge. Undoubtedly there are arguments in favour of prescription charging. It places a value on the medicine that patients require, helps reduce the level of less urgent demands on GPs’ time and provides a much needed source of revenue for the National Health Service. There are indications that between a quarter and a fifth of people would be more likely to go to their doctors for prescriptions if prescriptions were free to all. Dropping prescription charges might lead to an increased demand on doctors’ time and for prescriptions. As indicated in the amendment, current exemption arrangements contain certain anomalies that need to be addressed. Any changes to the present system should be straightforward and easy for patients to understand. Secondly, the impact of any changes should not increase the administrative burden on GPs and community pharmacists. Some chronic conditions are currently exempt while others are not. The argument is made that it is one thing for diabetics, for instance, to receive free prescriptions for their condition, but quite another that they should receive free prescriptions for conditions unrelated to diabetes. However, it may prove difficult to determine whether one medical condition is related to another. In addition, some conditions can cause secondary problems or can affect sufferers’ general health. For example, the symptoms that affect sufferers of multiple sclerosis are wide-ranging. They include fatigue, pain, spasms, depression, incontinence and other problems. Drawing a distinction between drugs that relate to multiple sclerosis may, therefore, be difficult. Similarly, it has been recognised that treatment of the main condition may cause side effects for which a prescription is also required. Furthermore, a patient may suffer from an illness that is unrelated to the exempt condition, but which may, nonetheless, lead to a deterioration of that condition if left untreated. Concern has also been expressed that limiting exemption to treatment for the main condition would require significant changes to be made to current administrative systems, which would be costly. From a processing perspective, it would be difficult to have some items on a prescription form that were exempt from charges and others that were not. It has even been suggested that such changes could cost more than the complete abolition of charges for people who have a chronic condition. Another idea is to base exemptions on a list of drugs rather than on a list of conditions. However, there are several drawbacks to that suggestion. The extra bureaucracy required to maintain the list of drugs may prove costly. There would be a potential time lag between new drugs coming on to the market and their addition to the list of exempt drugs. The feasibility of developing a list of drugs that includes all of those medicines that are required to treat even common chronic conditions is questionable. As many drugs are used to treat more than one condition, drugs-based exemption from charges might be granted not just to those who have chronic conditions, but also to those who have minor ailments or short-term acute illnesses who may be less in need of assistance with charges. For example, antibiotics can be prescribed for anyone who has a cough. For a patient who has cystic fibrosis, however, the consequences of not taking antibiotics are severe. That is not the case for other patients. Some people have suggested that there be a reduced flat fee for prescriptions. The main argument in favour of that is that all patients would contribute something to the cost of their medicine, which would provide much-needed revenue to the NHS. There is no doubt that some of those people who are already exempt from charges could afford to pay something towards their medication. For patients who require many prescriptions, a more affordable option is to purchase a prescription prepayment certificate (PPC). Those can be cost-effective when a patient needs several items over many months. The PPC system could be improved by allowing patients to pay in instalments, issuing PPCs retrospectively and publicising the system better. For patients who are not exempt on the grounds of income, but who require many or frequent prescriptions, the prescription prepayment certificate presents a more affordable way of paying for their medication. However, it is recognised that the PPC system has several shortcomings; in particular, the size of the upfront fee may present difficulties for some patients, particularly those who are on lower incomes. Options include abolition of the system of upfront payment and allowing patients to pay in instalments with the option of paying by direct debit, standing order or by a stamp-scheme system. Some people favour the retrospective issuing of PPCs to patients who incur significant but unanticipated charges during a set period. There are many varied ideas on prescription charging. Representatives of the Royal College of General Practitioners have suggested replacing the current charging and exemption arrangements with a patient co-payment system, similar to those that exist in other countries, in which charges vary for different categories of drugs. They have also stated that it would be worth examining experiences elsewhere, such as the current French system in which patients receive a higher level of reimbursement for evidence-based treatment than for newer or more expensive medication, which is not necessarily more effective. 2.15 pm In such a model, it is likely that the great majority of prescription medicines — perhaps 90% — would be free to the patient. That would require the categorisation of all medicines. However, as a first step toward addressing this important issue, Members should seek to review the list of exempt conditions. Mr Deputy Speaker: I call Mrs Michelle O’Neill. She will be making her maiden speech, and it is the convention that it be heard uninterrupted. Mrs O’Neill: Go raibh maith agat, a LeasCheann Comhairle. I am pleased to have the opportunity to make my maiden speech on an issue that has an impact on the lives of so many people. Sinn Féin is determined to create a society in which inequalities in health provision are eradicated. To that end, we launched a campaign for free prescriptions over a year ago, which we took to most councils in the North. It received universal backing. Sinn Féin notes that the graduated abolition of prescription charges over one electoral term was in the UUP manifesto, and we will support the Minister of Health, Social Services and Public Safety in achieving that worthy goal. Prescription charges should be redundant in the Health Service, which is supposed to be free at the point of delivery. The current cost — almost £7 per prescription — has the detrimental effect of excluding many people from receiving the correct medical treatment. People on low incomes cannot access the medications that they need. That cannot be allowed to continue, and Members must end charging now. Sinn Féin recognises that it may take some time to implement, as it did in Wales. In the interim, we urge the Minister of Health to go the extra mile and to adopt our recommendations from last year concerning the list of chronic conditions that qualify for exemption. As other Members have said, that list was compiled in 1968, is no longer fit for purpose and must be modernised. There have been tremendous advances in pharmacology in the 40 years since the exemption list was compiled. Sinn Féin urges the Minister to immediately widen it to include long-term conditions such as Alzheimer’s disease, arthritis, cancer, multiple sclerosis, HIV and schizophrenia, to name but a few. There must be a more consistent approach for patients who require repeat prescriptions for long-term medical conditions. The disparities associated with the outdated exemption list must be addressed as soon as possible. In its report, ‘Unhealthy Charges’, the National Association of Citizens Advice Bureaux found that more than two thirds of those with long-term health problems had difficulty meeting prescription charges. That has an adverse impact on their health and raises costs elsewhere in the Health Service due to hospital admissions and appointments. With that in mind, Sinn Féin calls on Members to support the motion. Rev Dr Robert Coulter: Members have heard some lucid arguments in favour of the motion. A look back in time may help Members to take a long-term view. In 1979, the prescription charge was 20p. Figures for the retail price index, on the 1974 basis, show an increase by a factor of 6·62 between 1979 and 2007. That implies that the prescription charge could reasonably be expected to have increased from 20p to £1·32 — yet in 2007 it had reached £6·85. That is more than five times what might have been expected due to normal inflationary pressures. That simple arithmetical exercise shows how inflated prescription charges have become. That is not the whole story. If prescription charges played a significant part in recovering the cost of medicines, such an overblown increase might be understandable — even justifiable, if all moral and ethical issues were set aside to deal just in figures and recovery costs. However, the picture painted by the facts shows that prescription charges are negligible in terms of cost recovery. In 2004, just 4% of the cost of prescription items was recovered through prescription charges. Some 95% of prescription items — 25·73 million prescriptions — were not paid for at the point of dispensing. That figure included the 90% receiving free prescriptions and the further 5% using prescription prepayment certificates. In 2005-06 the 501 pharmacies in Northern Ireland dispensed 27·1 million prescription items at a cost of £340 million. Four million pounds was received in prescription prepayment certificates, and only £10 million was received in prescription charges. That is £10 million out of £340 million. The general pharmaceutical service cost some £381 million in 2005-06, and that cost was defrayed by only £14 million from prescription charges and prescription prepayment certificates. The extent of the bureaucracy involved in administering the system simply cannot be justified in terms of the rate of recovery. A new prescription bar- code system, begun in 2006 and based on a £6·8 million contract with Hewlett Packard, will enable whatever data recovery is necessary on patterns of prescribing by drug, patient and doctor. That will render much of the bureaucracy obsolete. Quite apart from this statistical approach, there is the ethical issue of taxing health. Make no mistake — that is what prescription charges actually are. Strip away all the arguments and you come back to this point. That is why the Welsh Assembly, which has fewer devolved powers than the Northern Ireland Assembly, has abolished prescription charges from 1 April 2007. The purpose of levying prescription charges is now unclear. The income from them is negligible in overall terms. We must get away from continuing and perpetuating activities simply because we have always done them. Levying prescription charges is one of those survivals from past practice that no longer makes sound business sense for Government. It may be argued that we need to get back to the founding principles of the National Health Service in this matter. The National Health Service introduced in 1947 was a comprehensive health service that was free of charge at the point of need. If patients are treated free of charge at the point of need, medicines should also be free. The motion calls for a review of prescription costs and benefits. On that basis, I support the motion. Mrs Hanna: The existing charging scheme in Northern Ireland is outdated and inconsistent. A review of the system is clearly needed. There are many inequities and anomalies in the system. Although around four out of five prescriptions are exempt, the price of a prescription — set at £6·85 from April — sometimes hits those who cannot afford these charges. There are many people with chronic conditions who are still not exempt. With the continued rise in prescription charges there is concern that more patients will be discouraged from visiting the doctor when they are ill. Research in the UK and Canada shows that charges result in patients not taking the treatment that they require. Therefore, prescription charges may constitute a financial barrier to receiving treatment for a portion of the population, which would obviously have a detrimental effect on the health of those individuals. That is probably accurate. There are many other groups of patients who are on long-term, or indeed lifelong, treatment, such as those with cancer, cystic fibrosis, Parkinson’s disease and other conditions. They are certainly disadvantaged. Unfortunately, some terminally ill patients cannot afford the cost of medicines. It would be fairer, particularly for the most vulnerable, to extend the grounds for exemption from prescription charges to include chronic illness. Cancer charities have recently called for the abolition of charges for the chronically or terminally ill to be implemented as a matter of priority. Of course, a fair legal definition of the word “chronic”, on which to base the exemptions, would have to be established. The Scottish Parliament is not convinced that an equitable charging scheme can be created by identifying exemption categories and may be in favour of abolishing prescription charges entirely. However, in Northern Ireland the abolition of charges should be costed to determine whether it could be budgeted for. It is estimated that, in Wales, free prescriptions will cost £25·5 million for the first year. I have no doubt that the Minister of Health, Social Services and Public Safety will initiate a cost-and-benefit review to measure the impact of abolishing prescription charges. Indeed, it might be more cost-effective to abolish charges; the vast majority of people already do not pay for prescriptions. Another important question is whether abolition of prescription charges will impact positively on public health and benefit the people of Northern Ireland. There is an argument that free prescriptions will result in fewer hospital stays. Conversely, there is an argument that free prescriptions will encourage a rise in the number of prescriptions issued, which will put further pressure on the health budget and may not be good for public health. Doctors should be encouraged to prescribe less expensive generic medicines. Pharmacists should inform patients when there is a cheaper, over-the-counter alternative to that prescribed. Pre-paid prescriptions should be availed of and made more flexible. Society is very reliant upon medication, and that is not to detract from the benefits of powerful drugs. However, these are often seen as the only solution to health problems. Members interested in health issues will accept that we must create a Health Service that promotes good health and supports early intervention. People must be encouraged to take more responsibility for their health, so that they do not become too reliant upon medication. That is why the costing of free prescriptions is important. It will assist those who cannot afford essential medication. Should prescriptions become free, the prescribers — mainly general practitioners — will have an added responsibility and will have to be extra careful, especially with regard to repeat prescriptions. We are all aware of individuals who are dependent on medication. Last weekend, we heard about an eight-year-old boy who was selling his parent’s medication. That is becoming common. It is important to weigh the options, and remember that medicine is not a panacea. Ms Ní Chuilín: Go raibh maith agat, a LeasCheann Comhairle. I support both the motion and the amendment. As the Sinn Féin spokesperson on health, I look forward to working with the Minister and acknowledge that the Committee for Health, Social Services and Public Safety and he will have much work to do together. The Investing for Health strategy should be at the centre of the Executive’s concerns. Health, like many other policy areas, cuts across the responsibilities of several Departments. Deprivation in north and west Belfast has been well publicised, as have the links between ill health and poverty. In this debate Members have consistently made the connection between those on low wages having restricted access to prescriptions and the fact that they also suffer the long-term effects of lack of access to primary care. Those people will be much more expensive to treat when accessing secondary care, which will put more pressure on an already stretched Health Service. Furthermore, it does not take into account the cost in human terms to the individuals. 2.30 pm At this early stage of the Assembly, it is good that Members are seeking to help those in most need — by trying to give them access to services from which they are deprived due to the financial implications. Sinn Féin supports the motion and the amendment. Go raibh maith agat, a LeasCheann Comhairle. Mr Deputy Speaker: I call Mr John McCallister to make his maiden speech, and I ask Members not to interrupt. Mr McCallister: First, I congratulate the Members who tabled the motion for bringing the extremely important issue of prescription charges before the House. It is encouraging that they have read, and agree with, the Ulster Unionist Party manifesto. It is with personal satisfaction that I make my maiden speech on such a pressing matter. If the Department of Health, Social Services and Public Safety establishes a cost-and-benefit review, such as the motion calls for, I hope that it would result in firm and sustainable proposals to abolish health prescription charges. I use the phrase “firm and sustainable” because there have been situations in which similar measures have been adopted and subsequently rescinded. The National Health Service Act 1946 did not allow for health prescription charges — those were introduced in 1952. The founding fathers of the NHS wanted the service to be free at the point of need. It was my party that brought the National Health Service to Northern Ireland. However, for many hard-working families today, the Health Service is not free at the point of need. Those people have already paid for their healthcare through their taxes; therefore, the present situation results in almost double taxation. Members must agree that it has to stop. As Rev Coulter stated, prescription charges are a tax on health, or indeed on ill health. A recent citizens advice bureaux survey found that 37% of respondents who suffered from long-term conditions such as arthritis could not pay for all or part of their prescriptions because of cost. If those people cannot afford prescriptions, their health may deteriorate, they may be hospitalised and may cost the NHS and the taxpayer even more money. There are serious flaws in the current exemption regulations for prescription charges. The exemption system does not necessarily include chronic conditions and terminal illnesses such as cancer, multiple sclerosis, cystic fibrosis, arthritis and asthma, which means that sufferers have to pay for what could be life-saving treatment. The Ulster Unionist Party wants to introduce free prescriptions, and the cost would be around £14 million to the taxpayer — less than 0·5% of the current health budget. The new Minister of Health, Social Services and Public Safety, my friend and colleague Michael McGimpsey, has reiterated his commitment to free prescriptions. The Welsh Assembly has delivered free prescriptions from 1 April 2007, and the Scottish Parliament may follow soon. Why should Northern Ireland be the only devolved region in the UK to be different? The proposal to abolish prescription charges serves as an excellent example of how devolution can benefit all of the people of Northern Ireland. It is a prime demonstration of how the Ulster Unionist Party plans to serve the people, and how we will strive to improve the quality of life for everyone. Mr Armstrong: I welcome the debate and support the call for the Minister of Health, Social Services and Public Safety to examine the cost and benefits of abolishing prescription charges. Ending prescription charges is a step towards restoring a key principle of the National Health Service. The Ulster Unionist Party supported free prescriptions in its manifesto, and I am delighted to see that the measure has attracted support from all parties. Prescription charges are effectively a tax on illness. It is an unfair system that gives free medication to various groups who can often afford to pay, while charging numerous other groups who may find it difficult to pay — for instance, those who have chronic illnesses or who are on a low, modest income but who do not qualify for income support. The current exemption system is complicated and unbalanced. There is a range of chronic and terminal illnesses that are not included in the list of conditions that are exempt from prescription charges. These conditions include arthritis, asthma, cancer and multiple sclerosis. Sufferers of those illnesses must continually pay for medication that could effectively save their lives or at least improve their quality of life. It is grossly unfair that 230,000 people in Northern Ireland who are affected by arthritis, many of whom have to take a wide range of medications over a long period of time, should not be awarded free prescriptions on the basis of their condition. Those costs are in addition to other financial restraints such as loss or limitation of employment and the cost of aids and adaptations that are necessary to easing their everyday lives. Arthritis is the single largest cause of physical disability and lost working days in Northern Ireland, yet many people suffering from arthritis find it difficult to pay for the necessary medications to reduce their pain. That is unacceptable. Similarly, all those suffering from cancer would benefit from free prescriptions. Macmillan Cancer Support research has shown that one in seven cancer patients under the age of 55, who must currently pay for prescriptions and whose financial situations have worsened, are unable to afford their cancer treatment. Poverty is a particular problem for people of working age who suffer from cancer. That is deplorable. Macmillan Cancer Support research has established that, of those people who have been diagnosed with cancer at age 55 or younger, seven out of 10 households have suffered an average loss of income of 50%. Furthermore, increasing numbers of cancer patients receive their treatment as outpatients, which means that more and more people must now pay for medication such as treatment for side effects, long-term preventative medicines and even treatments such as oral chemotherapy when they get home. Prescribing medicines is often complicated, with some medicines complementing another, and others requiring to be taken with another drug. Two substances can sometimes be combined into one tablet, but others cannot and must therefore be paid for separately. That creates further financial problems for many people who are already suffering a lot of distress. The National Association of Citizens Advice Bureaux found that 37% of respondents with long-term conditions have failed to purchase all or part of their prescriptions because of cost. It would surely be more cost effective for the National Health Service for patients’ conditions to be adequately treated as prescribed rather than paying for avoidable hospital treatments in the long term. Rather than select only parts of medication that patients are prescribed, free prescriptions would enable them to comply fully with their prescription, bringing longer-term health benefits. The inequalities of the current system must be eliminated. The British Medical Association calls for a: “fundamental review of the whole system of prescription charges”, describing prescription charges system as “outdated”. The current system awards free prescriptions to 87% of the people, but many of the remaining 13% who pay regularly for prescriptions are suffering because of the outdated system. The National Health Service makes a real difference to our lives, contributing in vital ways to the quality of life of people in Northern Ireland. Mr Deputy Speaker: The Member’s time is up. We need to keep within the time allotted for the debate. The Minister of Health, Social Services and Public Safety (Mr McGimpsey): I thank the two proposers for tabling the motion. The motion is entirely in keeping with the Ulster Unionist Party’s manifesto commitments and my already stated determination on the issue of prescription charges. Therefore, the support of Mr McCarthy and Dr Deeny is wholly welcome. I also thank all the Members who have spoken on the subject. Many useful points have been made. It is not overstating the case to say that there is strong agreement in the Chamber. I look forward to further cross-party enthusiasm in support of my future requests for additional health funding. Some Members: Hear, hear. Mr McGimpsey: It is clear that prescription charges are an issue on which Members want to make progress and that the people of Northern Ireland wish to have addressed. That is why the Ulster Unionist Party is committed to the introduction of free prescriptions for all. Therefore, I welcome the opportunity to bring the issue forward for review. Indeed, I have already told my departmental officials that such a review is a priority. My Department will also seek to restore the key principle of the National Health Service, which is that healthcare should be free at the point of use. After all, it was a Stormont Government that brought the National Health Service to Northern Ireland. Now, this Stormont Government have the opportunity to renew their commitment to the fundamental principles of the National Health Service. Some Members: Hear, hear. Mr McGimpsey: On prescription charges, it is worth considering a number of points. Currently, each prescription item costs £6·85, unless a patient is entitled to free prescriptions. Members will be aware that there are several grounds for exemption from paying for prescriptions. These include age, medical condition and income. However, the implementation of exemptions is complex and highly bureaucratic. Until now, the direct rule Government’s view has been that if people can afford to pay for their medicines, they should do so. Annually, approximately 28 million prescriptions are dispensed here. The income from charge-paying patients is around £13 million. That must be set in relief against the £360 million that is spent on medicines prescribed by GPs. Of that £360 million, only a small proportion — around 3·5% — is recovered. Additionally, each year, hospital consultants prescribe approximately £100 million worth of drugs, all of which are free to patients. Therefore, only a small proportion of the costs is recovered as income through prescription charges. People who are not exempt from prescription charges, and who need regular medication, can reduce their costs by using pre-payment certificates. These certificates cost £98·70 for 12 months. If a person buys a pre-payment certificate, it allows him or her access to a year’s worth of medicine for £100. Approximately 90% of NHS prescription items are dispensed free of charge: not 90% of prescriptions, but 90% of prescription items. Although that appears to be a lot, it disguises the fact that it accounts for approximately 28 million items. One prescription with, for example, four items on it will cost about £27. Therefore, prescription costs can be an onerous financial burden on families. I know only too well of large numbers of people — people with serious, often chronic conditions — who still have to pay for the very medication that is keeping them alive. That is not the kind of NHS that we envisage because it is not a free service. That principle apart, there are serious inequities and weaknesses in the current system that must be addressed. Irrespective of our views on charging for prescriptions, Members must ask whether the current system reflects the best way to deliver medicines to those people who need them. We must consider the categories for exemption. Aside from age, pregnancy, a war disability and income, several medical conditions are listed as exemptions, with no apparent justification for their inclusion, while others are excluded. How does that stack up in equality terms? Do we have a rational and robust explanation for why one person is exempt and another is not? Why does one person’s suffering have a greater priority than that of another? Those are the questions that must be answered. The rationale must be defensible on the basis of evidence or health grounds. Why is a prescription issued by a hospital consultant free of charge, while the same prescription, written by a GP, for the same illness and the same patient, attracts a charge? There is no good answer to that either. Why is a 50-year-old with a serious illness charged for prescriptions, yet a 60-year-old with a different illness, who may be better off, can get free prescriptions? I could go on, but the point is clear. The current system cannot be the best, and it should be changed. 2.45 pm As Minister of Health, Social Services and Public Safety, however, I know that my Department’s budget is neither infinite nor a bottomless pit. I have a responsibility — and I am well aware that Members will hold me to that responsibility — to ensure that the budget is spent in the most prudent, far-seeing and intelligent way for the health, social care and well-being of the people of Northern Ireland. In short, I shall decide how and where the health budget is best used to maximise its impact. It worries me to hear evidence from patients and their families that prescription charges deter some people from having their prescriptions dispensed, either in part or entirely. The long-term costs for the Health Service of avoidable hospital treatment would improve if patients were able to afford the medication needed to treat their condition. I am aware that people who might be able to go back to work fear that, in doing so, they will not be able to afford the prescriptions to which they were entitled when unemploye |