Ben Lowry: Early rates payment 4% cut is a rare perk for the frugal

Rates bills are cut by 4% if people pay in full early
Rates bills are cut by 4% if people pay in full early

This week I was asked on radio to defend the 4% reduction granted to people who pay their rates bill in full. I had no hesitation doing so.

The then Sinn Fein finance minister Mairtin Ó Muilleoir had proposed phasing out the measure (his plan is on hold).
It is said by some critics to be a perk for wealthy people.

But I think it an excellent scheme. Prudent, responsible ratepayers get a small reward for paying their bill in full, at a time of agonisingly low interest rates for savers. Better that than keeping the equivalent amount of savings in a bank earning 1% return.

The government gets its payment promptly, and so has to borrow money for a shorter period of time.

One objection is that people who struggle financially and cannot pay in full do not benefit from the discount.

I have written about some of the inter-generational challenges we face, in which many older people have done well financially while many younger people struggle. But it is a complex picture, and one group of people who have suffered badly over the last decade is small savers – prudent elderly people who have modest amounts of money in the bank that has not even kept pace with inflation, with interest rates so low.

And we must remember why those rates are so low – after the 2007 financial crisis western governments pulled every monetary lever they could to help the very people who put us in the crisis: the profligate, both within and without the banks.

This has led to a peculiar injustice in which people who have been careful with their borrowings over the decades have done less well than the people who borrowed heavily.

In the 1970s, people who borrowed heavily saw their debts wiped out by inflation and they ended up asset rich.

People who borrowed heavily in the run-up to the 2007 financial crisis were helped by ultra low interest rates to weather the storm, at the expense of frugal savers.

The 4% rate reduction is one of the few perks for them.

It does not in fact benefit the rich much, because wealthy people in Northern Ireland have relatively modest rates bills. The Province has a £400,000 cap on rates valuations. This means that a house worth £400,000 pays the same rates bill as one worth £600,000 or even £2 million.

Mr Ó Muilleoir wanted to abolish that cap. The case for doing so is more powerful than the case for scrapping the modest early payment bonus.

• Ben Lowry (@BenLowry2) is News Letter deputy editor

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