Secretary of State Chris Heaton-Harris may seek to 'incentivise' return of Stormont with rates hike, suggests economist

Dr Esmond Birnie was speaking to the News Letter after Belfast City Council agreed to increase household rates by 7.99%.

Household rates bills in Northern Ireland are set in two ways - by local councils, and by the Department of Finance at Stormont.

With no Finance Minister in place, it will fall on the Secretary of State Chris Heaton-Harris to set the Northern Ireland wide portion of household rate bills.

Earlier this week, Retail NI chief executive Glyn Roberts described, in a statement issued to the local media, the 7.99% increase in Belfast as "regrettable" as he urged Mr Heaton-Harris and the remaining councils not to hike business rates.

Dr Birnie, meanwhile, said rate hikes are to be expected due to soaring running costs and ongoing budget problems.

"There are several reasons why," he explained. "Obviously, the general costs of running district councils are higher - energy costs, the costs of various materials, and they are probably anticipating the wages of their staff going up. Another aspect is that in the past, there was to some degree an ability by UK central government in London, and to some degree Stormont, to give grant aid, rate support money to local government. But the amount of that money, as you might expect given the general difficulties that budgets are in, has been scaled back. That subsidy to keep rate increases down has been scaled back, so that has implications as well."

On the regional setting of rates, the Ulster University academic said: "There is both an economic and a sort of political, with a small p, side to this. The economic side is obviously those same factors about higher costs and so forth, and indeed the fact that that the Stormont budget is under strain. There is a very big budgetary challenge. The regional rate is one of the very few taxes that can be varied to adjust the amount of revenue coming in to support Stormont departments.

"This has happened before, back in 2006 when Peter Hain was the Secretary of State during that long period when Stormont wasn't operating. He was sending the same signals that 'if you don't come back I'm going to hike the rates massively', and there were also hints that he was going to introduce water charges. There is a sense that the Secretary of State may want to incentivise the return of Stormont. That's in the mix as well, quite apart from the budgetary considerations."

He added: "It's all part of the general pattern we're seeing that household budgets are being squeezed. In effect, this is another tax increase to go along with the other increases, and alongside the higher costs of living, and alongside as we saw yesterday the mortgage payments going up. There is less left to spend, and then that feeds through into spending in restaurants, cafes, bars and various sectors of the economy. It's a challenge."