A fairer and clearer rates system

The Isle of Man’s rating system is long overdue for reform. Property valuations are still based on an estimate of what each property could have been rented for in 1969, under legislation dating from 1953. Even properties built since then must be compared with properties from that period. It is difficult to explain, difficult for ratepayers to understand and increasingly difficult to defend.

Previous governments have reviewed rates reform without completing it. I do not believe the answer is another wide ranging consultation that identifies the same problems and then leaves the difficult decisions to the next administration.

Rates are a property tax. I do not support trying to turn the rating system into an alternative form of income tax by adjusting bills according to household income or personal circumstances. That would make the system more complicated to administer and make income less predictable for local authorities.

Capital value as the starting point

I support replacing the current system with one based primarily on the current capital value of each property.

How much a property is worth is a concept that most people can understand. Government already holds significant information through the Land Registry and other public records, while completed property sales provide evidence that can be used to assess comparable homes.

A property’s most recent sale price could not be the only consideration. Some homes will not have been sold for many years and individual properties will differ in size, condition and character. Valuations should therefore be produced through a consistent process, with independent oversight, using available property information, comparable sales and local market evidence.

I do not support owners declaring their own value as the principal method of valuation. Ratepayers should be able to correct inaccurate information, question the evidence used and appeal their valuation, but the system should not depend on every owner estimating the value of their own property.

Valuations should also be reviewed regularly. There would be little point replacing one historic valuation system only to allow its replacement to become equally outdated.

Reform should not be a disguised tax increase

The first year of the new system should be revenue neutral within each local authority area.

This would not mean that every household paid the same amount as before. Revaluation will inevitably mean that some properties pay more and others pay less. It would mean that the change in valuation method was not itself used to increase the total amount collected by a local authority.

After that initial year, local authorities would continue to set their budgets and rates in the normal way. Any increase would therefore be a visible budget decision for which elected representatives could be held accountable.

Significant increases and decreases should be phased in over a reasonable transition period. Ratepayers should receive indicative bills well before the new system takes effect, and government should publish clear information showing the likely effect on different property types and areas.

Local accountability

Commercial rates should continue to be retained within the communities where they arise. Local businesses use local infrastructure and services, and local authorities should remain accountable for how that income is spent.

The valuation and treatment of commercial property should be considered separately. Business property presents different issues from domestic housing, but that should not become another reason to delay reform of the domestic system.

Local authorities should also retain the discretion to offer a modest discount for prompt payment where the benefits to cash flow and administration justify it. Practical payment options, including instalments and direct debit, should remain available.

Rates reform is not local authority restructuring

Rates reform should not be tied to arguments about merging local authorities, changing boundaries or transferring additional services from central government.

There may be separate debates about how local government should operate, but combining every possible reform into one project increases the complexity and makes meaningful progress less likely.

Nor should central government transfer services to local authorities without clearly identifying the cost, the funding being transferred and who will be accountable for delivery. Moving expenditure from general taxation onto local rates does not make a service cheaper.

My commitment

As one MHK, I could not promise to deliver a complete new rating system alone. I can promise to press the next government to treat rates reform as a legislative priority, publish the necessary financial modelling and detailed assessment of the effect on individual properties, and provide a clear route from policy to legislation and implementation.

The Island has already spent years discussing the weaknesses of the current system. What has been missing is the willingness to make a decision and carry it through.