Speaking at the Conservative Party Conference in Manchester earlier this month, the Chancellor George Osborne has announced plans that will enable local councils to take full control of business rates.
At present, local councils keep up to 50% of the rates with the rest being sent to Westminster, who then redistributes them so that areas with fewer businesses do not miss out. Currently around £11.5 billion in business rates goes to Westminster, with around £9.4bn being redistributed in grants.
Described by the Chancellor as “the biggest transfer of power to our local government in living memory”, the plans will allow local councils to keep the rates that they collect from businesses as well as to set the level. It aims to provide local councils with the freedom to cut the tax, therefore encouraging companies to invest locally.
The plans, which will also allow areas with directly elected mayors to increase business rates if they invest the extra money into infrastructure schemes, has come under scrutiny from a number of critics.
Frances O’Grady, the Trade Union Congress General Secretary says:
“By devolving business rates without any national safeguards, regional inequalities will get wider. The communities that most need investment are often those with the weakest business revenue base”
Another critic, Shadow Home Secretary, Andy Burnham took to twitter:
“Big contradiction at heart of Osborne speech. Says wants to close North-South divide. But then announces taxation reform that will widen it.”
However, the Chancellor backs his plan by saying to councils:
“Attract a business, and you attract more money; regenerate a high street, and you’ll reap the benefits; grow your area, and you’ll grow your revenue too”,
He goes on to explain that the changes, which are due to be in place by 2020 would mean cities and communities will no longer have to go to the government with what he described as a “begging bowl”.
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Following on from our article about Britain’s ‘Rising Star’ high streets, business rates are often cited as one of the greatest obstacles to high street vitality – particularly as online competitors have no such burden. It is interesting therefore, to see Mr Osborne finally putting the power to control rates in the hands of local government, though it remains to be seen whether councils will use it to bolster their beleaguered coffers or to incentivise business on their ailing high street.
BT www.propertysurveying.co.uk 10.10.15