Business rates devolved to local level – of course politicians say yes

There have been more and more calls coming from lobby groups of late that suggest business rate decisions should be made at local level.

Local authorities have weighed into the debate and, according to reports, have submitted their own detailed proposals as part of the consultation on how to reform business rates. The most recent LA to join in was Westminster Council which argued they should be given more control, in particular through increased powers to award tax reliefs and exemptions. The leaders also called for the annual rate increases to be calculated using the CPI measure of inflation, rather than the generally higher RPI index – and they are not alone there.

I have said this before, but there is nothing like a Government consultation to bring out the vested interests in droves and local politicians are no different. With Government funding drying up quicker than a Californian vineyard they have got to find new ways of clawing more back from central coffers or face more vote-losing service cuts on the ground. Asking council leaders if they would like to have more control over business rates is like asking turkeys to vote for a vegetarian Christmas.

What people seem to forget is that we have had this devolved system of business rates before, it isn’t anything new, and what we saw the increasingly skewed business rates from region to region, council to council, as they vied to attract or retain new businesses to their patch. The difference in a few metres or a post code turned some industrial areas into ghost towns.

The consultation period has now closed so the powers that be have to sift through the hundreds of submissions to try and make up their “fiscally neutral” policy on business rates. The linking of business rates to the CPI measure rather than the generally higher RPI index mentioned earlier would seem fairer to businesses, but if it usually would mean a downgrade of the annual rate being set I fail to see how this can end up being fiscally neutral?

The recovery is still shaky, many firms are still not willing to invest long term, so unless untapped tax revenues somewhere suddenly start shooting through the roof, the Government will have no extra money to play with. Whatever plans they unveil around business rates either later this year or next will merely see a restacking of the same wad of bank notes. Responsibilities may be moved around, perhaps, but I would be willing to bet my next business rates bill that we will see at a flurry of headlines after it’s unveiled that state: “Government business rates reforms don’t go far enough”.