AS2015: Chancellor passes business rates buck to local authorities

The thorny issue of business rates was kicked into the long grass yet again by the Chancellor, according to Adam Burke, director of rating at Colliers International.

In the Spending Review and Autumn Statement the Government promised to use business rates to “transform local government, enabling it to be self-sufficient by the end of the Parliament by paving the way for 100% business rate retention, giving councils the power to cut business rates to boost growth, and give elected city-wide mayors the power to levy a business rates premium for local infrastructure projects – with the support of local business.”

The government will also “consult on options to fully fund local authorities’ public health spending from their retained business rates receipts, as part of the move towards 100% business rate retention.”

However, councils are cash-strapped and the likelihood of being able to reduce rates to encourage business investment is slim. Colliers’ Burke added: “With a record-breaking 255,000 ratings appeals outstanding, the system is creaking. With further complications to the way local authorities are funded, the question has to be asked whether the so-called ‘devolution revolution’ is a work of fiction – what business can plan beyond the next 12 months for what they will pay in business rates?”

Duncan Harkness, senior director in the business rates team at Bilfinger GVA, said: “The Treasury has neatly passed responsibility to the councils for spending increases, but is likely to only allow modest opportunities for councils to increase business rates income in line with increased demands for local services.

“It is difficult to imagine many large authorities with pressing social issues being in a position to reduce business rates to win new jobs and generate wealth as George Osborne is suggesting. The noise from ratepayers for a reduced business rates burden is getting ever louder, with the CBI and the BRC recently meeting with the Treasury to discuss the Government’s on-going review of rates, and press the case for the business rates burden to be shared more equally throughout the economy with other businesses.

“Retailers believe the current system is outdated, and unduly damages Britain’s retailers and high streets.

“Clearly the Chancellor is under pressure to reform the system, but the only certainty with these is that at best they will be fiscally neutral.”

Edward Cooke, director of policy and public affairs, British Council of Shopping Centres, said: “Business rates continue to be the elephant in the room with lots of talk and no action from government to address the major issues of this outdated tax. All we have heard is that, having failed to tackle the issue, government is now proceeding to gradually delegate the responsibility and the risk of reducing the rate of this outdated tax to local authorities. In practice this means more delays for business rate payers on a tax with a rate of almost 50%.”

There was an extension of small business rate relief in England for 12 months to April 2017. Around 405,000 of the smallest businesses will continue to receive 100% relief from business rates, with around a further 200,000 benefiting from tapering relief. The government is undertaking a review of business rates. The review will report at Budget 2016.

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