Business Rates to be retained by councils

Local authorities will be allowed to keep all of the revenue they raise from business rates under a radical proposal announced by Chancellor George Osborne.

Chancellor George Osborne sprung a surprise in his speech to the Conservative party conference by announcing that he was to hand complete control over business rates to town halls.

Councils now collect business rates, which are sent to Whitehall and then redistributed back to local authorities – but only after a significant cut has been taken for the national government. It is right that all of the money which a business pays is retained by local government and this will be a vital boost to investment in infrastructure and public services.

The Chancellor today (5 October 2015) set out major plans to devolve new powers from Whitehall to local areas to promote growth and prosperity.

‘We would expect measures to ensure local areas with less ability to generate business rates income do not suffer as a result of these changes and all councils are also given leeway to vary business rates up as well as down’.

The move could raise up to £26 billion in total for local authorities, according to The Guardian. He added that the move was a “devolution revolution”.

The Uniform Business Rate will also be abolished.

Last September, 100 firms including Waterstones, WH Smith and Foyles called for the overhaul of the business rates system, calling it a “critical problem”. We need to be sure that councils are able to retain any increased revenues over time.

Councils have an uneasy relationship with government when it comes to finance, arguing that they should have far more autonomy over what is in their piggy bank.

He said: “It’s time to face facts”. On the contrary – those areas have the greatest potential to secure a competitive advantage by slashing Business Rates. Whether you’re a bank rigging interest rates, a vehicle manufacturer cheating on emissions or a company not paying your fair share of tax, be warned – we will come after you.

Mr Osborne also said his plan would mean “money raised locally, spent locally, every council able to cut business taxes, every mayor able to build for their city’s future, a new way to govern our country”, and declared: “Power to the people”.

Westminster City Council – population 227,000 – collects nearly £2bn-a-year in business rates, more than Birmingham, Manchester, Sheffield, Liverpool and Bristol combined, he added. Rates are charged regardless of whether a business is profitable or not, unlike corporation tax.

There are issues, however: the freedom to set lower business rate levies will undoubtedly lead to competition between authorities.

He christened the larger schemes “British wealth funds” and said they would focus in part on investing in infrastructure in the regions in which they operate.