BUSINESS RATE REFORM.
Over the next few years businesses across the North could be set to benefit from a major revolution in the way that councils are funded.
By 2020 central funding of local government through the revenue support grant will be replaced entirely by business rates income. At the moment councils keep half the business rates collected in their area. The uniform business rate, set in Whitehall, will be scrapped and the Combined Authorities around Manchester and Liverpool will be able to increase the tax, but only if business agrees.
But in the new regime local councils will be able to reduce business rates too, giving the opportunity to encourage new firms into their area, boost growth and increase their rates income. This is certainly the intention of the Chancellor who is behind this change. However there are a couple of snags. Councils will have to carefully balance the impact of new firms moving in and swelling their coffers, attracted by competitive business rates, and the pressures on their spending on services like adult care.
The other problem is that all this may widen the North South divide. While it will be relatively easy to attract businesses to move into council areas in the south, further north it is a different story. Calculations have been done about the impact of the new regime in the North. These show what proportion of the national share of business rates an area would need to retain to replace the current central grant. Scores below 100% mean an area will cover its lost grant. London scores 52% whereas the North West score is 104% Relating these “self sufficiency” scores to specific councils makes even more dramatic reading. While Westminster is quids in because it can cover its lost grant with just 8% of its business rate, Knowsley scores 241% and would experience a massive shortfall of income. Even within the North there are sharp contrasts with Trafford on 38% whilst Wirral is on 187%.
Safety net mechanisms will be put in place to even out some of the disparities. Next month’s Budget is likely to reveal the details of how it will be done along with the outcome of the government’s review of business rates. It’s expected to confirm that rates will still be linked to property values.
The government’s overall intention is that councils should be incentivised to boost their business rates by competing to attract firms in their area.
I see the former Crosby MP Shirley Williams has retired from the House of Lords. Roy Hattersley did the same recently. They were both politicians of the highest quality in the Labour governments of the sixties and seventies. Shirley Williams should have been our first woman Prime Minister.
It says a lot about them that they think it is time to retire with dignity, although I think they both still had a great deal to contribute to the House of Lords.