UK200Group has commented on the government’s announcement to decentralise business rates
Speaking during the Conservative conference, the Chancellor George Osborne announced that local authorities would be allowed to keep the £26bn they raised from business rates by 2020.
Under the proposal, councils will no longer have to send the business rates they collect to a central government funding pool and will instead be able to hold on to the money themselves.
The amount each business pays will still be based upon the value of each business’s property, but councils will be permitted to cut rates to attract new businesses, investment and jobs to their area.
Meanwhile, elected mayors in cities such as London, Manchester and Sheffield will be granted power to add a premium to fund major infrastructure projects.
Jonathan Russell, partner at UK200Group member firm ReesRussell: “Local councils will receive and have incentives to encourage business, but we wonder what the compensating adjustment will be from central government. I am sure that this will not really mean extra funding for local councils and there will be equivalent cuts to the grant funding local authorities receive from the central pot.
“Because business rate yields are generally higher in the South of the country it must follow that the South will suffer greater cuts in central grants and the opportunity to move more of the benefit to the North might be taken. At the end of the day, we are not going to be talking about more money, just a difference in the distribution and control.”