Yesterday George Osbourne announced that his long promised Business Rates Reform would become an abdication of responsibility passing the buck onto local Government. The delay in the implementation of the revaluation of properties from 2015 to 2017, announced early in the last parliament, already condemned businesses in the North to two more years at levels last valued before the crash in 2008 when property prices were high. It provided two more years of grace for the South where property prices have risen particularly in London and signalled a windfall for the Big 4 Supermarkets who will gain some £1.3bn over the two years. This latest move lets the South and the Big 4 off the hook and lumbers Northern local authorities with the problem of sorting out the mess.
Clearly Osborne’s announcement will undoubtedly benefit wealthier southern councils more. Westminster Council raises £2billion a year from business rates, so there will be winners and losers particularly in the North of the country.
Also, this announcement comes after it’s long been trailed that the Government were looking to reform business rates and this looks to have now been ditched in favour of a major windfall for wealthy Tory councils instead. That’s a shame because everyone has long recognised that business rates are one of the unfairest and most antiquated taxes in the UK. The response we’ve all been looking for is to make them fairer and more in line with business reality. Yesterday’s announcement doesn’t do that, it passes the buck onto local government.
It may also cause real bitterness among poorer councils already struggling with cuts, seeing wealthier councils get an unfair funding advantage in this way.
There are enough divisions in this country already without exacerbating them further and making that sense of unfairness even more pronounced.
However, on the positive side there are opportunities that can be seized. I’m pleased it’s going to make councils focus much more on business growth and enterprise. In our research on high streets a few years ago we saw that the majority of local authorities had no plan for their high street and many did not see this as falling under their responsibilities. Business growth and stimulating the local economy was often seen as an afterthought. That will have to change now. This is a game-changer in that councils will now be forced to take this more seriously – and so they should.
What it’s going to do is really shine a spotlight on the relationship between local politicians and business, which I don’t think is especially good.
The good councils will use this to stimulate business – it is a very powerful tool and they could significantly grow their high street. There are many entrepreneurs out there who do not see the bricks and mortar high street model as viable because of business rates. That could now change and if this is used wisely it could stimulate a lot of new business growth.
However, councils that have an unfavourable view of business and simply use this as a means to squeeze extra revenue from traders will end up losing out. If it becomes a blunt anti business instrument it’ll decimate local economies.
I think we’ll see some vary varied results and best practice will take some time to spread. My hope is that some councils will be really brave, identify areas that need a massive start up boost and take all small businesses out of paying business rates for two years. That could really have a big impact in turning run down areas around and bedding down an entrepreneurial culture in challenging areas.
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