Chancellor’s new initiative to scrap uniform business rates opens up questions

Andrew Wellens, Director in Business Rates at Bilfinger GVA in Bristol

“George Osborne’s announcement to devolve the setting of business rates back to local councils is certainly unexpected. The devil is in the detail, but the change in policy opens up two fundamental questions,” comments Andrew Wellens, Director in Business Rates, Bilfinger GVA in Bristol, following the Chancellor’s recent announcement.

The first question concerns the redistribution of income across England. “Currently,” says Andrew, “the uniform business rate broadly allows for income distribution back to the councils on a per capita basis. Where economies are strong and the RV pool high, council’s will be able to use business rates to increase income levels and/or stimulate new business migration.  However, given that the South West has one of the lowest average rateable values in England, unless there is some form of redistribution the region is likely to be a net loser.”

The second question involves business.

He continues, “If local councils use these new powers to offset cuts in central government funding, then business could suffer. If local councils in the region apply these new powers and increase the multiplier whilst councils in other areas of England that are net winners are able to reduce their rate, then it will ultimately affect the South West’s ability to attract business and stimulate growth.

“We wait to see what checks and balances will be introduced to temper these new powers. However, if questions are not answered on how to deal with adequate redistribution of wealth, and in doing so ensure business is not over taxed, then this decision could come back to haunt this government.