A House of Commons report into the Government’s proposals for local authorities to retain 100% of business rates revenues has exposed fundamental flaws, unanswered questions and gaping holes in the policy.
The report, published today by the Communities and Local Government Select Committee, looks into the feasibility of the policy, unveiled at the 2015 Conservative Party Conference by the George Osborne, of allowing local authorities to set their own uniform business rate (UBR) and retain all of the revenue generated.
Among the issues still to be resolved uncovered by the report are:
• Local authorities having to shoulder the risk of lost income from appeals, something outside their control
• No detail about a redistribution mechanism, without which there is a massive risk of divergence between ‘have’ and ‘have not’ local authorities
• Any detail about how frequently the system should be ‘reset’, and how the risk of stymieing development in the run-up to a reset will be overcome
Jerry Schurder, head of business rates at Gerald Eve, said: “More than anything, this report highlights the lack of detailed thought and planning that has gone into this policy, giving the impression of a headline-grabbing announcement welcomed initially by local government and designed to shift responsibility for business rates away from No.11 and onto local authorities.
“Since the policy was first announced, local authorities have voiced their concerns at the worrying absence of detail, specifically measures that need to be introduced to ensure some level of redistribution of revenues and to cover the risk of appeals reducing rates receipts. Without these in place, it becomes simply impossible for any local authority to properly budget for expenditure and to resource delivery of public services, and yet the silence from central Government is deafening.
“The lack of further information increasingly makes it look like a deliberate ploy on the part of the Chancellor to offload an issue that had become a thorn in his side and a political embarrassment, namely the onerous level of business rates and the need for systemic reform.
“Placing greater responsibility into the hands of local authorities isn’t necessarily a bad policy, but it can only work if the right support measures are put in place by central Government. The report from this committee – which includes six MPs from the Chancellor’s own party – sadly testifies to the lack of progress in this area and the huge amount of work still to be done if an effective policy is to be enacted before the end of the Parliament.”