Expect to hear more in the coming days about changes to business rates and how this could be a spur to economic growth. The policy has the rare advantage of fitting into two of the coalition’s most favoured agendas – “growth” and “localism”.
A review was launched last October examining whether the £24bn of business rates collected each year could be kept locally. At present the money is collected by local authorities and sent to central government which then applies a complex redistribution formula and sends it back to the regions.
Ministers’ cunning wheeze is that if councils could keep the levy directly they would have a new incentive to oversee more economic growth in their neighbourhoods – because they would keep the extra cash. True.
But the complete localisation of business rates would prompt agonised complaints from scores of local authorities. Why? Because there are some such as Westminster which have few residents and lots of companies; they would have a huge financial windfall. Others, with large populations and few businesses, would lose out.
I’m told that a full localisation would mean 75 per cent of councils seeing no change, 5 per cent benefiting enormously and 20 per cent losing out. So officials and ministers are scrambling to find a way to incentivise councils via business rates while still redistributing between poor and rich areas. Good luck to them; but this seems a terribly tricky circle to square.
Jim Pickard
Kiran Stacey