Like most government announcements, once the rhetoric of delivery has subsided, the substance of the content starts to emerge. Beverley McDougall, Director of Business Rates at Lambert Smith Hampton, separates spin from substance.
Following the Chancellor’s announcement on 5 October 2015 that the Uniform Business Rate (UBR) multiplier is to be abolished and local government is to retain 100% of local taxes there are more questions being posed than answers. Both local government and business are right to view the proposals with a degree of caution until there is further understanding of the mechanisms and complexities that this transfer of funding will bring.
The Autumn Statement 2015 contained in the “Blue Book” reiterated the Chancellor's pledge but failed to clarify any of the questions, other than stating that there will be consultation in 2016 on how the system of local government finance will change to pave the way for 100% business rates retention.
The Government is committed to retaining fiscal neutrality. With the anticipated polarisation in rateable values between the North and South of England resulting from the 2017 revaluation, the replacement to UBR could necessitate some politically unacceptable, geographic spikes and dips to retain the neutral base which, in turn, will engender much uncertainty - or is it likely to be a UBR rose by another name?
Here are the facts:
- By the end of Parliament, local government will be allowed to retain 100% of local taxes including all £26bn from business rates to spend on local government services.
- UBR will be abolished and local government will be given the power to cut business rates and boost enterprise and economic activity in their areas.
- Local areas which successfully promote growth and attract business will keep all benefits from business rates revenue.
- The core grant from Whitehall will be phased out with local government taking on new responsibilities by 2020.
- Those with citywide elected mayors will be given the power to increase rates for spending on local infrastructure as long as they win the support of local business. This will be limited to a cap likely to be set at 2p on the rate.
- Top up and tariffs under the current business rate retention scheme will be extended to protect higher risk authorities with lower income levels.
- The reforms have to remain fiscally neutral and local government will need to contribute to fiscal consolidation over this Parliament.
Key dates to remember:
- 4 January 2016 - DCLG consultation on business rates appeal process closes
- 16 March 2016 - Summer Budget
- 30 September 2016 - The Draft 2017 Rating List is published ONLINE only
- 1 April 2017 - The new Rating List comes into effect
- 2020 - Transfer of powers over Business Rates
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