Business rates shake-up a potential ‘disaster’

George Osborne at the Conservative Party Conference
George Osborne at the Conservative Party Conference

Local authorities will be allowed to keep all of the revenue they raise from business rates under a radical proposal announced by Chancellor George Osborne.

The move will see councils take full control over the £26bn raised each year - some £245m-a-year in Sheffield.

At present councils receive 50 per cent of what they collect, with the rest taken by central government.

Mr Osborne told the Conservative party conference in Manchester that the move will be the “…biggest transfer of power to our local government in living memory”.

He said his government would abolish the uniform business rate – the single, national tax imposed on every council – meaning they could cut business rates “to win new jobs and generate wealth.”

But business rates expert, Paul Turner-Mitchell, warned it could be a “disaster” for companies in the North if it meant cash-strapped councils were tempted to raise rates to pay for services.

“In contrast, some councils in the South will receive far more than they need and will be able to cut business rates.”

Westminster City Council - population 227,000 - collects almost £2bn-a-year in business rates, more than Birmingham, Manchester, Sheffield, Liverpool and Bristol combined, he added.

Northern businesses were already suffering due to a two-year delay in the revaluation of business rates announced by the Chancellor this year.

It meant northern firms were paying rates based on old property values - which have fallen dramatically in the North - while the reverse was true in the South.

He added: “So the North is effectively subsidising the South.”

Chris Hobson, director of policy at East Midlands Chamber, said: “This has the potential to be a game-changer.

“However, the details are critically important.

“At a time when the Chancellor is promoting a national rebalancing, Government needs to ensure London isn’t the major beneficiary.”