Business rates, infrastructure and skills: the big issues for cities from Budget 2017

Alexandra Jones’ take on a budget in which UK cities were lower on the agenda than in recent years

Much of today’s Budget statement was focused on social care, the self-employed and business rates – with cities much less at the forefront than they have been in previous years.

Nonetheless, there were a few announcements which will affect cities across the country, including the Chancellor’s commitments to boosting productivity, improving skills and infrastructure to boost economic growth, and explicit mentions of the importance of ‘inclusive’ growth. The £23bn Productivity Fund announced in the Autumn Statement is starting to be allocated, with £300m committed to science and innovation research talent, £270m to robots, driverless cars and biotech, £16m to a 5G mobile technology hub and £200m to fibre broadband.

The Statement also featured infrastructure funding for roads in the Northern Powerhouse and Midlands Engine, as well as a fund to tackle urban congestion, and there was also a welcome emphasis on technical skills. The creation of T-Levels to even out the playing field with academic qualifications is an interesting innovation, and the next challenge for the Government will be to work closely with education providers and employers to ensure they are meaningful and useful in the workplace.

Devolution and regions featured but only briefly, with commitments to funding for the devolved regions, the announcement of a Midlands Engine strategy to be published tomorrow, and moves towards further devolved powers for London. It was good to hear mayors mentioned, but overall devolution made up a much less significant part of the Budget than in 2015 or 2016.

However, it is Philip Hammond’s announcements on business rates and social care that are likely to have the biggest impact on cities. The Chancellor addressed the two issues separately in the Budget, despite the fact that they are strongly linked – with business rates expected to fund more and more local authority services, as the Revenue Support Grant is phased out in the run-up to 100% local retention of business rates in 2020.

Crucially, the announcement of business rate reliefs – including a commitment to a £435m fund for firms affected by increases in business rates, discounts for pubs and caps for businesses losing existing reliefs – will have differing impacts up and down the country. Our analysis suggests that this will benefit businesses in London and the South East (which is welcome, as many face incredibly high increases) – but may slow the introduction of lower business rates in more deprived areas, which is less good news.

The Chancellor also committed to increasing the frequency of business rate valuations, something we have long called for. However, his pledge to do so sometime before the next scheduled revaluation, which is five years away, represents a missed opportunity; we think there needs to be movement on this much sooner. Despite hints at more fundamental business rates reform, there was no information about whether the Government would move from its unhelpful fixed yield towards a much fairer fixed rate. We’ll continue to argue for this in the months ahead, as well as looking at the implications of business rate changes for local authority finances up and down the country, and their ability to fund social care.

Ultimately, this was a budget in which the Chancellor outlined broad commitments – to make taxes fairer, to help ‘just-about-managing’ families, and to tackle the deficit – but one that was essentially short on details and specific policies. Putting meat on the bones of these pledges will be crucial if the Government is to realise its vision of a “stronger, fairer, better Britain”, and to act on its promise to build an economy that works for all.

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