Important technical details need to be addressed, but we mustn’t lose sight of the bigger picture.
The announcement that business rate revenues will be fully devolved to local government come 2019-20 has thrown into sharp focus flaws in the current system, which will be amplified by devolving the tax as it currently stands.
For example, money tied up in appeals (i.e. by organisations questioning the level of business rates they are required to pay) risks outweighing any benefits of devolution. Feedback to the Local Government Association from local Treasurers shows that up to 25 per cent of their business rates tax base is subject to appeal at any one time, with authorities in London, Birmingham, Manchester, Leeds, Bristol and Liverpool among those with the highest number of appeals currently outstanding. As a result, fixing the appeals process is high up on the list of concerns of both local government and businesses, and something which the national government is currently consulting on.
More regular valuations and other measures to make the system more responsive to changes in local economic conditions (such as those outlined in our recent report Beyond Business Rates) would also go some way towards reducing the needs for appeals in the first place, and making the current devolution offer on the table work better.
However, beyond the technical details of the implementation of the tax itself, the devolution of business rates raises much broader questions about the changing relationship between central and local government (especially in the context of reduced grant funding to local authorities), and what this means for the role of cities in attracting investment and delivering key services. The breadth of debate was reflected in a recent roundtable held to discuss our Beyond Business Rates report. Some of the big issues that came up included:
As the model for a devolved system is worked through and legislation is drafted over the next year, the technical details will need to be resolved. This will be a key part of our work at the Centre for Cities, and we will be looking in particular at what devolved model can strike a balance between delivering a significant growth incentives, and redistributing funds to those areas that need it.
But these details should not be at the expense of addressing the broader questions that the reform raises about the role we expect local government to play in delivering public services and supporting economic growth – including working more closely with the businesses that fuel that growth in local economies.
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