Local control of £10bn stamp duty tax should be the next step in Government’s ‘devolution revolution’

Centre for Cities report offers the first in-depth analysis of plans to devolve control of business rates.

Press release published on 15 December 2015

A new report by the think tank Centre for Cities argues that for the Government’s devolution revolution to be successful over the long term, local leaders must be given more control over their own finances – including the power to retain stamp duty tax revenue, worth £10bn in 2014-15.

The report, ‘Beyond business rates: incentivising cities to grow’, supported by the Business Services Association (BSA), offers the first in-depth analysis of the Government’s plans to devolve control of business rates to local leaders. It argues that while this is a welcome step, the devolution of fiscal powers must go further in giving places real incentives to boost growth, in order to create a sustainable system of local government funding for the future.

To address this issue, the report calls for the devolution of land and property taxes, together with the responsibility for funding local housing benefit – arguing that this would offer local leaders more powers and sharper incentives to invest in key areas of economic growth such as housing and infrastructure, in the following ways:

  • Giving places more control over revenue and how it is spent – devolving land and property taxes, on top of business rates, would give local authorities responsibility for 41% of their spending (based on 2014/15 figures), compared to just 19% in the current system of funding – enabling local leaders to take spending decisions which better meet the needs of their economies. (This would still represent a relatively small proportion of local government spending compared to in other countries – local taxes account for 48% of local government spending in France, and 64% in New York).
  • Creating stronger incentives for places to generate more revenue for the overall local government funding pot – the report shows that while devolving land and property taxes will increase variation and disparities in revenue between different places, it will also increase the size of the overall local government funding pot, by giving places more control over a growing tax base and encouraging cities with strong economies to grow faster – meaning there will be more money in the sector that can be redistributed to places with weaker economies.
  • Generating more income tax revenue for the national exchequer through boosting growth – there is a strong correlation between land and property taxes and other tax bases such as income tax, and so incentivising places to boost growth by devolving land and property taxes would also generate more revenue for the national finances. The report shows that if local government were incentivised to achieve 1% growth in land and property taxes though devolution, an extra £1 billion in income tax would be generated annually (based on 2014-15 data)

Commenting on the findings, Alexandra Jones, Chief Executive of the Centre for Cities said:

“For places across the country to prosper in the coming years, local leaders must have the right financial powers and incentives to support growth in their local economies. With a new funding system in which places are expected to raise more revenue themselves, some will argue that the focus should be on redistribution from relatively prosperous areas to those with weaker economies. However, this report shows the best way of generating more revenue for places with low demand is to increase the overall pot of local government funding – by giving places strong incentives to really drive growth in their local economies.

“The Government’s move to devolve business rates was an important step in the right direction, but doesn’t go far enough. Devolving land and property taxes would encourage places with weaker economies to develop their tax base, while also giving places with high economic demand more incentives to take the often difficult decisions needed to invest in infrastructure and new housing.

“This should be the next step in the Government’s devolution agenda, to ensure that local leaders across the country have the powers and responsibilities they need to help their local economies thrive in the years to come.”


Melanie Maxwell Scott, Director of Policy at the BSA, said:

“We are pleased to sponsor this report from Centre for Cities to help inform the vital debate taking place on devolution. The BSA is playing a full part in these discussions, representing as we do a decentralised industry which contributes jobs and prosperity to every part of the UK.  Our members work in partnership with authorities to deliver projects right across the country and so particularly welcome any moves to commission services closer to the people who use them.”




For more information, or to set up an interview with Alexandra Jones, please contact Brian Semple, Press Manager for the Centre for Cities, on 0207 803 4316 / 07595 439 638 or b.semple@centreforcities.org


Centre for Cities is a research and policy institute, dedicated to improving the economic success of UK cities. We are a charity that works with cities, business and Whitehall to develop and implement policy that supports the performance of urban economies. We do this through impartial research and knowledge exchange. For more information, please visit centreforcities.org

The Business Services Association is a policy and research organisation. It brings together all those who are interested in delivering efficient, flexible and cost-effective service and infrastructure projects across the private and public sectors. More information can be found at www.bsa-org.com.

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