Plan to localise business rates gains mixed reaction

PLANS announced by Deputy Prime Minister Nick Clegg to boost localism by letting local councils keep the business rates they receive gained a mixed reaction in the North West.

The government’s proposal is to give local councils the ability to keep revenues and the power to borrow against future income to devote to projects which would drive business growth and eventual generate more revenues, lessening local authorities’ reliance on Whitehall.

While Greater Manchester’s Chamber of Commerce gave the plans a cautious welcome, city leaders in Liverpool slammed the idea.

Cllr Joe Anderson, the Leader of Liverpool City Council’s Labour-controlled council argued that the plan could cost Liverpool City Council £112m a year in lost revenues, while more affluent areas like Westminster with a stronger business base would be set for a windfall of £1bn currently contributed to a national pool.

Cllr Anderson said: “We’ve already seen deep cuts to our council’s funding from the Tory-led government.

“Unless they spell out clearly how they will ensure we don’t lose out, we could be in line for yet another devastating blow to local services.”

Chris Fletcher, director of policy at Greater Manchester Chamber of Commerce, said: “This is an issue that comes around every few years and one that we have done some work on already.

“Whilst on the face of it, taxes raised locally and spent locally sounds sensible, there has to be a mechanism in place that allows businesses – the ones who are paying the tax – to have a say in where and how the money is spent.

“If the money raised is ring-fenced and returned for the benefit of local business to allow them to grow or put in new infrastructure that enables jobs growth and attracts new business, then there will be a level of support for this.

“The fear is that it will be used to plug totally unrelated funding gaps in local budgets and any possible benefit will be frittered away.

“Before these plans get the thumbs up from business the above issues have to be addressed otherwise they will prove deeply unpopular. This is a major issue that will affect all businesses and we will be consulting our members.”

Richard Wackett, head of rating at property consultancy Lambert Smith Hampton, agreed with Cllr Anderson that the scheme would only work if there was some method of redistributing money from wealthy areas to poorer ones.

“The temptation would be irresistible for a rich borough like Westminster to retain the greater share of its own collection at the expense of some of the less wealthy areas in the north who, in turn, would seek to recover more through a higher business rate multiple.”

However, Andrew Gosnay at Manchester-based law firm Pannone, believed that it could help areas to develop funding streams for stalled infrastructure and investment projects at a time when other sources of grant funding have dried up:

“Ringfencing business rate income stream and assigning parts of that to funders of specific projects will release private sector funds to leverage public sector investment, boosting much-needed urban regeneration schemes in the North West,” he said.

“If properly implemented, it should help release the logjam in financing capital projects such as schools, social housing and transport infrastructure.

“Several schemes in the north west such as £700m Tithebarn project (above) to regenerate Preston town centre are through the planning process and well into site assembly but need the finance in place to start work and create jobs.”