WIREDGOV

More than two-thirds of UK businesses agree that councils should be able to set business rates locally in discussion with local businesses, a national poll revealed yesterday.

The Local Government Association (LGA), which represents councils in England and Wales, is calling for councils to be devolved powers to set business rates in their local area.

Polling for the LGA, by ComRes, found 68 per cent of businesses across the UK agree that business rates should be set locally in discussion with local businesses.

Just seven per cent of businesses surveyed disagreed.

Currently, government sets the business rates charge and keeps half of business rate income and growth – extra income earned from new business premises – which it redistributes to local authorities in grants.

This hugely restricts the ability of councils to reduce business rates for the types of shops and businesses that residents want in their high streets and neighbourhoods, help new firms open and keep small businesses alive. 

Retaining income and growth from business rates would ensure rate reduction and discount schemes – already up and running in some areas – could benefit thousands more business nationwide.

The poll also found almost half (47 per cent) of UK businesses are concerned about the impact on their business of cuts to council services, such as road maintenance, planning and licensing, over the next few years.

Greater powers and flexibility over business rates would free councils to cut rates to encourage growth or raise rates to fund investment in the local economy or running of these other vital services, under pressure from 40 per cent real terms reduction in core government grant funding since 2010.

Support for locally-set business rates is broad across the businesses surveyed, notably among companies in the manufacturing (73 per cent) and service industry (72 per cent).

It is particularly high among businesses in the south-east (83 per cent), the north-east and Yorkshire & Humber (76 per cent) and in the east Midlands and east Anglia (65 per cent).

The LGA is calling on the Chancellor to outline full details of the business rates review announced last year and heed calls from councils and businesses by committing to devolving control of business rates down to local government as part of next month's Budget.

LGA Chair Cllr David Sparks said:

"This polling shows that businesses up and down the country and across different industries have lost faith in the current system of business rates and agree that it should be a local tax set by local areas.

"The current system of business rates is not fit for the 21st century and is preventing councils from supporting small businesses and boosting high streets as much as they would like.

"Councils could do much more to support small businesses if we were given the freedom and finance to set rates and discounts locally. We could also invest in infrastructure and vital local services if all of the money a business paid was retained by local government.

"Councils and the majority of businesses agree that it is essential that any reform of business rates must make it a truly local tax which gives them freedom to work together to boost growth and ensure local economies and businesses thrive.

"The Government has committed to a long overdue review of business rates and councils are calling on them to publish its Terms of Reference as soon as possible. The LGA looks forward to playing a full part in the review."

Notes to editors

1. ComRes interviewed 500 UK businesses over the telephone between February 2 and February 12, 2015. Data were weighted to be representative of all UK businesses with an annual turnover of more than £50,000.

1. The LGA has set out five key areas for long-overdue reform urging government to:

• Devolve the setting of rates and discounts to local authorities who would be able to use this power to reduce bills to help support local and independent businesses.
• Commit to 100 per cent of business rates income, including growth, being retained by local government. Currently 50 per cent of business rate income is paid to the Treasury as is half of the extra income raised when new businesses open. They use this to pay grants to local authorities.
• Establish an independent body for the distribution of funding to councils. This would take the politics out of financial distribution and would redistribute business rates income across the country in a way which would ensure those areas with less business activity do not lose out.
• Work with local government to minimise business rates avoidance.
• Reform the appeals system. The number of appeals and time they take to resolve is major problem which restricts the ability of local authorities to reinvest the money to support business. According to most recent government data there are more than 130,000 outstanding appeals from businesses over the rates they pay.

Overhaul business rates to help small firms and save high streets

2. Councils estimate that about £22.4 billion will be collected in business rates in 2014/15. This is after accounting for costs of collection and about £347 million expected discretionary relief

3. There are nearly 1.8 million properties liable for business rates in England. Business rates account for around one-fifth of local government income.

Contact

Greg Burns, Senior Media Relations Officer
Local Government Association
Telephone: 020 7664 3184
Email: greg.burns@local.gov.uk
Media Office (for out-of-hours contact): 020 7664 3333
Local Government House, Smith Square, London SW1P 3HZ