Watch retailers could see changes to their business rates in the near future after Chancellor George Osborne this week paved the way for local councils to manage the funds directly, and “cut them as much as they like”.
Business rates – the perennial bugbear of the retail industry – are currently collected by councils who pass most of the money to the Treasury. It then provides councils with grants from the £26 billion that it receives every year through this process.
Moving forward, however, Osborne said that every council in the UK will keep the amount they raise from local business rates, with authorities free to reduce taxes if they believe it will attract employers and boost high streets.
Commentators have welcomed the move, although some critics point out that councils in deprived areas, where there are fewer successful businesses, could struggle to raise funds.
Speaking at the Conservative party conference in Manchester, Osborne said that scrapping the existing system would hand the power back to local authorities.
“Right now we have the merry go-round of clawing back local taxes into the Treasury and handing them out again in the form of a grant,” he said. “In my view, proud cities and counties should not be forced to come to national government with a begging bowl.
Osborne called the announcement the “biggest transfer of power to local government in living memory”, adding: “We’re going to allow local government to keep the rates they collect from business. That’s right, all £26 billion of business rates will be kept by councils instead of being sent up to Whitehall.”
Osborne admitted that the government currently collects more in business rates than it gives back in the main grant, so will therefore phase out the local government grant altogether.
“But we will also give councils extra power and responsibilities for running their communities,” he promised. “The established transfers will be there on day one, but thereafter, all the real growth in revenue will be yours to keep. So this is what our plan means – attract a business, and you attract more money. Regenerate a high street, and you’ll reap the benefits.”