Significant changes to business rates announced

George Osborne, the Chancellor of the Exchequer, in his speech to the Conservative Party Conference announced significant changes to the business rates system - the uniform business rate across the country is to be abolished and instead of the revenues raised from this tax being transferred to Whitehall they will be redistributed to local authorities.

Rochdale-based business rates expert Paul Turner-Mitchell said "Any proposal would have to address the fact that this could exacerbate the current north south divide. The high value prosperous rateable values in the south would enable councils there to afford to reduce rates payable significantly whereas councils in the struggling north would need to raise rates poundage or levy more for projects to stand still unless there was a distribution away from some of London’s revenue".

Christian Spence, Head of Research & Policy at Greater Manchester Chamber of Commerce, said: “The Chancellor has announced what is arguably the largest single change to local government finance in 30 years.

"The abolition of the uniform business rate across the country means a reversion to the system that existed before 1990, where local authorities are able to set the tax rate on business property in their area independently.

"Also, instead of the revenues raised from this tax being transferred to Whitehall to be redistributed to local authorities, each will keep 100% of the business rates that they receive and the revenue support grant to local authorities will be abolished.

“All local authorities will receive the freedom to reduce the business rate multiplier in their area, and those with elected mayors will, with the support of businesses in their area, be able to add levies to support investment in infrastructure.

“Having worked on business rate reform in detail over the past year and more, this is a significant change, the details of which are not yet clear. This will increase incentives for local authorities to promote business growth in their area, but this could also have a significant impact on local authority revenues, particularly in areas of weaker or little economic growth.

"Businesses across the country will be fearful that they may be used as a cash cow by local authorities seeking to protect their currently declining revenues from central government. The business vote to approve any increases is a welcome concept, though we have as yet no detail on this proposal.

“This is a very large change to a complex system: the devil will be in the detail, which we look forward to reading hopefully very soon.”