Local business rates expert voices concern over effect of devolution on business rates

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Paul Turner-Mitchell

The Chancellor's 'Devolution Revolution', could increase business rates by as much as £55million a year across Greater Manchester, warns local business rates expert, Paul Turner-Mitchell.

In George Osborne's speech to the Conservative Party Conference, as part of his 'devolution revolution', he indicated that those areas with an elected Mayor would be given powers to levy business rates to fund infrastructure.

Greater Manchester will go to the polls in 2017 to elect its Mayor, a position which has been agreed between the George Osborne and Greater Manchester's 10 council leaders as part of the Government's plan for the creation of a Northern Powerhouse.

The Treasury has indicated that such levy is likely to be limited to two pence in the pound.

The move mirrors those in London when, in April 2010, the Mayor of London introduced a levy of 2p on non-domestic properties to help pay for Crossrail.

Mr Turner-Mitchell says that there are some 100,000 business properties across Greater Manchester liable to pay business rates with combined Rateable Values total £2.758billion.

Whilst the devil will be in the detail, and whether thresholds will apply to those having to contribute to the levy, potentially, such a move could add an extra £55million to the annual business rates bill for Greater Manchester when the Chancellor's plans come into force in 2020 says Mr Turner-Mitchell.

Mr Turner-Mitchell said: "Property taxes in the UK, through business rates, are the highest of any European, G7, G20 or OECD country. The OBR, in Osborne's emergency Summer Budget, project a near on £5bn increase over the next 5 years."

He added: "Businesses, over the last few years, have been lobbying hard for meaningful reform of rates and will be deeply concerned with any powers given to increase the current damaging yield".

Whilst the Chancellor also announced plans for councils across the country to lower business rates, these powers have been force since April 2012 when Clause 69 of the Localism Act gave councils the power to discount rates.

The ability of councils to reduce rates across the board for all their ratepayers is already being questioned. Mr Turner-Mitchell says under 100% business rate retention, councils like Westminster and City of London will have spending power of £7,945 and £100,362 per resident compared with just £282 in Rochdale and £617 in Manchester.