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Business rates reform: We will balance the risks and rewards

Business rates cover
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It’s not often that the detail of local government finance takes centre stage at a major speech at a political party conference.

But by putting the devolution revolution at the heart of his address to the Conservative Party conference, the Chancellor showed the commitment that both he and the government have to giving more control to councils and combined authorities; putting power closer to local people; and providing real incentives for local economic growth.

Marcus Jones Large

Marcus Jones Large

Marcus Jones

In doing so, they set out a blueprint for devolution not only to build the northern powerhouse, but to rebalance and grow the economy right across the country.

The landmark deals we have done with Greater Manchester, Cornwall and more recently with the Sheffield City Region have shown that the government is willing to listen to local areas that want to improve local services, support innovation and business growth, and strengthen local accountability through a new directly elected mayor. The vision set out by the Chancellor goes further; a major reshaping of the relationship between central and local government, and the biggest transfer of power to our local government in living memory.

First, 100% business rate retention for local government by the end of the Parliament. That is all £26bn staying within local government to support local government services rather than half being sent to Whitehall.

Secondly, no national tax on local growth. We will abolish the levy on growth in business rates so that all local areas and communities see the direct benefit of business rate growth in their budgets and local services. Attract a business, and you attract more money. Regenerate a high street, and you regenerate your revenue. Create more jobs, and you create more cash in your coffers.

The reforms are not straightforward and we want to talk to the sector

Thirdly, an abolition of the uniform business rate by allowing, for the first time since 1990, any local area to cut business rates to support local firms and local people. For those areas with an elected metro mayor, there is the power to increase business rates in order to fund vital infrastructure investment, so long as this has the support of local business leaders through the local enterprise partnership. This power will also be subject to a cap.

Alongside these reforms, we plan to abolish the revenue support grant and decentralise a number of new responsibilities to give councils a greater role in supporting their local communities. This will help ensure that the reforms are fiscally neutral as well as continuing the transfer of powers from Whitehall to town hall.

The reforms announced to the business rates system, out of necessity, are not straightforward and we want to speak to the sector to ensure we get this right.

Redistribution between councils will remain important, to reflect the different need of different authorities. In developing the reforms we will consider the responsiveness of the system to future changes in relative needs and resources, whilst maintaining a strong incentive for authorities to grow their local economies. We will also consider how risk and business rates volatility can be better managed and how to protect authorities against significant falls in income.

It is interesting to note that based on local authority data, it is the east midlands and Yorkshire and the Humber, not London and the south east, which are forecast to see the largest increases in business rates as a proportion of spending this year.

Of course, local government will also need to continue to make a contribution to fiscal consolidation in the spending review, but we want to make sure that as we make these savings we use this moment to undertake far-reaching reform.

This amounts to a fundamental reform of local government, devolving control over tax revenues to a local level and giving local areas greater flexibility to attract and support businesses, fund infrastructure investment and create jobs. I look forward to working with you on how we put this into practice and keep the devolution revolution going strong.

Marcus Jones, local government minister




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