Councils that receive money from business rate redistribution have reacted with alarm to chancellor George Osborne’s plan to abolish this system and allow councils to retain all this income locally.
Mr Osborne told the Conservative party conference that councils would become free to retain all business rates income instead of remitting part to the Treasury for national redistribution.
Nottingham City Council deputy leader Graham Chapman (Lab) said the chancellor was acting like “Robin Hood in reverse”.
He said affluent areas in London and the south-east were more easily able to attract businesses and the policy would “leave poorer cities in the Midlands and the north, which rely more heavily on the revenue support grant, struggling even more.
“Under this government we have seen a process of transferring money from the poor to the rich, like Robin Hood in reverse.”
South Tyneside MBC leader Iain Malcolm (Lab) (pictured) welcomed the principle of local control over business rates.
But he added that the reform alone would not “address inequalities in different areas – especially those with a low tax base where independent studies have previously highlighted the need for some form of reallocation of resources to reflect local circumstances”.
Blackpool Council leader Simon Blackburn (Lab) said: “I am very concerned – as are the leaders of all councils with low tax bases – that this policy does not see the very rapid withdrawal or abolition of the £19m per annum [business rate] top-up grant that we currently receive – the consequences of which could be very damaging indeed and would effectively redistribute wealth from poorer authorities like Blackpool to wealthier authorities.”
Leeds City Council leader Judith Blake (Lab) said welcomed the idea of more resources and decision-making powers being devolved but said the change to business rates “creates further uncertainty in terms of financial planning, and there’s also a concern that if the revenue support grant is phased out quicker than the income from business rates grows, that will just be another hit on council budgets”.
She added: “Another outcome which needs to be avoided with this change is that it benefits better-off areas and only serves to widen the north-south economic divide.”
Not all Labour-controlled councils were sceptical, however.
Telford & Wrekin BC leader Kuldip Sahota said 100% retention of business rates was part of the council’s devolution bid tabled last month “and it is positive the chancellor has listened to us, however, as ever with these things, the devil will be in the detail”.
Cllr Sahota said there were “too many unknowns at this stage” to be certain, but he said the change would be positive.
Conservative-led councils reacted with enthusiasm.
Westminster City Council leader Philippa Roe (Con) said: “We hugely welcome the chancellor’s ambition and boldness and we are looking forward to continuing to work closely with the government and the mayor of London to ensure that the finances are devolved to the appropriate level to ensure that this radical change truly delivers here in the capital.”
City of York Council leader Chris Steward (Con) said “This is excellent news for York, which is well-placed to benefit from its healthy city economy.
“The system of the government of the day collecting local taxes and then recycling the same money back to local councils – minus a substantial ‘handling charge’ – is both wasteful and paternalistic.”