All councils should be able to vary business rates both up and down, the Local Government Association has said in response to the chancellor’s proposals to reform the system.
George Osborne has said that while councils would become free to reduce rates, powers to impose an increase for financing infrastructure projects, capped at 2% would be available only to city region mayors who enjoyed the support of their local enterprise partnerships.
LGA chair Lord Porter (Con) said: “We would expect measures to ensure local areas with less ability to generate business rates income do not suffer as a result of these changes and all councils are also given leeway to vary business rates up as well as down.”
He said councils already had to fund half of all business rates refunds but would by 2020 be liable for the whole cost under the proposed system.
“This makes reform of the appeals system even more urgent to protect councils from the growing and costly risk and appeals and ensure businesses are happy with what they pay,” Cllr Porter said.
He said the chancellor’s announcement showed “the government has listened to the arguments set out by local government”.
“The LGA has long-argued that the current system of business rates needed reform so councils could effectively support small businesses and boost high streets,” he added.
“With greater local control, councils will have flexibility to reduce business rates for the types of shops and businesses that residents want in their high streets and neighbourhoods.”
Councils faced almost £10bn of cost pressures by 2020, “so we will now seek to work with government about how this proposal can be introduced more quickly”, Cllr Porter added.
The County Councils Network objected to the chancellor’s proposal to restrict the power to increase rates to city mayors.
Its finance spokesperson David Borrow (Lab) said: “If local areas are to realise the full benefits of the new system, they must have the tools to respond to local business and community needs.
“This includes the powers to reduce rates and attract more business, but equally must also include powers to raise funds for vital infrastructure projects which he proposes to restrict to city mayors.
“The chancellor has today outlined the importance of major infrastructure to the nation and we must allow all areas the ability to be part of this.”
Cllr Borrow welcomed the proposed new powers over business rates but warned that any new system “must maintain a certain level of national redistribution to enable reinvestment in growth in all areas and offer protection from the shocks and cycles of the economy”.
Wandsworth LBC chief executive Paul Martin, finance spokesperson for the Society of Local Authority Chief Executives and Senior Managers, welcomed the change but warned: “Great care will need to be taken over the detail of the transition. In particular, during a period of sharp reductions in grant, it will be essential to ensure that no local authority finds itself in a more adverse financial situation as a consequence of this change.”