Councils will employ their new powers over business rates to “nick” business from abroad instead of each other, the chair of the Local Government Association has said.
Speaking to LGC at the Conservative Party conference in Manchester, Lord Porter said he had been surprised by the chancellor’s announcement that councils are to retain 100% of business rates from 2020.
“The task now is to make sure we take advantage of it and attract businesses in from abroad or new business start-ups by offering lower rates for particular sectors or new businesses,” he said.
“The real test is can you go and nick a load of business from abroad, from places like France where the bureaucracy is a nightmare,” Lord Porter added.
“We have already got an advantage on the bureaucracy, now we have got an advantage of the finance as well.”
He rejected suggestions by critics that the freedom to reduce business rates could lead to a ‘race to the bottom’ as councils compete to offer the lowest rates.
“Local government is much more mature than it was in the 1970s [when it last had power to set business rates]. There is no point slashing and burning your rate because you undermine services.”
Lord Porter, who is also leader of South Holland DC, acknowledged that two-tier areas would have to work out a new distribution of business rates to reflect the loss of government grant.
Currently, county councils retain 20% of the local share of business rates with districts pocketing 80%.
Lord Porter called on areas to negotiate the split themselves, adding that county-wide business rate pools could be created to cushion areas from sudden falls in business rates and deter areas from poaching “businesses from next door”.
“If they can work it out themselves, it will show government a level of maturity,” he added.
“It’s one of those defining moments; if they can’t do it then government won’t look to [devolve] much more.”
The LGA has been lobbying to retain a greater share of business rates for the past few years.
Lord Porter told LGC the LGA would work with ministers to develop an ‘equalisation process’ to ensure areas with low business rates income did not lose out.
The LGA would seek a national process not a sub-regional one, as proposed by the Independent Local Government Finance Commission this year.
The association would also continue to push for the power to increase business rates to be devolved to all councils.
Currently, this has only been promised to combined authorities with directly elected mayors.