“There has been a trend for a few time in the United States of America to grow power in the regions and a few major U.S. cities now have considerable autonomy in their areas”.
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He called it the “biggest transfer of power to local government” in recent history.
The reform was announced in the Chancellor’s speech to the Conservative annual conference in Manchester, as he claimed the mantle for the Tories as “the builders” with a plan for a prosperous future for working people. Attract a business, and you attract more money.
Under the current system, which dates back to 1988, business rates are collected by councils and handed straight to central Government, which then re-distributes money back out under a complicated formula mainly based on population.
Christian Spence, Head of Research & Policy at Greater Manchester Chamber of Commerce, said: “The Chancellor has today announced what is arguably the largest single change to local government finance in 30 years”. They will be accountable for their choices and whether their choices result in more or fewer windows on their high streets being boarded up.
The Federation of Small Businesses also gave a cautious welcome.
In addition directly elected mayors, including Mayor Johnson, will be able to add a “premium” to business rate levels to pay for new infrastructure projects such as the proposed Crossrail 2 rail link.
Jonathan Carr-West, chief executive at the LGiU said: ‘The chancellor’s devolution revolution must be a locally-led process.
Since 2013, a few councils in Worcestershire have been working under a “pool arrangement” where they only return 50 per cent of the rates they collect, and keep the rest in the county. The Conservatives under Margaret Thatcher stripped local authorities of their powers over business tax in 1990 due to mistrust of Labour-dominated authorities. “Not only will it create better incentives for councils to encourage local economic growth, it will also instill discipline as their decisions will affect where businesses locate and the wider prosperity of the area”. “As ever the devil will be in the detail but we are confident that any system which rewards growth and ambition will be beneficial to Slough”.
‘While this is good news for councils and businesses, local authorities will face nearly £10bn of cost pressures by 2020 so we will now seek to work with government about how this proposal can be introduced more quickly.
“Businesses have been clear that they want enterprise to be put at the heart of the devolution agenda, and the Chancellor appears to be doing just that”. Rates are charged regardless of whether a business is profitable or not, unlike corporation tax.
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Central government now takes in around £11.5 billion in business rates and redistributes £9.4 billion in grants to councils.
