Latest Public Sector News

11.11.14

LGA calls for chancellor to devolve control of business rates

The Local Government Association has called for the chancellor to devolve control of business rates to councils in a bid to “help small firms and save high streets”.

Councils are concerned that many of the small firms and businesses that do most of their trade on the high street rather than online are unfairly penalised by business rates in their current form.

Councils, responsible for collecting business rates, are restricted in their ability to introduce local discounts, according to the LGA, as the government sets the change keeps half of the income, as well as any growth income.

The LGA wants to see business rates set by local government and have them retain the growth income.

They are urging George Osborne to commit to devolving control of business rates in next month's Autumn Statement.

The LGA believe that with greater local control, councils would have more flexibility to reduce business rates for the types of shops and businesses that residents want in their high streets and neighbourhoods.

“Locally decided policies could include start-up leases for new businesses or rate relief for firms which use local suppliers. Such schemes operate in some areas already but could benefit thousands more businesses nationwide if business rate income was kept by local government,” the LGA said in a statement.

They are also calling for government to explore the potential for linking business rates to turn-over and e-commerce as part of a wider package of reforms to make business rates fairer for business and local areas.

Cllr David Sparks, chair of the LGA, said: "We need a system of local business taxation which is fit for the 21st century, which supports the areas in which companies operate and which helps, rather than hinders, business and the growth of our economy.

"The current system is failing to do that. Councils can't support their local businesses as much as they would like to. There are many areas in which local authorities have been successful in helping new firms to open and keep small businesses alive, but in reality we are working with one hand tied behind our backs.

"The money which a business pays should be retained by local government to invest in the vital local services, all of which help local businesses either directly or indirectly.

"We need to remove Whitehall's hands from the business rate purse and find a fairer way to invest the taxes paid by business so that areas with growing economies feel the benefit in a way which does not come at the expense of those parts of the country where business is less buoyant.

"Government should work with businesses and councils to go back to the drawing board on business rates.

"The idea that the local taxes paid by business should be based solely on the size of a building predates the English Civil War. In a world where business and retail is increasingly happening online, a fundamental rethink is clearly long overdue."

(Image: Licensed under Creative Commons, c. Adam Tinworth)

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