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Business rates retention is unfair, pilot scheme leaders warn

Council leaders who are already piloting the government’s scheme to fully devolve business rates have labelled it “unfair” at a Communities and Local Government (CLG) Committee hearing.

Joe Anderson, mayor of Liverpool, Richard Paver, treasurer of the Greater Manchester Combined Authority, and Sharon Gregory, group accountant with LGSS finance, a public venture owned by Cambridgeshire and Northamptonshire county councils, said that problems with the reforms included inequality, difficulty calculating how much tax should be paid and the forthcoming business rates cuts.

Anderson said that the 100% business rates retention would lose £52m for Liverpool.

He said: “I am a big fan of all forms of devolution, including fiscal devolution, but I have always argued in terms of looking at the rate support grant and reductions, which has been iniquitous and unfair to local authorities - some have benefited and some have lost.

“We are glad to be involved in the pilot so that we can show how there is an unequal, one-size-doesn’t-fit-all approach.”

Council leaders have previously warned the CLG committee that not enough is known about the proposals and that they could leave councils with a lower business rates threshold worse off.

Paver also said that the government needed to release funds to ensure that northern and southern towns had an equal starting point.

However, he said the fact that both Manchester and the less economically active town of Rochdale had experienced business rates growth in 2015 was a sign that the scheme could work.

The leaders also expressed concerns about the business rates cuts announced in last month’s Budget.

Anderson said: “It was disappointing that the decision and the statement on small business rates were made in the way they were, without any involvement or discussion, especially with those engaging in the pilot.

“Clearly we all want small businesses to take off and grow, and that is part of what we should be encouraging and helping, however there is no question but that that will have an impact on the financial state of not just Liverpool but the whole city region. It is disappointing but, nevertheless, we have got to get on with it. We have just got to accept that that is the decision that has been made, but it is disappointing that it was made in the way that it was.”

Sharon Gregory added that “the appeals we are expecting to be generated from that revaluation potentially could significantly impact the baselines going forward for the 100% retention scheme”, as any new baselines get reset. She said this was a “quite big concern” for her.

The leaders also said that it was difficult to establish a measurement base to calculate how much tax should be paid.

Paver said: “Extracting information in a meaningful way is difficult. The rating list of the city council is about 24,000 hereditaments, which range from £30 million-plus at one end for the airport as a single hereditament to £5 or £10 at the bottom end for a car parking space somewhere. Trying to understand the numbers, the flows of money and the way the valuation office works has been a real problem. I think we are getting there.”