Business rates and local government

The unexpected reform in the Chancellor’s speech to the Conservative conference was his proposal on business rates. He has offered to local government the transfer of all business rate revenue. This £26 billion a year would replace all the current grant income Councils receive from central government.

The reform will be complex. In order to make it work the Treasury will need to identify additional spending areas to transfer to local government, as business rate revenue exceeds grants. These will need to be agreed with Councils and the necessary arrangements put in place for them to run this extra spending.

The Treasury will wish to keep an overall limit on the level of business rates. They were transferred to central government for that very reason, to prevent local Councils trying to extract too much from business, which can work in the short term but creates longer term problems as business leaves a high tax area or fails to come to invest there.

The Treasury will also need to provide a means of sending some of the business rate money collected in a successful and prosperous area to poorer parts of the country. The City of London is the most extreme example, with a huge business rate income but few overnight residents to spend the tax on. As now there will need to be some formula for evening out the money, and a  new mechanism to claw it back from Councils in receipt of it.

Areas with elected Mayors will be able to increase the tax for better infrastructure. This power will need careful use, as business is more worried in the short term by the level of the tax than by what the tax will be spent on.


  1. Lifelogic
    October 13, 2015

    It sounds like pointless change for changes sake. The money would almost certainly be better spent by the businesses than the government the last thing we need is even more taxes on the productive or any way in which taxes can be increased even further.

    The big con of Osborne’s budget is the claim that people will be better off overall. Suggesting he is making tax reductions when it is actually a massive tax increase. This is done by his raising of the minimum wage and pretending this is a gift from government. But businesses who will be forced to pay low earner more (thus paying more NI and tax too) will clearly have less to pay to higher earners, to invest in more plant, expansion & training. Many will just reduce staff levels or other pay levels. It is a giant con by Osborne.

    The real effect is more money being taken off the productive sector to be wasted by Osborne’s bloated and incompetent state. The complete opposite of what is needed. Austerity for the productive and more bloated waste from Osborne on HS2, greencrap, happiness indexes, overseas aid, the EU and endless other damaging state sector drivel.

    1. Lifelogic
      October 13, 2015

      Essentially government in the UK is yet another example of a tragedy of the commons. The government and local authorities keep increasing tax rates, creating new taxes, fines, licences, tolls, OTT regulations, over priced religious energy and other back door ways of taking funds off the productive. The effect of this is to decrease the tax base (per capita anyway), chase many jobs overseas and in the end it generates far lower tax revenue (certainly per capita).

      Slowly strangling the goose that lays the golden eggs while delivering increasingly dreadful services like an NHS – where you often cannot even get to see a doctor (for a few minutes) for perhaps 3 weeks.

      1. Lifelogic
        October 13, 2015

        A letter in the Telegraph today poses the question will we get our nice blue British Passports back for The United Kingdom of Great Britain and Northern Island should we vote to leave the EU. I certainly hope so.

        Doubtless we will have to pay £150+ for each one and it will take the incompetent passport office months to deliver them (given how efficiently the state usually performs) but well worth the money and the wait.

    2. Lifelogic
      October 13, 2015

      BBC getting very excited about racial differences in the numbers of Taser incidents.

      The BBC is usually totally innumerate. So I assume they have not bothered to adjust for the social profile, age breakdown, different racial breakdown of the (usually higher crime areas) where most of these incidents take place. Perhaps there is actually no bias at all and they are just causing pointless upset & resentment at our expense?

      1. JoeSoap
        October 13, 2015

        Yes I am not certain which message this gives us, and it is disappointing that money is being used to effectively stir up racism in whichever direction.

  2. Antisthenes
    October 13, 2015

    When I heard the chancellor announce that councils would be keeping business rates I thought what a good idea. It would be a good devolutionary step as I believe in localism as the closer that people are to power the greater the chance that power will be kept in check and reflect the wishes of the people.

    However what you tell us about the complexity and dangers of doing so is worrying. The NHS it appears is also to be devolved with Manchester leading the way.

    Devolution is an intention that on the face of it is a very good thing to do especially for enhancing democracy but we have already seen that devolution has many down sides. The rise of nationalism in Scotland and the installation of left wing governments in both Scotland and Wales that are slowly but surely impoverishing those those two nations. Their healthcare and education services that were already mainly dysfunctional and not fit for service are rapidly deteriorating even more because they are sticking to their socialist principles and not implementing unlike England any reforms at all just to cite two examples.

    The further we devolve it will unless people actually respond which they do not do now anywhere near enough to the performance of their governments and replace bad ones with good ones then some people are going to be much worse off. Wales and Scotland have badly performing governments but have not been replaced as they should be .

    So devolution to councils will not do what it is meant to do encourage competition and thereby best practices and make government more democratic. However it will make for greater mobility as people will be moving from badly run areas to better run ones. Welsh people are already when they can doing exactly that so as to be able to take advantage of the English NHS as their own is so bad. Despite badly run area are obviously so the voters still do not vote for change.

    Devolution will make England a patchwork of areas some that will improve a persons life better for living in them and others that will make them worse. We know generally what the politics of the councils that run the better run ones will be I do not need to spell it out on this blog me thinks. There of course will be exceptions.

  3. JoeSoap
    October 13, 2015

    I see that you haven’t cited any justification for this move. Business rates are a brake on business expansion. They need to be paid in good times and bad. This is a socialist business tax, if ever there was one. The entities which pay receive no discernible return. Saying “infrastructure will be improved” as a local return for businesses is a bit far-fetched-it is the best reason for keeping business rates in Central government. You are also correct in saying this discourages manufacturing, which uses more space hence normally more rates per employee. A thoroughly regressive tax not linked to profits or corporate wealth, only to the level of facility.

    1. Lifelogic
      October 13, 2015

      Indeed you even pay business rates when your property is unoccupied. Rates are a brake on expansion, productivity, competitivity and job creation. The state should really tax only profits and incomes. Rates are a large brake on expansion and job creation thus keeping the tax base far smaller than it would otherwise be.

    2. formula57
      October 13, 2015

      @ JoeSoap – ” A thoroughly regressive tax not linked to profits or corporate wealth, only to the level of facility” – so much like the Council Tax on individuals then, charged on the supposed value of the property, not linked to income or other wealth, but not as bad as that since it does not penalize sole businesses in the way Council Tax penalizes sole occupiers.

      1. JoeSoap
        October 13, 2015

        Except individuals benefit from council tax via “services”, whereas businesses even pay for rubbish collection.

    3. CdBrux
      October 14, 2015

      Surely a good, attuned to business needs, council will then take the opportunity to decrease business rates to stimulate growth. Indeed Rochdale council has been trying something similar recently and it appears to have had some success:

  4. DaveM
    October 13, 2015

    Even more complexities involving taxes. I think I see the point – ie, to encourage local governments to promote business in their areas and attempt to redress the London-centric business balance. But this means that local areas need far more freedom to spend, and they need to spend far more sensibly as LL says.

    The formula and mechanism you mention in your penultimate paragraph is exactly the kind of thing which needs to be decided by English-only MPs or indeed an English Parliament of some kind, without the far left input from Scottish MPs who will insist on far more wasteful spending on welfare etc.

    I can’t help thinking, though, that this policy from Gideon is somehow aimed only at enriching big corporations. The excessive efforts to release probable, non-UK inmates from Guantanamo Bay compared with the lack of effort to release an old man from a Saudi jail – who is going to be killed for having wine in his car – shows quite clearly that the govt’s interests lie purely in the enrichment of themselves and their big business buddies. Heaven forbid we should upset the Saudis with their oil money. I’ve visited KSA and it’s the most disgusting country I’ve been to, yet our govt sucks up to them purely due to money. Pathetic and disgusting behaviour from a govt which claims to be the bastion of liberal democracy.

    Reply The Saudi judgement was for lashes, not death. The UK government is seeking to have that punishment cancelled as I understand it.

    1. backofanenvelope
      October 13, 2015

      350 lashes will probably kill off a 74-year old man.

      1. Cheshire Girl
        October 13, 2015

        He wont get it. David Cameron has written to the Saudis. I tend to think that people should have more respect for the laws of the countries that they choose to live in, but that seems to be an unfashionable view nowadays.

    2. Denis Cooper
      October 13, 2015

      Back when Royal Navy discipline relied heavily on the use of the cat healthy sailors who were sentenced to be flogged around the fleet would often die from the kind of number of lashes that the Saudis plan to inflict on this old and ailing man. Of course it does depend on how the Saudis flog, and whether they would cut it short on medical advice, but I should think in this case it will be close to a death sentence.

    3. DaveM
      October 13, 2015

      To reply: It is for lashes. 350 to be precise. Which would probably kill a normal person, let alone a 74 year old with asthma and cancer.

      Regardless, a year in jail plus 350 lashes for having 6 bottles of wine?!!! The govt would go mental in this country if a judge sentenced someone to that punishment for armed robbery!

      The point is the horrific double standards. Govt pressure on the US to release terrorists from Gitmo, at least one of which has apparently joined IS, yet no attempt to help our own. Yes, he knew the law, but even so. The conservative Saudis live in the dark ages. There was hand-wringing about the Russians refusing to teach six-year-olds about homosexuality yet Cameron, Osborne et al (apply different standards for Saudi Arabia ed)

  5. Lifelogic
    October 13, 2015

    Stuart rose seems to think voting to stay in the EU is patriotic. How on earth does he come so such an irrational conclusion?

    Wiki says he was CEO of M&S (2004–10) Executive chairman of M&S (2008–11). Perhaps before following any advice from him people should look at the dire M&S share price performance over this period.

    Also was this not also the period when M&S (patriotically?) moved away from its UK suppliers to cheaper and largely inferior product from overseas producers?

    1. Ian wragg
      October 13, 2015

      Lol. Yes M&S moved production abroad but to China and Asia not their beloved EU. Comensurate with a reduction in quality.
      John says elected Mayors will be able to designate spending priorities. These are the people overseeing the Balkanised regions such as the East Midlands which is part of the Eu’s agenda.
      Business rates were taken off local authorities precisely because they made such an a… of them so what’s changed.

      1. Lifelogic
        October 13, 2015

        Business rates were indeed taken off local authorities precisely because they made such an a… of them. They moved on to motorist mugging and similar I understand.

    2. Iain Moore
      October 13, 2015

      Stuart Rose and the in campaign sought to attribute pretty much every achievement to the EU, I was surprised they stopped at trying to claim that our security was down to the EU and not also claim the EU made the earth go round the sun.

      PS It was also a pretty big porkie Rose claimed for the EU, when he suggested that the EU protects us from foreign criminals, rather than the EU being the cause of us having to open our borders to foreign criminals and gangs.

      1. Lifelogic
        October 13, 2015


    3. Bob
      October 13, 2015


      “was this not also the period when M&S (patriotically?) moved away from its UK suppliers to cheaper and largely inferior product from overseas producers?”

      Yes, also in Asia, which I believe is outside the EU, unless you count Turkey, which has it’s foot in the door.

    4. Lifelogic
      October 13, 2015

      Someone this morning on TV even suggesting that holidays were all thanks to the EU. The IN side really are getting very desperate.

      Do they think no one went on holidays before the EU?

      1. graham1946
        October 13, 2015

        The more they fetch out of this stuff and people like Rose, the better the OUT campaign will get. The sound of barrel scraping is deafening.

      2. Mike Wilson
        October 13, 2015

        At one point in the 70s we were moving towards 35 hour flexitime weeks. A mate of mine worked for a car manufacturer in those days and used to work a 9 day fortnight by working 9 hours for 9 days. 3 day weekend every fortnight.

        Now 60 hour weeks with work in the evening when you get home are the norm.

  6. alan jutson
    October 13, 2015

    What is the point of saying you are going to allow a local area to keep its business rates, when successful areas are going to have some of this income removed, to be sent to other areas.

    Sounds like a half baked idea, that is neither one or the other.

    As it was announced , I thought it was all (100%) of the business rates to its own area, and it was done to encourage all areas to back business formation locally.

    Indeed I thought it would mean open competition for business set ups/relocation etc.

    Looks and sounds like more words over substance, yet again.

  7. Old Albion
    October 13, 2015

    The Tory government calls this tax alteration, English devolution. It’s nothing of the sort.
    Devolution means an English parliament. Nothing less.

    1. Denis Cooper
      October 13, 2015

      Correct, that is what is has meant elsewhere in the UK.

  8. Bert Young
    October 13, 2015

    Local Councils – like Central Government ,will gauge their financial planning on short term measures . Business investment is a long term consideration that seeks to maximise a return to investors as well as a place in the community ; periods in excess of 5 years are the norm . If Osborne proceeds with his scheme to hand the collection and levels of business taxes over to Local Councils , he must also put in place a supervisory system to make sure the investment balance is not overlooked .

    Local Councils are not imbued with a lot of business acumen and will not have the co-operation needed to make the proposed system work . Furthermore , requiring well-off Councils to despatch a proportion of the taxes they receive to other less well off areas sounds to me like pie in the sky .

  9. paul
    October 13, 2015

    Build and they will come, no power, last coal station go soon, a total waste council workers pension, as i said the councils will loses over 1 billion a year for five years, you had all this back in the seventies now wet & mad wants it back, hes a dreamer.
    You smashed it all up for the bankers you went with the bankers and did not invest in the workers, now you want to go the other way but you have no money, so you want the people pension now, government employees do not have pension funds their pension is pay as you go. One wonders that back in the eighties under careful management and with new plant if by supporting the workers like in germany if the country and the people would of been sitting on 1.6 trillion of borrowed money now

  10. English Pensioner
    October 13, 2015

    A good political ploy!
    If a council hasn’t got enough money the government can say “You are free to set your business rates”
    If a town has boarded-up high streets, the government can say “what do you expect with those high business rates?”
    A win-win situation for the government which may possibly make some left-wing councils understand the idea of “cause and effect”!

  11. Denis Cooper
    October 13, 2015

    I support the general principle that more of the money that councils spend locally should be raised locally, although as ever the devil may be in the detail.

  12. Iain Gill
    October 13, 2015

    More complexity, more expensive admin, more power to those who have proven time and time again to be useless at running anything

    Shows how little real world experience Osborne has trotting out this nonsense

    Is this really the Conservative party?

    The country can and should do a lot better than this

  13. Roy Grainger
    October 13, 2015

    Sounds like a good idea. It should make local councils actively business-friendly and try to attract more, it they put businesses off by high taxes or obstructive regulations then businesses will move elsewhere.

    1. Lifelogic
      October 13, 2015

      That was not what happened last time very much. Tragedy of the commons (the common tax base) is far more likely.

    2. Mike Wilson
      October 13, 2015

      Local councils, generally speaking, could not organise a drinks party in a brewery. Massively increasing their budgets and responsibilities is mad.

    3. Mike Wilson
      October 13, 2015

      It should make local councils actively business-friendly and try to attract more, it they put businesses off by high taxes or obstructive regulations then businesses will move elsewhere.

      You have a strange idea of how business works. You’ll just ‘move elsewhere’ eh? What about your employees? Customers? Lease? New lease? Higher rent? Find suitable premises? Fit it out? Pay a fortune. Why do you think people put up with their useless, high charging local councils now? Because they are ALL THE SAME!

      The only way you get to pay lower business rates is to move to a ghetto.

  14. graham1946
    October 13, 2015

    £26 billion is more than the Support Grant, so govt will transfer more costs to local govt.

    Is this actually going to mean a cut which seems most likely, meaning locals and businesses will have to stump up more and the government can then put the blame elsewhere? Osborne is not doing this for nothing. A cut is bound to be what it is. The local authorities will then decide that as they have much bigger budgets to deal with, they all need a nice increase in status and salaries of the top executives.

    Too right you need to work out the details. What happens in the rural villages and market towns? You say ‘The Treasury will need to provide a means of some of the business rate money to go the poorer areas’. I can just see that working out well, with the governments disdain of the rural areas and their love of cities. What could possibly go wrong? When we are down to once yearly rubbish collections, all the libraries are shut and the CEO of local councils get a 100 percent rise in salary, we’ll find out.

    On the subject of rates, its about time the big supermarkets paid their full whack as well, instead of the restricted rates they do which means their rate per square is far cheaper than independent small shops and and of course their car parks are free of charge to their customers and free of rates as well, whilst town shoppers pay through the nose to go there. All very nice and fair. Any chance of this being addressed? Doubt it.

    October 13, 2015

    Mr Osborne did say at the Conference Party Conference 2015 that implementing Northern Powerhouses with associated stuffing money from one box into another in the form of an alteration in the deployment of Business Rates “…may not work.”
    Well if the Rt Hon Mr Osborne MP Chancellor of the Exchequer who started working for the Conservative Research Department nearly 20 years ago in 1994 hasn’t a clue then who am I?
    Had Santa Claus at some stage in his life given him a ” Boys’ Very Own Chemistry Set ” then it may have quenched his thirst for irresponsible experimentation past the spotted adolescent face stage of his development.
    Santa was mean. We in the North will just sit down and patiently but seriously quaff our homemade beer and wine awaiting the outcome of his experiment. We can party at Redcar Steel Works if pushed for space. ‘Strange kind of Powerhouse:- Redcar.

    1. stred
      October 18, 2015

      The Chancellor has his Office of Budget Responsibilty to help him sort out a fair way to distribute the money. Even better, their chief economist is married to the chief one in the Treasury and they can sort it out while doing the hoovering and washing up.

  16. botogol
    October 13, 2015

    maybe councils will set LOW business rates, to try and attract business into their patch.
    that would be good.

  17. forthurst
    October 13, 2015

    “The Treasury will also need to provide a means of sending some of the business rate money collected in a successful and prosperous area to poorer parts of the country.”

    Where would be the incentive for successful councils to collect business rates above the level at which they would be syphoned off to fund poorly run councils? Does the government believe that telling historically badly behaved councils that they are part of the Northern Powerhouse that, abracadabra, they will become more supportive of businesses in the future?

    What is the government’s strategy to address the higher taxes on retail outlets with a high street presence against those that trade on the web?
    Increasing taxes on the those with a high street presence in order to compensate for the losses from the dematerialision of many ‘shop fronts’ is unsustainable. Was hiring Mary Portas a publicity stunt or are the government genuinely concerned about the boarding up of high streets?

    How much is the reform of local sales taxes encumbered by the EU imposed VAT invented before the web existed?

  18. Mike Wilson
    October 13, 2015

    My experience and observation is that the people least capable of administering a budget work in local government. Who are you devolving power to? Elected councillors? Some councillors I have met are, frankly, a bit strange and think that money comes from the money tree.

    October 13, 2015

    Please can MPs/Parliament have a word with “BBC Parliament” to place the following at the bottom of the screen when televising in regard to the Immigration Bill showing LIVE as I write and,any every other matter related to MPs discussing migrants:-

    “To save Parliamentary time and the annoyance of viewers it should be taken as read that MPs when speaking of migrant issues are not themselves racist; are not expressing racist remarks and are in no way promoting racism ”
    One tires of hearing each and every MP justifying his desire and speech to control immigration numbers by announcing he is married to a foreigner/has bi-lingual children/his grandfather came from abroad etc etc..none of which actually, proves he is not an out and out racist. It does show the state of the UK when every mention of “foreigner” even by our legislators requires a footnote to their utterance.
    Could the Speaker also be empowered to ban from Parliament for 6 months (appeals allowed ) any MP who suggests even by a roundabout way that an MP is speaking in a racist way or promoting racism and thus giving cause to an MP giving everyone his family lineage to “prove” the opposite.
    Unfortunately the public at large are also obliged to justify legitimate remarks about immigration if they dare to open their mouths on the issue. It has become like an unfunny sad version of a repetitive satire sketch.
    JR your comment on Andy Burnham’s late-to-the-party remark on controlling EU migrant numbers as part of Mr Cameron’s negotiations and his reply was hopeful indeed.

  20. Martyn G
    October 13, 2015

    Business rates? They are already the primary reason for so many empty premises and proliferation of charity shops in the average town centre. What is now proposed will, I am sure, add hugely to the costs of operating a business or shop and many, many of those impoverished by the increased demands of councils, all eager to fund their pet outreach or whatever projects and looking only in the short term, are going to see their town centres turn into bleak and cheerless areas as business after business folds. I do not for a moment believe that councils in the round will be able to control their greed and neither do I believe that central government will be able to stop them adding to the burden of those trying to make a living and keeping people employed.
    I think that the next thing we will see is increased taxation of private property, probably by the government directing a wholsesale re-evaluation of property in order to hike up council tax. How can government resist that, bearing in mind the stupid, relentess increase in property prices brought about perhaps no least by the 500,000 or so per annum immigrants? Everywhere we look these days lies the potential ruination of the nation by uncontrolled immigration and it is noticeable that those most in favour of it live in conditions of prosperity that will remain unaffected by it all. We are ruled by people absolutely out of touch with the real world.

  21. pauline jorgensen
    October 13, 2015

    Interested in the comment about elected Mayors and not clear why the Conservative Government are so keen on them?

    Reply It is a passion of Mr Osborne who wants larger governing areas in the North to help power his powerhouse and sees elected Mayors as necessary drivers of change. So far a number of Councils in the north have agreed to club together to get more money from the centre and to accept political leadership from a new elected person. Mr O likes the London experience where an elected Mayor tries to find things to do on top of the Boroughs who deliver most of the services and do most of the work, and is meant to have a clear strategic view.

    1. stred
      October 18, 2015

      Strategic view, like converting the only dual carriageway from Whitehall to Islington into a bike lane.

  22. Colin Hart
    October 14, 2015

    This makes little or no sense. Local government is to all intents and purposes an arm of central government, required by law to deliver statutory services; the lion’s share of what all councils do.

    This is an elaborate piece of cost-shunting with no democratic handbrake. Local businesses don’t have a vote and won’t be able to punish high-taxing councils.

    October 14, 2015

    14/10 2015 15.10 hours. I am listening to the Cities and Local Govt Devolution Bill LIVE on the BBC. Lots of talk about democracy and local democracy…with voter turnouts of between 11% and 35% what can they mean?

    A foreigner lacking basic geography education and devoid of spacial ability looking at a world map may be forgiven on hearing MPs speak of Devolution in concluding the UK is a most massive state on the scale of North America.
    With instant emails, messaging, video-conferencing, 3 to 4 hours travel time by road from South Yorkshire to the Houses of Parliament…plus accommodation in London …yet MPs are discussing with straight faces Devolution? What is the next step for Devolution…building 10 walls dividing the seats in the House of Commons so that each segment gets individual powers and money to spend for just those MPs in each section?

    As with many things, rail, road, tram, air travel, boat, British MPs have in their hearts that Britannia covers half the northern hemisphere. Darn it, it is a little island. A Local Councillor in Cornwall is not going to make fundamentally different decisions given the facts than a Local Councillor in Hartlepool. Try swapping them round to see if they differ if proof in necessary. A Silly Billy Bill

    October 14, 2015

    Mr Jack Dromey MP for Birmingham Erdington is now as I write speaking LIVE on the Cities and Local Govt Bill on the BBC. He has mentioned in sequence “The Great City of Birmingham for..( some historical reference )..The Great City of Birmingham…(another historical reference ) with two other “Great” references plus a” The GREAT City of Manchester ” chant possibly so he is not venturing on to “Regional Racism” as his Labour Party once had it, just for good measure.

    This debate could perhaps with a vestige of logic been held after the Second World War when people had had their cities leveled by the Luftwaffe and needed a pick-me-up both psychologically and by way of new construction.

    Now it is half a century out of date. There is no call for Devolution amongst normal people. There never has been actually and there is less reason for it nowgiven our modern technology and interactions. We the English are not separate in that we ever were. We, albeit with differing accents, speak the same language, have the same values, and guess what… one or two of us have married with people a whole two and a half hours hours away by train.
    It is embarrassing listening to Mr Dromey. I do hope his Labour Party colleague perhaps speaking for “The Great City of… Nottingham ” doesn’t start slagging off The Sheriff of Nottingham, calling for the return of King Richard and pointing out that local opinion of the men of Sherwood Forest are right behind Local Councillor Robin Hood.

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