THE DEVOLUTION of tax-raising powers to the country’s regions and allowing councils to retain business rates raised in their area were at the heart of George Osborne’s keynote speech at the Conservatives’ party conference in Manchester yesterday.
At a time when those outside the capital are increasingly disaffected with the politics of Westminster, Osborne reiterated the desire to give greater power, including more control over tax, to regions.
Under the plan, councils will be able to cut rates to attract new investment and jobs. At the moment, rates are calculated by multiplying the rental value of a property by either the standard rate of 49.5p or the lower rate of 48p, before subtracting any relief.
Osborne vowed to spark a “devolution revolution” by allowing local governments to keep the rates they collect from businesses. Currently, local authorities collect the rates before they are sent in to Westminster for redistribution after central government has taken its cut.
Central government currently takes in about £11.5bn in business rates and redistributes £9.4bn in grants.
Business groups gave the policy a warm reception, with Institute of Directors director-general Simon Walker claiming businesses are “excited about the prospects for devolution”.
“The promise to devolve business rates will give local authorities a greater stake in the success of their local economy,” he said. “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. More than 60% of IoD members back local politicians being given the power to set business rates.”
But Labour warned it could start a “race to the bottom” with councils competing to cut their rates the most.
Shadow chancellor John McDonnell told the BBC: “We run the real risk of seeing the explosion of Tory tax haven councils, and it’ll be consumers and taxpayers who are left to pick up the bill for it in our communities.”