Business rates 'should be set by local councils'

The body, which represents councils in England and Wales, said any growth in business rates income should be retained by local government and the redistribution of the tax should be taken out of central Government’s hands.

Local councils are currently responsible for collecting business rates but LGA said they are “hugely restricted” in their ability to introduce discounts. It said this is because Government sets the charge and keeps half of the rates income as well as growth (extra income earned from new business premises), which it redistributes to local authorities in grants.

LGA said under their proposals councils would have more flexibility to reduce rates for “the types of shops and businesses that residents want in their high streets and neighbourhoods”.

It added that locally-decided policies could include start-up leases for new businesses or rate relief for firms which use local suppliers. It said similar schemes operate in some areas already but could benefit “thousands more businesses nationwide”.

The organisation also called for the Government to establish an independent body for the distribution of funding to councils, work with local authorities to minimise business rates avoidance and reform the appeals system. It said Government data shows there are more than 130,000 outstanding appeals from businesses over the rates they pay.

'Fairer way'​

LGA chair David Sparks 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.

"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.”

'Unworkable'​

However, Jerry Schurder, head of business rates at Gerald Eve, said the proposal for local authorities to set their own business rates is “unworkable and undesirable”.

“Companies value the stability that comes with business rates being set nationally and support the level playing field this system creates. A local rates system abandons this fairness and jeopardises the predictability over their outgoings that businesses crave,” he said.

“Local control over business rates introduces a temptation for local authorities looking to plug holes in their budget and business will simply not accept being treated as a cash cow by poorly-run councils.”

'Detrimental'​

While he said there are “good arguments” in favour of local authorities retaining the growth in business rates collected in their jurisdiction, he said there is a “significant risk” that this would result in authorities adopting “heavy-handed practices” in the collection of business rates.

He said: “We are already seeing the virtual disappearance in some areas of discretionary reliefs alongside councils actively asking the Valuation Office Agency to increase assessments – behaviour which does nothing to improve the built environment and is in fact hugely detrimental to businesses.

“Any increase in the proportion of rates growth that councils retain locally should relate solely to that created from physical changes to the built environment.”

'Councils already have powers'​

Local Government Minister Kris Hopkins said: “This Government has introduced the local retention of business rates, allowing councils to keep half the revenues raised from business rates – equivalent to £11 billion a year. This provides real incentives for councils to support enterprise and economic growth.

“Despite the need to tackle the deficit by the last Administration, we have also cut business rates for small firms and local shops.

“Councils already have the powers to introduce provide local discounts, and they can levy a supplementary rate or business improvement district levy – if they are backed by a referendum of local firms.”