Jonathan Werran 18 March 2015

Budget 2015: Councils could keep full fruits of business rates growth

Local authorities have provisional agreement to keep the full yield of additional business rates growth, chancellor George Osborne announced in today’s Budget.

In a move trailed earlier this week by chief secretary to the Treasury, Danny Alexander, in a speech made at Cambridge which launched a wide-ranging review into the business rates system, the chancellor confirmed local authorities could fully retain extra cash raised from commercial property levies.

Mr Osborne said ‘We have now reached provisional agreement to allow Greater Manchester to keep 100% of the additional growth in local business rates as we build up the Northern Powerhouse.

‘For where cities grow their economies through local initiatives, let me be clear: we will support and reward them,’ Mr Osborned said.

He also confirmed he would offer the same business rates deal to Cambridge and the surrounding councils, adding his door was ‘open to other areas too’.

‘For our ambition for a truly national recovery is not limited to building a Northern Powerhouse,’ said Mr Osborne. ‘We back in full the long term economic plans we have for every region.’

Under the pilot schemes, local authorities would retain 100% of any additional growth in business rates above existing forecasts and be free to invest this extra yield in new pro-growth economic schemes and infrastructure projects.

Commending the review on business rates announced on Monday, the chancellor said the current system – which brought in £20.5bn of revenue from 1.8 million non-domestic properties to fund local services in 2013/14 – had not kept pace with the needs of a growing economy and changes to town centres and needed far-reaching reform.

A spokesman for Cambridgeshire said: ‘Cambridgeshire and Peterborough competes on the world stage and is a key engine for the UK economy. It is therefore only fair that with the extra pressures that come with growth the local area should also benefit from the extra income generated by it.

‘We are pleased to hear from Danny Alexander that government has listened to our arguments and that they see us, like we do, as a leading contender to take part. We hope we can benefit from this and that an announcement can be made as soon as possible on any trials.’

Zach Wilcox, an analyst at the Centre for Cities think-tank told The MJ the pilots were ‘a recognition that the system isn’t working for business or local government’ but also marked a ‘positive signal to experiment’.

‘I think it demonstrates that [the Treasury] is looking to make changes to the system to provide incentives for business rates retention that support growth for local government,’ Mr Wilcox said.

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