London councils’ business rate tariffs are set to rise by £400m a year to £730m, to top up income elsewhere, according to the Institute for Fiscal Studies.
However, London authorities are set to benefit more from new developments in the future than their top-up council counterparts as local government moves towards business rate retention.
Analysis the Local Government Finance and Devolution Consortium – an IFS group backed by Capita, CIPFA, ESRC and PwC and supported by The MJ – found business rates would rise by about 11% above inflation, while they fall by 10% in the North.
The latest report from the consortium also found big rate rises were more likely in the South and in city centres like Manchester. In April, increases will be capped at 5% for small properties, but 42% for large properties – with cuts capped at 20% for small properties and just 4.1% for large properties.
IFS associate director, David Phillips, said: ‘By stripping out the overnight effects of the revaluation on the amount of business rates each council is able to retain, the government is stopping large overnight cuts (and increases) to council budgets and services.
‘But it means councils have less incentive to boost demand for existing properties: they do not benefit from the resulting increases in rents and values of these, only from new development. This suggests devolution of other revenues may need to be considered if broader incentives for growth, beyond promoting new property development, are seen as desirable for councils.’
