A recent survey undertaken for the Local Government Association (LGA) found that more than two thirds of UK businesses thought that local councils should have more power in the setting and distribution of business rates.
The rateable value is currently set by the Valuation Office Agency (VOA) and, for public houses, is based on the rent at which it is estimated the property might reasonably be expected to let from year to year. There might have been confusion in the LGA survey that locally set business rates would mean councils would have the power to reduce the rateable value. Not so!
Business rates are set by multiplying the rateable value by the rates multiplier set by central government and it is intended that this bill tracks inflation. Local authorities do not have complete control or flexibility concerning the funds that are raised by local rates. This has been recognised by Government and, last year, legislation was updated enabling councils to decide how most of their grants should be spent in their area so they can support local services.
The current scheme also allows authorities to keep a higher share of growth in business rates in their area and set community budgets for the fairer distribution of local public services.
'Political football'
It is considered that allowing local authorities to totally set their own business rates would then become a political football. This is not the case with the stability that comes from the business rates multiplier on rateable value being set by central government.
Tinkering with who gets what on a local authority grants’ basis might be the subject of political manipulation with no government control. In the current era of belt tightening, local rates being set solely by councils might see elected councillors using the opportunity to subsidise areas that should otherwise have a strong cost control. A blanket release of autonomy to local authorities would not differentiate between well-run councils and poorly run ones, each of whom are dependent upon the quality of their council representatives.
The LGA’s poll will have little effect on established legislation given the Government’s efforts to gently but firmly give local authorities more control over how they spend public money.