Local authorities will be encouraged to approve development after the government announced this week that they could keep the extra business rates.
The change – posted without comment on a government bulletin board – gives an incentive to local authorities to grant consent for major schemes, and could help regeneration projects, such as Thames Gateway, Birmingham’s Masshouse, and Manchester’s Eastside.
Business and property bodies, including London First, the CBI, the RICS and the BPF, as well as the Association of Local Government, have welcomed local government minister Nick Raynsford’s promise that the “growth incentive” scheme would allow councils to keep all the additional revenues from increases in the tax base.
“The money raised will be genuinely additional to local authorities, and they will be free to decide how to spend it,” said Raynsford.
“But the scheme will only allow local authorities to keep revenues associated with any growth in the business rate tax base, and they must be in addition to the current business rate pooling system.”
Gerald Eve head of planning Hugh Bullock said the change “creates an increasingly positive climate for development”.
“It’s a big incentive for local authorities to allow new, high-density schemes,” he said.
Julian Barwick, joint MD of Development Securities, said: “This is a very pro-development proposal, and is very welcome.”
Judith Salomon, head of property at London First, said: “Local authorities will start to want developments to be as dense as possible, as the more development that’s crammed on the site, the more rates they can keep. It completely changes the relation between the developer and the local authority.”
The incentive scheme goes out to consultation this summer, with the aim of introducing it in 2005, following the next business rate revaluation.
● The RICS is making a last-ditch attempt to amend the Local Government Bill, which it calls “fundamentally flawed”. It claims the bill will impose a £1bn stealth tax on the property sector.
Together with the IRRV and the RSA, it sent a briefing note to all MPs this week ahead of next week’s third reading.
