As the UK and UK regions look to accelerate out of the downturn, local authorities should be smart about how they use business rates to fuel growth. Effective local reinvestment and use of locally raised rates income have a key role to play.
The Scottish referendum has put the devolution argument centre stage – as Nick Clegg says: “The devolution cat is out of the bag.” The debate, irrespective of one’s views on the outcome, has pushed arguments about self-determination and taxation right up the agenda.
Now, many city regions – such as Manchester, Leeds, Bristol and other UK core cities – are saying they want more control of local taxation (both gathering and spending) and we might expect to see more on this under future City Deals and as LEPs carve out their roles. Invariably, this leads us to business rates.
Just as there has been fervour for “yes/no” in Scotland, so too there is a passion in many quarters for a better system for business rates, more transparency in how rates are calculated, collected and used, and more accountability too. As a taxpayer, I understand this. Don’t we all want reassurance that our taxes are being put to beneficial use and that those benefits will accrue locally?
Today, there are already various ways that local retention of rates works in the interests of local authorities. The smart ones, in our opinion, are structuring schemes to deploy business rates income for economy-enhancing benefits, whether that’s to help fund investment in infrastructure, to kick-start regeneration projects, create jobs, or to create attractive conditions for inward-investing companies.
Within this debate, we need to be clear on what business rates exist to do. Are they a charge to occupiers for the enjoyment of services in the locality of their property? Or are they an instrument to influence local economic policy and prosperity? If we are going to achieve a balance between devolved powers for tax and spending and some degree of consistency in how business rates are calculated and collected, we need to address fundamental questions such as this.
One thing above all is clear – the voices calling for more devolved powers and the voices championing business rate reform are both loud and growing louder. I dare say that many at MIPIM UK will hold strong views.
Achieving a politically and financially acceptable solution is not going to be easy. With the 2015 General Election manifestos being shaped as I write, we are expecting a lively conversation through until May 2015.
Mark Rigby is chief executive of CVS.
