Tax & admin · 25 November 2015

Autumn Statement 2015: George Osborne abolishes uniform business rates to boost local economic development

AutumnBudget1BA
Chancellor Osborne’s Autumn Statement announces plans to abolish the uniform business rate, devolving more power to councils to help boost local economies

Chancellor George Osborne has today confirmed the government will abolish its uniform business rate, granting local UK authorities with significantly greater power to determine the cost of business.

In his Autumn Statement, Osborne announced the scrapping of the unpopular uniform rate in favour of a new system that will give locally-elected mayors the chance to set business rates depending on local economic conditions. Mayors will gain the ability to add a premium to business rates to fund local infrastructure projects.

Describing the new measures as a “devolution revolution”, the chancellor outlined plans in his Spending Review that will give councils control of an extra £13bn a year by 2020, and will see 100 per cent of taxes being retained by local authorities to spend on public services.

Under the current system, local authorities collect a standard business rate on Whitehall’s behalf, and receive a spending grant in return. It is hoped the new system will encourage local authorities to compete for business and create jobs.

Previously, local authorities paid all revenue raised through business taxes to the chancellor. They would then be redistributed on a needs-basis according to the Formula Grant System. However, in April 2013 the government allowed local authorities to retain 50 per cent of business rates, while the remainder went to Whitehall.

Philip Vernon, PwC business rates leader in the Midlands, said: “Giving local authorities the power to retain all local business rates will better incentivise economic development and enable local voices to define clearly how this should happen. Success will come to those areas that can readily differentiate themselves from their competitors and really attract and support business growth.

“The private sector is the vital engine for job creation and growth and this initiative should pave the way for councils to use these new powers to attract businesses and regenerate high-streets.”

Osborne first outlined the plan to scrap the uniform business rate at last month’s Conservative conference in Manchester, when the suggested new measures as “the biggest transfer of power to local government in living memory”.

Ian Cass, MD of The Forum of Private Business, commented: “Small business rate relief for a further year is also welcome although giving 100 per cent of business rates raised locally may starve the rest of English Authorities of resources as London has 30 per cent of the country’s rateable land.”

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ABOUT THE EXPERT

Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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