Business rate reform - local authorities given the power

November 25, 2015

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By Philip Vernon

The Chancellor's announcement to create 26 new Enterprise Zones in rural areas is an important part of the measures to support regional areas and counties, to be engines for their own growth and help implementation of the devolution revolution.

In addition, 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.

However, it is also a fundamental change to local authority funding in an already complex system and there is a risk that disparity between business rates set by councils could remove the present level playing field, and might be difficult for smaller Local Authorities with very low business rates income to set competitive tax rates.

There will still be concerns for councils in smaller towns and rural areas, where many business rate payers are exempt, who have previously benefitted from the governments’ redistribution of the proceeds. But creation of the new Enterprise Zones should help alleviate some of these concerns.