Osborne hands over business rates control to councils

Local councils will gain control of business rates under new plans unveiled by Chancellor George Osborne in his speech at this week’s Conservative Party conference in Manchester.

In a move he called “the biggest transfer of power to local government in living memory”, Mr Osborne announced that councils in England would be able to set their own level of rates and keep the proceeds raised in their area.

Councils raise £26 billion from business rates, but the money is collected by Whitehall and then redistributed.

Currently, local councils keep up to 50 per cent of the money raised, but the Chancellor has promised that they will retain 100 per cent from 2020.

Mr Osborne referred to the move as a “devolution revolution”, however Labour warned that it could start a “race to the bottom”, with councils competing to cut their rates the most.

In response to the announcement, a spokesman for the British Retail Consortium (BRC) said: “We look forward to learning more about the Chancellor’s plans to fundamentally reform the business rates system in the autumn.

“The announcement only highlights the urgency of reforming this outmoded tax, which acts as a drag on the economy.

“We will now look closely at the detail as it emerges, but it’s worth remembering that there is a widespread consensus that any package of reform to the system must address head-on the need to reduce the burden of a tax that discourages investment in jobs and growth.

“The national business rates multiplier needs to be frozen, and then reduced to encourage local and national growth. The detail of the Chancellor’s plan and ongoing review is now absolutely essential.”

Said John Allan, national chairman for the Federation of Small Businesses (FSB): “The surprise announcement to allow councils to retain business rates presents a huge opportunity for local authorities and business to work together to boost local growth, develop a fairer tax system and create the jobs of the future.

“We also know there will be challenges to get the new system right. We want to ensure businesses don’t get short-changed. It is essential the new rates structure works for all our 5.2 million small firms.”