Sir Peregrine Wortshorne famously cautioned the Conservatives after the 1987 General Election victory against “bourgeois triumphalism”. As the son of a baronet George Osborne can hardly be accused of being “bourgeois”. Yet the tone of his speech of his speech carefully avoided triumphalism. So instead the pundits criticised it for being dull.
However there was a pretty radical announcement included. The Uniform Business Rate will also be abolished. That might be dull (for those who don’t have to pay it) but it is not trivial. Local government will be able to keep the rates they collect from local businesses. Power over £26 billion of revenue from business rates will be devolved.
Councils will have the power to cut Business Rates. Those with directly elected mayors will be able to increase business rates – if the for spending on local infrastructure projects, within a cap of 2p on the rate, and as long as they win the support of local business.
“Local authorities will be able to cut business rates as much as they like,” as Mr Osborne put it.
Mark Littlewood, the Director General at the Institute of Economic Affairs, said:
“For too long, governments have devolved spending powers without decentralising the power to collect tax. Today’s announcement to devolve business rates and allow councils to collect revenues locally is brilliant news. Not only will it create better incentives for councils to encourage local economic growth, it will also instill discipline as their decisions will affect where businesses locate and the wider prosperity of the area.”
Simon Walker, the Director General of the Institute of Directors, said:
“Businesses are excited about the prospects for devolution, and the promise to devolve business rates will give local authorities a greater stake in the success of their local economy. Businesses have been clear that they want enterprise to be put at the heart of the devolution agenda, and the Chancellor appears to be doing just that. More than sixty per cent of IoD members back local politicians being given the power to set business rates.
“We hope this new deal will pave the way for councils to use these new powers to attract businesses and regenerate high-streets. While businesses support devolution, they will not stand for local politicians using it as an excuse to hike taxes. More than half of IoD members were concerned devolution would lead to higher taxes. Councils must avoid the temptation to increase rates to raise revenues, and instead compete to attract businesses to the area, which will bring jobs and wealth.”
I agree with Mark and Simon.
The reaction of the BBC was that poorer areas with fewer businesses would inevitably lose out. On the contrary – those areas have the greatest potential to secure a competitive advantage by slashing Business Rates.
Anyway now local politicians will be able to choose. They will be accountable for their choices and whether their choices result in more or fewer windows on their high streets being boarded up.
No longer will they be able to shrug, shuffle along and tell their voters that it is nothing to do with them.