The retail industry was split by today’s autumn statement, as the government confirmed the devolution of business rates to local councils but failed to give clarity on the progression of the business rates review.
Chancellor George Osborne confirmed that local councils will be given control of business rates in an overhaul of the system and said that the report following the year-long review into the tax will be unveiled no earlier than the March 2016 Budget.
The British Retail Consortium (BRC) welcomed the fact that the government was “taking its time” to consider the issue.
BRC director general, Helen Dickinson, said: “It is encouraging that the Government appears to be taking their time to consider their options for fundamental review of the business rates system. We have long said that it would be better to take the time to get the solutions right on the first go and design a system that is fit for purpose.”
However David McCorquodale, UK head of retail at KPMG, said the government was just “kicking the business rates can” further down the road. “The retail sector continues to face significant cost increases from the already announced National Living Wage and was hoping for earlier reform of the business rates from the promised review. However, the Chancellor has kicked the ’business rate can’ further along the road until the Budget.”
Edward Cooke, director of policy and public affairs at shopping centre body BCSC agreed. “Business rates continue to be the elephant in the room with lots of talk and no action from government to address the major issues of this outdated tax. All we have heard is that, having failed to tackle the issue, government is now proceeding to gradually delegate the responsibility and the risk of reducing the rate of this outdated tax to local authorities.”
Local councils will be allowed to retain the £26bn raised through the tax each year and will be able to set their own rates by 2020. Elected mayors will be able to lower rates to encourage investment in local areas or increase rates to raise funds for specific projects including street repairs, libraries and transport. As part of the overhaul, 26 new enterprise zones will be created.
Additionally Osborne has extended the small business rate relief scheme for another year for 600,000 SMEs.
Under the current system councils collect business rates and send them to Whitehall. Central government takes a cut and then redistributes the rest back to local authorities.