Local authorities’ ability to stimulate growth by retaining 100% of business rates may be seriously hampered by appeals and a lack of transparency, a report by the communities and local government committee has warned.
The cross-party group, led by Labour MP Clive Betts, published the report 100% Retention of Business Rates: Issues for Consideration today. Although it widely supports the government’s plans to fully devolve business rates by 2020, it raises several concerns.
It argues that councils will face an increased financial risk, as many small businesses are likely to appeal against their rating assessment.
In its research, the committee found several examples where authorities are putting large sums of money aside in case an appeal is successful. This would impact on their ability to use the increased revenue from business rates to stimulate growth, the report warns.
The report also criticises a plan to put key decisions in the hands of local enterprise partnerships (LEPs).
Many business leaders, especially those in retail, feel these groups are not representative of the interests of the majority of local businesses and therefore cannot make decisions on their behalf, the report says.
This, combined with the removal of central revenue support grants for local authorities, will make it difficult for councils to allocate resources quickly to where they are most needed, the committee concludes.
Steve Cochrane, who founded independent department store Psyche in Middlesbrough in 2002, is not concerned about these potential pitfalls.
“Anything that puts money in the control of local decision makers, who are closer to the action, can only be a good thing because they have sight of where the money’s needed,” he said.
“I also think that central funding being taken away, which used to favour areas with higher greater concentrations of retailers, will lead to a more even playing field for retailers across the country.”
But Katherine Tanswell, owner of Walk In Wardrobe in Hove, said she does not believe the reforms will make a difference.
“I’m looking at the possibility of having to sell up, and that fact that so much of my money goes to paying my business rates is a big part of that,” she said.
“My shop, at 12,750 sq ft, is just above the threshold where I would be considered for any help. I don’t think the government and the council care about promoting boutiques in the face of larger chains who have more money to survive.”
She added: “I can’t see these changes doing anything to help us. And anyway, 2020 is too far away. Some of us need help now – not four years down the line.”