London local government has very little fiscal autonomy when compared with major cities in other countries, and while devolution of some powers to Scotland, Wales and Northern Ireland is a step in the right direction, such progress in England has been extremely limited. Partial reform of business rates in England has broadly allowed local authorities to retain half of the yield but the machinery of the business rates retention system is now so complex as to be opaque, and tracing how the centrally retained portion of the tax take is returned to the sector is similarly difficult to ascertain. When the effects of pools and appeals are factored in, it becomes extremely difficult to clearly understand how effective the reforms have been.
In light of this and the broad range of other problems with the tax, London Councils welcomed the second fundamental review as an opportunity to address the systemic problems left unresolved by the one concluded in 2016. Our evidence to the review can be found in the link below and its results were published alongside the Autumn Budget and Spending Review 2021. For a second time the opportunity was not taken. The outcome of the fundamental review of business rates confirmed 3 yearly revaluations from 2023, a new temporary relief for eligible retail, hospitality and leisure properties for 2022-23, a new 100% improvement relief, and the freezing of the multiplier in 2022-23.
Fundamental reform cannot be delayed indefinitely as the capital’s rate payers contribute an increasingly unsustainable proportion of the national business rates yield. Fixed yield revaluations mean London’s share of England’s rates take is increasing at each Revaluation and, if this continues, we could reach a situation where London has over half of the national business rates base by the early 2040s. This is not good for anyone.
With the rates system being as unsatisfactory from the rate payers’ perspective as it is from the billing authority one, it is unsurprising that both sides continue to demand change.
London Councils will continue to press for the major reforms to the non-domestic rates system required to make it fit for purpose as a mechanism for ensuring that businesses make a fair and sustainable contribution to funding the local services that enable businesses to thrive. This includes reforms to business rates to make the system less complex and more responsive to local economic conditions through greater local control.
To read our joint submission to the Treasury’s call for evidence to its Business Rates Review, click here.