Labour unveils plans to devolve business rates to city and county authorities

Labour leader Ed Miliband revealed his plans yesterday when he unveiled the report Mending the Fractured Economy, which he commissioned from Lord Adonis. It comes as Labour ramps up its policy plans with just 10 months to go until the general election.

Lord Adonis, the former transport secretary, has identified £30bn of Whitehall funding that could be funnelled to local authorities to pay for housing, transport, business support, education and adult skills.

The report outlines Labour’s plans to create new statutory authorities at city and county region level, which could bring local authorities together for joint purposes such as transport. 

Labour wants “substantial devolution” of business rates to these combined authorities and revenues from business rates would then be used to fund infrastructure priorities in authorities’ growth plans.

The report said: “This tax devolution will provide big growth incentives to local decision makers.”

At present local authorities are able to keep 50% of their business rate yield but the report claims that doesn’t go far enough.

It added: “The devolution of just 50% of business rates does not provide a strong enough incentive for city and county regions to invest in economic growth because the additional revenue generated is too small.”

David Ford, regional director of business rates specialist firm CVS, said: “The Adonis report will certainly be welcomed in those regions which have campaigned for local retention of business rates and may see Combined Authorities as a good opportunity to kick-start commercial activity. This announcement suggests that, in the face of significant pressure, Labour is committed to retaining a property-based tax on non-domestic premises after the 2015 election.”

However, retailers have been highly criticial of the current business rates system, which they say is burdensome and is restricting investment and job creation. In response, the BRC has tabled a number of alternative systems to tackle the issue as it believes a property-based tax system is no longer the right solution.