What rate for business?

The Business Rate Supplements Bill currently before Parliament gives councils the right to levy a business rate supplement (BRS) to fund local economic development.

This consultation paper 'Business rate supplements: a consultation on draft guidance to local authorities' sets out draft guidance to be issued under clause 26 of the Bill for the consideration of local authorities, businesses and business representatives, and any other stakeholders in relation to when it might be appropriate to fund a project through BRS, how to levy the BRS, and the circumstances under which to conduct a ballot.

The Bill arose from the 2007 Review of council tax by Sir Michael Lyons, but is a much diluted version. Lyons recommended that the large homes of the super-rich should be charged double what they are currently paying to allow for a rebate of £150 per year for the poorest. He recognised that council tax was regressive, but New Labour has done nothing to address this injustice, nor the injustice of £1.8bn of Council Tax benefit goes unclaimed every year due to the complications and stigma of claiming.

On business rates, Lyons noted that in 1993, local government raised 23% of its expenditure through business rates, now it's just 17%. According to Lyons’ calculations, the average household could be about £250 a year better off if business paid the same share of taxation as they did in 1993. Neither the Bill nor this consultation gives local government the ability to challenge this.

Instead, in an act of tokenism it allows local councils to levy a supplementary rate of no more than 2%, and in a further blow to local democracy only for hypothecated expenditure on local economic development (which this consultation seeks to help define), and if the BRS will fund more than one-third of the total costs, then businesses must be balloted (by value and number) – as if business had a democratic legitimacy. The consultation paper makes it clear that "a BRS is not a new means to fund existing expenditure or a resource to support general service expenditure".

Despite the fact that the Bill and this consultation will not restore anything like the powers to local government taken since Thatcher, it is a (pigeon) step in the right direction.

The consultation paper 'Business rate supplements: a consultation on draft guidance to local authorities' can be downloaded from HM Treasury website. The deadline for responses is 17th April 2009.