Fiscal devolution and business rates reform

Devolving responsibilities and services alone will not square the circle of fewer resources, growing service demand, and the need to raise productivity and drive economic growth. Our functional devolution proposals are a step towards this within specific services, however, more fundamental questions remain about how local public services are funded in the long term. With the devolved nations gaining greater control and freedom over their own taxation, and 100 per cent business rates retention to English local government by 2020, the question of further fiscal devolution and financial autonomy for areas in England beyond 2020 is now being raised.

Business rates reform

London Councils and GLA’s joint response to the Government’s consultation on 100 per cent business rates retention sets out a detailed set of proposals for the devolved retention and management of business rates by London Government, that will balance the need to incentivise growth against the pressures caused by population growth and any newly transferred responsibilities. It sets out a clear vision for a devolved London business rates retention system, including 14 specific asks of Government that would be needed to enable such a devolved system.

The proposals seek to address two fundamental issues with the current system: the negative impact of business rates appeals, which currently impedes growth and makes funding unstable; and the premise that revaluations should be to a fixed yield nationally – seeking for London’s business rates to be de-coupled from the rest of the country, to prevent economic growth in the capital artificially constraining business rates growth across the rest of the country. The 2017 revaluation provides further evidence of the unsustainability of the current system with values again increasing disproportionately in London compared with the rest of the country, thereby restricting any future business rates growth outside of the capital and making local authorities outside of London more reliant on top-up grants.

London’s proposals, as set out in the 14 “asks”, would help address these problems in ways that would not only help London manage its future sustainable economic growth, and the financial sustainability of its local public services, but would benefit local government in the country as a whole.

Read the joint response.