On 17 February 2016, the government published statistics on the non-domestic rates expected to be collected by local authorities in England next year (12.02.16).
The headline is a £400m increase to £23.5bn, the growth explained by a rise in new business. Local government minister Marcus Jones was quick to say that £3.2bn would be handed out as discounts to support charities and entrepreneurs and to fill vacant shops. He went on to explain that the government wants to incentivise councils to do even more, which will be achieved by giving them more financial autonomy by 2020. This is, of course, a reference to the devolution plans announced by George Osborne in the 2015 Autumn Statement. Councils will, according to Jones, “be handed the power to cut rates as much as they like to boost enterprise in their local areas”. He added: “Those that do give business a helping hand will reap the rewards - keeping 100% of the additional growth they generate.”
That all sounds fantastic, doesn’t it? Well, actually, no it doesn’t. A businessman, developer or entrepreneur understands the concept of invest to grow or speculate to accumulate. They will have access to credit, and can justify a loss this year to create a greater profit next year. But local authorities have neither the skills to make intelligent investments nor the liquidity to pay for them. They are constantly having their budgets hammered and can barely pay today’s bills, let alone cede income in the hope that in two, three or five years’ time they will be better off.
The Local Government Information Unit’s 2016 State of Local Government Finance Survey published on 18 February tells us all we need to know. In the press release we are told: “As councils finalise their 2016-17 budgets, nearly 90% say they will have to increase charging for services while a further 82% say they will be forced to dip into reserves to balance the books [up from 55% in 2015]. Nearly 40% of councils say their 2016-17 budget will lead to cuts in frontline services that are evident to the public.”
Rather than granting reliefs and encouraging growth, they will deny reliefs, resist claims for exemptions that businesses are already entitled to and invest only in legal advice to protect their coffers. How do we know this? It’s already evident under today’s devolution-lite, the Localism Act.
Devolution is a great idea on paper, but it’ll never work. In fact, it will be a disaster for everyone - well, everyone except George Osborne, who, in giving power to the local authorities, will no longer be to blame.
Robert Hayton, national head - specialist empty rates team, Altus Group