Local councils should be allowed to charge occupiers a supplementary business rate of up to four pence in the pound, according to Sir Michael Lyons’ inquiry into local government finance, published today.
Lyons suggested that the money could help pay for infrastructure such as Crossrail, the railway line mooted for London. A four pence supplement levied across London could raise £438m over 10 years and a further £3.6bn in loans taken against that revenue. ‘This would amount to a fifth of the cost of Crossrail,’ said Lyons.
Lyons said the supplement ‘could be introduced within the life of this government’, although there would need to be consultations with business groups and the local government association before it could be implemented.
The proposal was attacked by Jerry Schurder, head of business rates at Gerald Eve and vice-president of the Rating Surveyors Association, who said that ‘businesses will be exceptionally concerned at any increase in their tax rate’. He added that a supplement of 4p on top of the existing uniform business rate of 43.3p in the pound amounted to a 10% increase.
The idea of supplements had already been examined in government Green papers of 1998 and 2000, only to be dropped after central government realised that ‘local councils would regard it as a revenue-raising exercise,’ said Schurder.
Lyons suggested that future governments could consider more radical options such as returning business rates wholly to local control, and introducing a local income tax in place of council tax, but stressed that ‘these reforms require greater public support and understanding than currently exists’ .
Lyons also recommended increasing the rates payable on business premises that are empty for more than three months and creating new council tax bands for the most expensive and cheapest housing.