Select Committee report offers clear endorsement for supplementary business rates

August 7, 2007
  • Committee right to back Lyons proposal to let councils vary business rates
  • However detailed recommendations could re-create burdensome bureaucracy

Reacting to the publication of the Communities and Local Government Select Committee report into supplementary business rates, the New Local Government Network (NLGN) said that whilst the tone of the report was encouraging, it fails to recognise the full potential of councils to develop their local economy.

NLGN said that it is pleased the Committee supports the recommendation from the Lyons Inquiry that local authorities should be enabled to levy a supplementary business rate (SBR) to increase or decrease the business rate paid by local businesses.

However, it said that whilst they was pleased that there was now resounding support for giving councils greater financial freedom, the report did not share the same devolutionary spirit of the Treasury’s recent Sub-national Review or Gordon Brown’s recent Green Paper, The Governance of Britain.

The committee’s concern that investment from SBR be used effectively had drawn it into re-creating some of the central controls that both Sir Michael Lyons and the government in its response to the Lyons report, had pledged to abolish.

NLGN also questioned the viability of stipulating that all revenue from a supplementary business rate is spent only on genuinely additional projects deemed to benefit the local business environment, saying that this would be almost impossible to qualify and define. NLGN suggested the vast majority of council spending, from a new school or road to new housing projects, could be interpreted as “benefiting the local business environment” and as such any definition would be extremely difficult to frame.

Giving any one section of the community, in this case business, a veto by ballot is wrong in principle. It is also to miss the strategy behind the government’s sub-national review. The discipline on local government is that only effective plans with genuine local support will entice central government to deliver greater devolution.

In this context it is surprising that the Committee dispensed with Sir Michael’s requirement that in two tier areas both county and district councils must agree a single plan in order to change SBR.

NLGN’s Deputy Director, Dick Sorabji said:


“It is excellent that the Select Committee have supported Sir Michael’s plans for step by step financial devolution. It is wise of the committee to suggest that councils should be able to reduce business rates as well as increase them.

“But in their search for mechanisms to ensure SBR will be wisely spent, some recommendations have drifted into the top down policy making that central government has now pledged to abolish.

“The Sub-national review has recognised that local authorities are central to faster economic growth. They need flexibility to innovate. The disciplines that will drive effectiveness are the need to demonstrate local consensus and central government promises to devolve further economic powers. These are best captured through rigorous Multiple Area Agreements as recommended by John Healey.

“The SNR suggests that ring fencing and ballots for special interests is not on the agenda so it seems strange that the Committee should back such plans”.


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