The devil is in the detail of business rates reform pledge

The devolution of the £26bn business rates system to local authorities was one of the biggest policy surprises of the Conservative conference this week.

The most significant overhaul since 1990 of this archaic regimen includes plans to abolish uniform rates and allow local authorities to set taxation levels.

But the jury is still out on whether this radical plan is a sign Chancellor George Osborne is to finally unshackle the industry from this punitive burden, or whether retail will continue to be seen as a cash cow – one that just answers to a new owner.

However, there is enough in the proposals to foster hope the conclusion will bring significant progress in the industry’s battle to have the rates system overhauled.

Collaborative approach

In handing power to the councils to cut rates, Osborne has incentivised local authorities to embrace the power of enterprise to create growth at a regional level by encouraging competition to attract investment.

“As is so often the case with large policy pledges, too much of the important detail is lacking”

Chris Brook-Carter

Meanwhile, the decision to allow areas with elected mayors to raise rates, by 2p in the pound to fund infrastructure projects, only with the blessing of local business, helps put retailers at the centre of the decision-making process.

Each of those elements has at its heart a collaborative approach. It not only recognises the role retail can play in shaping communities but conversely places the responsibility for incentivising business growth with the local authorities that understand those communities best.

But any talk of a more inclusive debate is meaningless unless the outcome is a significant reduction in the burden on retailers, allowing them to invest and create jobs.

And while logic should dictate that greater co-operation between councils and companies will lead to a more prosperous outcome, there are caveats.

Distorted landscape

Local authorities themselves remain under severe financial stress. And although they have greater control of income now, the Chancellor has also said he expects councils to take on “additional responsibilities”, which will come at a cost.

So even where there is a will to cut rates, there may not be the circumstances or courage to allow it.

Furthermore there are fears the proposals will create a distorted landscape with richer regions able to cut harder than the poorest to attract investment, exacerbating the challenges faced by many secondary and tertiary retail locations.

As is so often the case with large policy pledges, too much of the important detail is lacking.

Oddly, the Chancellor decided to announce the changes before the findings of a structural review of rates are unveiled later this year.

The devil is in the detail is a cliché when talking about changes to the way retail pays its taxes. But it has never been more true than here. And we must wait until that review is complete before understanding how committed this Government is to real change.