Backing for business rate hike to finance infrastructure

28 March 2007

Local transport authorities could be empowered to introduce a supplementary business rate to raise extra funds for infrastructure, after the chancellor said the idea had ‘potential to support local economic development’.
Senior county officials this week welcomed the Government’s pledge to consider the Lyons inquiry proposal, which could raise at least £2.5M a year in most authorities, and £5M or more in 12 shires, even if pitched at only one pence.
They acknowledged that business support would be crucial, as Lyons stressed, but claimed the chancellor’s test – that the supplementary rate would have to be ‘subject to credible accountability’ – could be passed.
The London mayor, meanwhile, saw the proposal ‘as a positive step’ to securing funding for the £10bn Crossrail east-west London rail project. Lyons had recommended a London-wide supplementary rate, which, set at 4p, would finance £3.4bn in borrowing.
Lyons said a supplementary rate would not, like re-localising business rates, hamper relationships between firms and councils, but prompt constructive talks on infrastructure needed to support growth.
The County Surveyors’ Society backed Lyons’ analysis that businesses could be won round to the need for additional contributions for specific benefits. Richard Wills, vice-chair of the CSS, agreed with Lyons that firms’ support for business improvement districts (BID) demonstrated this.
A supplementary business rate would provide much greater scope but the challenge would be to demonstrate that businesses across the whole of a county would benefit, and not just in one market town.
But the British Chambers of Commerce immediately voiced its opposition to the idea, claiming that it was ‘re-localisation of the business rate by the back door’.
The chancellor also announced in the Budget that 70% of proceeds of the planning gain supplement would be returned directly to the local planning authority granting each permission. There had been fears that funds would be leaked out of the local area, and returned too late to finance infrastructure.

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