Council finances 'must be considered as part of business rates reform '

A business rates expert is calling for government to consider reform of local government finances, including council tax, in any reform of the rates system.

John Webber, head of business rates at Colliers, has said that many cash-starved councils have been in discussions with the government for a bail out or “capitalisation directions ” due to loss of income during the pandemic.

The 12-month business rates holiday given to the retail, hospitality and leisure sectors, would have cost local government coffers between £11 and £12 billion in income if central government had not stepped in. WITH WHAT

In a normal year business rates contribute £26 billion to council budgets.

Mr Webber (pictured) says that £26 billion from this one source is unsustainable. Nearly one third of the total rates bill is funded by the physical retail sector, £7.6billion, despite this sector facing several challenges in recent years.

In a bid to reform the funding of local government services, Mr Webber is calling for government to review the business rates system and council tax.

He said: “The current pandemic has more than ever exposed the flaws in our broken business rates system as a means of funding local government services and any reform in Autumn must consider alternative means of financing- including looking at council tax. ”

Council taxes are domestic rates in the same way as business rates are non-domestic rates- yet whereas as business rates are based on rental values, council taxes are calculated on the value of the property- as of April 1, 1991. The highest band H is for properties worth £320,000 and above.

“Whilst it 's pretty shocking that we haven 't had a business rates revaluation since 2017, it 's probably more shocking that we haven 't had a council tax one for over 30 years! It 's way overdue, ” says Mr Webber.

Colliers research found that whilst Solihull and Stockton on Tees raise a similar amount of revenue annually from business rates and council tax, in Westminster the picture is totally different. Westminster raises a massive £2.35 billion from business rates, due to its higher property values.

This is almost twenty-two times what it raises from council tax, of £105 million.

In Westminster property owners in the highest band of council tax, Band H, pays £1655.12 in council tax a year, despite many houses in areas such as St John 's Wood and Mayfair being worth several millions of pounds.

In Stockton on Tees Band H council tax costs £4202.66, but there are actually few homes in either Band H or Band G; the highest band appearing to be Band F where property owners pay £2999 a year in council tax, nearly twice what is paid in Westminster.

“The current system is just out of step, ” Mr Webber said.

“If as a country we want our public services to be paid for - and I think the pandemic has shown how important this is - then we need to think wider than just relying on business rates and milking the system dry.

“The government is considering other options- such as a tax on online shopping or a tax on deliveries for online purchases -and all options should be explored.

“But a more equitable council tax regime would certainly be a good start in trying to reduce the burden on the business rates system and restore the balance in our local authority finances. ”