Thursday 6 January 2011

Rates Repatriation: How much is too much?

The more one looks, the more one realises that, without some form of equalisation, it quite simply does not add–up. Secretary of State, Eric Pickles’ turn of phrase about the ‘repatriation of business rates’ has been oft-quoted in the media since it bubbled to the surface in December. Given that my dictionary defines repatriation as “ being returned to one’s place of birth”, we can only hope that we are not to be returned to the very birth of rates as a form of taxation in the Poor Law Relief Act of 1601.

Joking aside, the uncorrected notes from the Comprehensive Spending Review’s submission of oral evidence by Mr Pickles is worth repeating here, if only in an attempt to contextualise his use of the word repatriation.

Having referred to the incomprehensible nature of the existing formula grant calculation(the calculation used to re-distribute funds from the centre to regional and local government), Mr Pickles went on to suggest that ‘quite a lot can be done with the repatriation of the business rates to local communities. I am hopeful that we can use that as a way of getting local authorities on a regular, predictable basis that is not subject as much to the decisions of central Government in terms of overall funding.

The inference for all of us is that the government clearly views the local authority as the natural home of business rates, and so intends to press ahead with some form of relocalisation such that local authorities ‘are not subject as much’ to the vagaries of centrally managed funding decisions. For those of a Big Society persuasion, limiting the influence of central government is probably a good thing. However, it was unfortunate that Mr Pickles’ inquisitors did not think, during their evidence gathering efforts, to enquire about fairness, equality and the impact upon business.

A quick look at the numbers, crunched and published by the Local Government Chronicle, highlights the winners and losers in a scenario in which local authorities collect and retain 100% of local levies. Westminster, London City, Hillingdon, Camden and Chelsea are the big winners, whilst authorities such as Birmingham, Hackney, Liverpool, Lewisham and Newham stand to lose hundreds of millions in funding.

A politically and morally unconscionable thought. So, it won’t happen. The question is, what might happen? Whilst headline writers jumped upon the emotive term ‘repatriation’, the real nuance lies in how Mr Pickles plans to ensure that local authorities ‘are not subject as much’ to the effects of centrally-determined funding decisions. And therein lies the real question for UK plc; when it comes to local authority intervention in property taxation, how much is too much?