Changes to business rates: who wins and who loses?

http://www.theguardian.com/society/2015/oct/05/changes-to-business-rates-who-wins-and-who-loses

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A prescient analysis by the Local Government Chronicle last month modelled the potential impact of the changes to business rates announced by George Osborne on Monday.

The LGC examined whether any increased income that councils received from retaining business rates would compensate for other grant cuts due to be imposed by central government over the next few years.

The chart shows the share of business rates an area would need to retain locally to replace the current level of government revenue-support grant. A score of 100 indicates that a council would be self-sufficient under Osborne’s plans; any figure higher indicates that a council would lose out.

Low-scoring councils who won under the system include a handful of prosperous inner London boroughs, including Westminster (which collects £1.8bn annually, equivalent to 8% of the entire business rate take for England). Other gainers include shire authorities such as West Berkshire.

Losers would include economically struggling urban metropolitan councils such as Newcastle (which raises £149m a year in business rates but calculates it would be a net loser), Knowsley, Lewisham and Barnsley, all of which have high levels of social need.

More than half of larger councils in England may struggle financially as a result of the plan unveiled on Monday by the chancellor, George Osborne, to allow local authorities to keep 100% of locally collected business rates, the study suggests.

Currently, the Treasury siphons off 50% of all business rates, enabling it to redistribute cash from prosperous areas to less well-off authorities, in effect helping to smooth out economic inequalities between councils.

Related: George Osborne's changes to business rates: Q&A

But the research suggests that while some councils would be winners under Osborne’s plan – becoming financially self-sufficient in effect – the majority would lose out.

The Treasury has yet to set out in detail how the system would work. While welcoming the idea in principle, councils will be keen to hear what plans the government has to provide a safety net to prevent struggling councils from going bust.