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Business rates: Give Wales control, report likely to urge Business rates: Let councils keep the proceeds, says report
(about 4 hours later)
Full control over business rates should be passed to the Welsh government as a way to boost the economy, a report is expected to urge. Councils should be allowed to keep some of the near £1bn they collect in business rates, a report says.
There are also calls for councils to keep income earned in their area as an incentive to grow their local economy. Allowing local authorities to retain some of the money would give them an incentive to help the economy, added the independent review commissioned by the Welsh government.
The Welsh government asked economist Professor Brian Morgan to look at how the complex regime of business rates can be reformed to help the economy. At present, councils collect rates and the money is then redistributed among them by the Welsh government.
Enterprise Minister Edwina Hart is due to make a statement to AMs on Tuesday. The review says control of the rate system should be devolved for reform.
Prof Morgan, of Cardiff Metropolitan University, is likely to recommend that Wales gets much greater freedom to design a system of its own. Led by Cardiff Metropolitan University economist Professor Brian Morgan, the review says changes to business rates should not be seen as a "cure-all" for the economy.
He has previously said control over business rates should be completely devolved to the Welsh government. It says there are strong arguments for greater retention of rates by local authorities, but acknowledges this could not happen unless the system was devolved.
Business rates are a tax on non-domestic properties. The money is collected by local authorities and then redistributed among councils as part of their annual funding from the Welsh government. Councils should be allowed to keep half of future increases in business rates revenue after 2015, the review says.
The rest could be pooled and shared among councils that are less successful in generating economic growth.
The review says its recommendations would make a "needlessly opaque" system "more transparent".
Business rates are a tax on non-domestic properties. The money is collected by local authorities and then redistributed by the Welsh government according to a formula based on population and needs.
Councils collected more than £900m in business rates last year. It ranged from £12m in Blaenau Gwent to more than £179m in Cardiff.Councils collected more than £900m in business rates last year. It ranged from £12m in Blaenau Gwent to more than £179m in Cardiff.
Evidence presented to Prof Morgan's href="http://wales.gov.uk/docs/det/policy/120328bratesen.pdf" >review showed strong support for allowing councils to retain the proceeds of business rates. Prof Morgan said: "At the outset the report emphasises that the primary role of business rates is to raise funds to support the delivery of local services.
The employers' group CBI Wales said the current system offers local authorities no incentive to be "pro-growth". "In this context we have recommended localising the income from business rates to incentives local authorities to increase their tax base."
'Raise threshold' Value
But there was overwhelming opposition to allowing neighbouring councils to set local rates.
The amount businesses pay is decided by their rateable value, although some pay less under the small business rate relief scheme.The amount businesses pay is decided by their rateable value, although some pay less under the small business rate relief scheme.
At present, businesses with a rateable value of less than £6,000 pay nothing, with further reductions available up to £12,000. The relief scheme is due to change in March next year. At present, businesses with a rateable value of less than £6,000 pay nothing, with further reductions available up to £12,000.
The review's call for evidence found support for rate relief, with many respondents saying the threshold should be raised. The review was "very much in favour" of extending the relief scheme beyond its scheduled withdrawal in March next year until at least 2015.
The Welsh Conservatives want businesses of up to £12,000 to be exempt, with relief tapered up to £15,000. Although research shows varying rates has a "negligible impact on the wider economy", rates remain a big concern for small and medium-sized businesses, the review adds.
Tory business spokesman Nick Ramsay said: "We have long called for far greater business rates relief and this remains the easiest way of getting money back to small businesses and aiding their development. The Welsh Conservatives want businesses of up to £12,000 to be exempt from rates, with relief tapered up to £15,000.
"Private sector growth is the key to creating Welsh jobs and small businesses in particular deserve far more support from the government." Tory business spokesman Nick Ramsay said: "Private sector growth is the key to creating Welsh jobs and small businesses in particular deserve far more support from the government."
Plaid Cymru economy spokesman Alun Ffred Jones said his party would graduate rate relief up to £18,000, helping more than 8,000 companies.
Business Minister Edwina Hart said she had written to the rest of the cabinet to formulate the Welsh government's response to the report.
She said: "I am confident it provides us with much to consider in addressing the challenges to create a better, more accountable and competitive business rates system in Wales."