The Government plans to let local authorities subsidise business rates in certain areas. Will this help stimulate local economies and reduce vacancy rates?

Empty_Woolworths.jpg

Not more bad news about business rates?

In fact this proposal could actually reduce costs to retailers. The Government has issued a consultation document on plans to allow local authorities to subsidise business rates in certain areas for certain types of businesses to help stimulate the local economy.

One of the main ways in which the Government envisages this power being used is to help breathe new life into high streets with high levels of vacancies by subsidising rates in the area.

Would localisation of business rates help?

It certainly wouldn’t do any harm. According to the BRC, business rates cost retailers £6bn a year and many retailers face big increases in their bills following the revaluation that came into force in April this year.

With property costs being a key factor in stores becoming unviable, the hope is that proactive councils could use the proposed powers to attract new businesses. “We welcome the proposal,” says British Council of Shopping Centres director Edward Cooke. “It’s a recognition that business rates are a significant burden on retailers, and that they are preventing retailers being profitable in some areas.”

Would councils use the powers?

Some councils are already being much more proactive when it comes to regenerating their retail zones. Authorities such as Woking have even bought shopping centres in their areas so that they can have more influence over their futures.

However, some retailers warned the scheme would only work if the Government kick-started it with central funds. “We welcome the thrust of the Government’s initial proposals on rate relief,” said a spokesperson for John Lewis. “However, we have some concerns over the level of uptake unless central Government is prepared to share the funding costs.”

Could this lead to councils having the freedom to increase rates?

A review of local government finance is expected in the autumn and could lead to a wider review of the business rates system. The Liberal Democrats have historically supported the re-localisation of business rates, but this would be an unpopular move with retailers.

At present there is one uniform business rate, and there is unlikely to be any appetite among retailers to deal with 420 different rate setting authorities, especially in cash-strapped times when retailers - which unlike Council Tax payers have no vote - could be seen as a soft touch for rate rises.