Examining the impact of the changes announced today, the IFS said the update found the value of non-domestic property is estimated to have risen by around 11% on average since values were last set in 2008.
The government plans the standard multiplier used to calculate business rates to be 0.48 next year, around 3% lower than the current 0.497. This means properties that have seen their rateable value increase by around 3% or less can expect a cut in their rates bill next year, while those whose value has increased by more than 3% can expect an increase in their bill next year.
However, the IFS highlighted that many ratepayers will likely appeal against their new values and get cuts in their rateable values and bills.
The Local Government Association has previously called for councils to be protected from the cost of meeting appeals. Currently, councils have to meet 50% of the costs, which is set to rise to 100% following full localisation from 2020.
The IFS highlighted that the 2017 review would lead to more appeals.
“First, if history is a guide, many ratepayers will successfully appeal against their new values and get cuts in their rateable values and bills,” it stated. Although the government was then likely to adjust the national multiplier, this would affect councils differently.
“Councils will have to bear their share of any successful appeals against the new values – and while estimates of the impact of such appeals can be made when the new valuations are introduced, such estimates are unlikely to be completely accurate.”
The IFS also noted that April 2017 will also see Liverpool and Manchester become pilots for the full localisation system, which would have a big impact on the kinds of financial risks and incentives councils face. The institute is to publish a report on the context and key issues of localisation on 26 October.
