Martin Reeves, the local government finance spokesperson for Society of Local Authority Chief Executives (Solace), said it was a “shame” that the chancellor had not consulted councils before making the decisions.
The chancellor announced in the Commons on Monday retail business with a rateable value of up to £51,000 will be charged a third off business rates in 2019-20 and 2020-21. The value of the tax relief will be £955m.
This along with a £675m ‘Future high streets Fund’ will aim to help the flagging high street to survive changes to shopping habits, such as people buying online.
“I know that many small businesses are struggling to cope with the high fixed costs of business rates,” the chancellor said on Monday.
“So for the next two years […] for all retailers in England with a rateable value of £51,000 or less, I will cut their business rates bill by one third.”
But Reeves said: “Making unilateral policy decisions to reduce business rates at the same time as making councils more dependent on their revenue renders the funding base for local services even more precarious.
“Central and local government need to work together on the fundamental reform of local taxes so that they are finally fit for purpose.”
Government is currently moving towards a system whereby councils are more reliant on business rate for their income than grant support from the government.
The government has committed to increasing local authorities business rates retention to 75% by 2020-21.
Although the Budget document confirmed that “local authorities will be fully compensated for the loss of income as a result of these business rates measures”, CIPFA chief executive Rob Whiteman suggested this could worsen councils’ financial position.
“Short term support for social care of £650m, £45m for disabled facilities, and £420m for road repairs are welcome, but with business rate relief amounting to £900m it remains the case that under these proposals councils will continue to face many of the same challenges they did before the chancellor rose to his feet,” he said.
The government had planned for councils to rely totally on business rates and for revenue support grant to be phased out by 2019-20. This has now been delayed.
Local government minister Rishi Sunak previously told PF that the government may move to 100% retention “when the appetite is there”.
Helen Miller, associate director of the Institute for Fiscal Studies, told a post-Budget briefing that instead of short-term relief the government should reconsider its position on business rates.
She said: “If there are concerns coming from the business rates system already it would be easier to fix that system,” as opposed to offering short term relief, Miller said.
Miller mooted the idea of a land value tax as a replacement for business rates.
The IFS tweeted the high street boost was likely to prove ineffective as a long-term measure:
Business rates relief will help retailers in the short-run but doesn’t provide a long-term answer to pressures on the high street #Budget2018 pic.twitter.com/RGq2n9Rzv4
— IFS (@TheIFS) October 30, 2018
