Monday, January 12, 2009

Business Rate Supplements Bill

Borthlas wrote a rather timely post on Friday in which he drew attention to the unfairness of the Business Rate system of payments, suggesting that this might be a means of easing the pain on small and medium sized businesses suffering in the recession.

It’s a line that the Federation of Small Businesses weren’t in disagreement with, noting that Business Rates are the 3rd biggest bill faced by SMEs.

Today, though, sees the Government introduce a bill that gives the possibility of a supplement being introduced on business rates in order to finance local infrastructure improvements.

The Bill will allow local authorities to make a 2p in the rateable pound increase on business rates specifically for advertised local improvements. Depending on the circumstances, there would be a ballot of affected businesses as to whether the scheme would be implemented.

Even though I appreciate the need to be counter-cyclical (by the time the Bill becomes law we should hopefully, even with the current government in charge, be through the worst of the recession), surely after the pronouncements of the past few months the thought of paying even more tax in future is not one which is going to appeal to businesses fighting the looming prospect of bankruptcy.

For example, there is a participation threshold set at £50,000, but as rates are due to be re-valued in 2010, before anyone introduces a Business Rate Supplement (BRS) scheme, no-one know exactly which businesses are likely to be affected.

Similarly, there is a need for a ballot if the BRS is more than one-third of the contribution to a scheme. Surely this means that local authorities will seek to inflate the cost of schemes to avoid a ballot while claiming the same amount of money from businesses. This threshold is arbitrary and has no obvious justification.

There are further issues here regarding the issue of funding in Wales.

The Bill gives powers to local authorities to raise additional income for schemes of local value, but, once again, there are no powers to raise funds for the National Assembly, which is reliant upon the Barnett block grant for its funding and has no powers to increase its’ own income, even for an agreed project.

It must be worth consideration to give these powers to the National Assembly, under the same or similar criterion.

In fact, given the different attitudes to the economic crisis seen in London and Cardiff, between headless chickens in Downing Street throwing anything and everything to see if it sticks and the cool and calm response of Ieuan Wyn Jones as Economics Minister, it might even get the backing of the business community in Wales.

Similarly, as I’m sure Borthlas would argue, why not allow the Assembly the power to vary or suspend payment of business rates in Wales, thereby allowing them the opportunity to freeze them for a temporary period – possibly saving businesses and, therefore, valuable jobs?

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