Councils should allow more cash machines to help revive high streets

What should councils do to help revive high streets where shops and pubs are closed or struggling? First they should do no harm. Or, try to do less harm. Business Rates are a terrible burden which councils could and should ease.  A more modest but still positive impact is to allow more shops to install cash machines (or "Automatic Telling Machines.")

If people can easily get hold of cash for small transactions - for a newspaper, a pint of milk, a loaf of bread, a bottle of wine - they are more likely to use their corner shop. 91% of transactions under £25 are in cash.

The attitude of planning officers to more of these machines is often unduly negative. The machines seldom have long queues so the notion that the pavement will often be blocked with crowds is unreasonable. Similarly the idea that they inspire a large amount of illegal parking is exaggerated. There should be some sense of proportion with these objections put against the benefits to local small businesses.

Some say that cash is out of date. But there is still a lot of it about. £180 billion of the stuff is taken out of cash machines a year. Many of the machines operate independently of banks. Indeed if banks were the only places to get money it would be very tiresome. According to the Campaign for Community Banking Services more than 7,500 branches have closed since 1990 - nearly half. The number is still falling.

Lib Dems call for new tax on the family weekly shop

The BBC reports that the Liberal Democrats are calling for a supermarkets tax. Lib Dem opposition councillors on Torbay are calling for a levy of 8.5% of the business rate paid by stores with a rateable value of at least £500,000. In Torbay it is estimated this would raise £804,950 by taxing eight stores. The Lib Dem MP Adrian Sanders backs the idea on the grounds that supermarkets make "massive profits." 

But Local Government Minister Brandon Lewis, said:

"Imposing new, additional taxes on supermarkets will push up the price of food and the cost of living, hitting low-income families the hardest.

"We ruled out such a bid for higher taxes under the last round of the Sustainable Communities Act proposals.

"There are much better ways to support small shops."

Councils should use their power to cut Business Rates for small shops

There is a community benefit in a local pub or corner shop which can sometimes be measured in economic terms but in a rather imprecise way. For example the Duke of Westminster's Grosvenor Estate includes a large chunk of Belgravia. I understand that they charge below market rents to butchers, bakers and grocers in streets like Elizabeth Street - this means Grosvenor Estate get more when selling leases for their flats in Eaton Square.

Councils now have the power to cut (but not put up) Business Rates from the level set nationally. They could reduce them for small shops, or for a particular high street, or for a particular type of business. The discretion under the Localism Act 2011 is wide - the Council merely has to be "reasonable" in showing regard for the interest of Council Taxpayers.

It might appear that any reduction in Business Rates would reduce the Council's revenues. However this could be offset by fewer empty shops. When a shop is empty only 50% of Business Rates are payable for three months. Even that money can be hard for a council to collect if the retailer has gone bust and they then have to go after the owner of the site. The British Retail Consortium estimate that 11% of shops are empty.

Government plans for Business Rates too complicated and unclear to work

Cllr Stephen Greenhalgh, leader of Hammersmith and Fulham Council, says Government plans don't give councils enough incentive to promote growth

I am delighted to see today's publication by the independent think tank, Centre for Cities of a comprehensive analysis of the proposals for business rate reform included in the Local Government Finance Bill. The Bill represents the single most significant change to the way council services are funded that we have seen for a generation.

At first I was delighted that local government finance reform was on the coalition government's agenda at all. Like Eric Pickles, I hoped for a move away from a local government finance system solely based on need to one based on whether your council is a great place to do business. I yearned for a simple, easy to understand and transparent system with a real incentive for councils to promote business growth.

Therefore I am disappointed with what the Local Government Finance Bill proposes which is currently at the House of Lords Committee stage. Like many, I support the Government’s objectives but the transparency, clarity and incentives that existed in previous iterations of these proposals seems to have been lost as an army of civil servants have sought to reconstruct the status quo. The Bill recommends the replacement of an incredibly complex system with an incredibly complex system which will be littered with tariffs and top ups, set asides, levies on high growth areas, revaluations and resets.

Reforming Local Government Finance

By Local Government and Communities Secretary Eric Pickles

Last night Parliament debated a Bill that at long last reforms local government finance.The need for reform is one of the worst kept secrets in British politics.  The Organisation for Cooperation and Economic Development has called England’s local government finance system one of the most centralised in the world.  The Lyons Review in 2007 was just the latest of a long series of papers to recommend fundamental change.

For many years Labour administrations put the whole question into a box marked “too difficult.” The last Government didn’t even make a formal response to the Lyons report. But where Labour failed to deliver, the Coalition is ready to act. Where others have pondered and prevaricated, we are ready to act.

The heart of the Local Government Finance Bill is a much-needed reform to business rates. Under the way the system works at the moment, councils collect rates from local firms. No sooner have they done so than central Government swoops in. The cash is counted up in Whitehall, before being allocated back to councils on the basis of a complex formula.

This creates a strange set of incentives and rewards. The councils who do most to encourage growth, who succeed at attracting new firms and creating jobs, don’t necessarily see any increase in their own finances as a result. In fact, the opposite may be true. Places which succeed can see their grant from central Government drop. This encourages councils to talk down their area’s successes. When the councils who can paint their area’s plight in the most vivid terms get the most out of the system, you can end up with a “begging bowl” mentality.

Government sets out strategy for local growth

The Government have produced a paper entitled Supporting Local Growth which highlights the initiatives being taken to promote economic growth - even on what Lord Howe might have described as "relatively stony ground."

In the foreward the Communities secretary Eric Pickles and the Business Secretary Vince Cable say:

Instead of seeking to engineer growth from Whitehall or through regional agencies, we are now putting power in the hands of local councils and businesses. Instead of seeing public investment as a solution in itself, we have a renewed focus and are using that to stimulate private growth and employment - catalysing investment and encouraging enterprise.

The past year has seen real progress. Local enterprise partnerships, bringing together business and civic leaders, are now up and running across ninety-nine per cent of the country. They provide a strong locally led structure to make strategic use of the growth initiatives in this paper.

Change rules on Business Rates to get development going now

Edward Cooke, Executive Director at retail property organisation BCSC, says future projected Business Rates should be able to finance infrastructure schemes - if the private sector takes the risk

Across England and Wales town centre development is stuck in a rut. The jobs and community benefits it could herald replaced by inactivity, with local authorities scratching their heads wondering how they can help kick-start economic growth.

But councils are being denied what could be a crucial development finance tool to get stalled proposals moving. Tax Increment Financing (TIF) uses projected increases in business rates income to secure debt or offset equity used for public infrastructure. Long practiced in the US, England and Wales lag behind, with current proposals as part of the Local Government Resource Review in reality still years off.

On top of this, there is a fundamental flaw in these plans – local government schemes won’t tap the full potential and widespread investment that TIF has to offer the UK.

Government also needs to embrace a private-sector led model, as in the US, and recognise that in a climate where it has, rightly, set itself challenging targets to reduce the budget deficit, increasing public-sector borrowing is out of the question.

Business rates reform will help kickstart growth

Alex Thomson of Localis says Government plans are a big step in the right direction

Back in March, I wrote on ConHome about Localis’s then forthcoming report on the local retention of business rates. The report – ‘The Rate Escape’ – produced in partnership with Ernst and Young and available to download here, made a strong case that the current local government finance system is opaque, highly centralised and riven with perverse incentives.

It went on to argue that giving councils more control of their locally collected business rates would empower them to help support local businesses, and play a key role in kickstarting national economic growth. For instance, a Localis survey, carried out as part of the report and completed by over 200 English council leaders and chief executives found that financial incentives, including the local retention of business rate growth, would drive a wave of innovation in councils across the country, particularly in the north and midlands, where 4 in 5 councils believe that more incentives would make them more innovative.

So it is excellent news that the Government is indeed moving forward with plans for the local retention of business rates, which will give councils a real incentive to grow their local business rates base. And I’m even more delighted that the Government’s proposals adhere so closely to those we outlined in ‘The Rate Escape’.

Localising Business Rates will boost economic growth

Rob Dale, the online engagement lead at the Local Government Information Unit, welcomes the proposals but warns there will be losers as well as winners. Follow Rob on Twitter

Localisation of business rates, as proposed in the Local Government Resource Review, is attractive in principle because it incentivises councils to encourage local economic growth and allows them to benefit from it.

It’s also an important early step in shifting the centre of political and economic gravity more towards the local.

At the same time, it is an issue that looks very different depending on where in the country you sit.

About a third of councils would not need a government grant if they could retain their business rates but, at the other end of the spectrum, there are others, including many of the most disadvantaged, who do not take in nearly enough in rates to be financially viable without additional funding.

Pickles to councils: keep business rates cash you raise

by Paul Goodman

When I was a member of the front-bench Local Government team, one of the biggest internal debates was about raising local revenue, without which there can be no lasting localism.

The team tended to push and the Shadow Treasury team to resist - understandably on both counts, since the former wanted more local control and the latter proper financial control.

The two present local taxes on the table were council tax and business rates.  When talk turned to the latter, the Shadow Treasury and Business teams would raise memories of the 1980s.

During those years, some Labour-run local councils - Liverpool springs to mind - raised business rates through the roof, driving businesses away locally and impeding recovery nationally.

The compromise struck was cash incentives for councils that build more homes and attract more businesses.  There are details of the latter in the Times (£) today, which reports that: