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Will The Business Rate Retention Scheme Have Regional Impact?

By +Eric Jafari

Will The Business Rate Retention Scheme Have Regional Impact .1As of April 2013 a business rate retention scheme is to be introduced nationwide, but there are those that question the impact it will have on commercial property beyond London. Currently, it is hoped that the arrangement will act as a direct link between business rates growth and the amount of money councils spend on local people and services. Under the scheme, councils will keep a proportion of business rate revenue, as well as growth on that revenue.

According to the government, this will be a "strong financial incentive" for councils to promote economic growth in their area. In terms of real estate, the policy could facilitate a raft of new planning approvals, as officials look to capitalise on the rate retention capabilities latent in the creation of more commercial enterprises, including hotels and retail spots.

Business rates retention is now at the heart of the government's reform agenda, promoting economic growth and localism. When the scheme commences, calculations will be carried out to ensure that councils with more business rates than their current spending will make a tariff payment to the government and those with greater needs than their business rates income receive top-up payments.

The levels of tariff and top-up payments will remain fixed, but will increase annually in line with the Retail Price Index. This will not change until the system is reset, which will occur in 2020 at the earliest to give councils the certainty they need to plan budgets. Safety net payments will also be provided in case a council's business rate income falls by a certain amount, due to a major closure, for instance.

However, there are some that question the effectiveness of such a scheme, including Peter Chapman from Cluttons. "Whilst, at first glance, this scheme appears to be an incentive to councils to stimulate growth and loosen planning restrictions on commercial schemes, in reality it is highly questionable whether this will be of any benefit to councils outside of London where there is little demand for additional space," he said.

"In particular, in parts of the north-east, where there is very little demand for new commercial premises, this will make no difference at all to either increasing the revenue of local councils or stimulating the local economy," Mr Chapman continued, adding that in actuality any increase in business rates from new commercial developments will have to be offset against losses incurred from successful appeals against existing properties.

14 January 2013


Business Rate Retention Scheme,Government Reform Agenda,Cluttons