Any other business

Finally, a business rates reform! If only I knew what it meant

Plus: George Osborne's cunning pension plan; and the delightful Denis Healey

10 October 2015

9:00 AM

10 October 2015

9:00 AM

This column has repeatedly cried that something must be done about business rates. Yes, it’s fair to ask businesses, as well as individual citizens, to contribute to local public-sector provision — even though businesses can’t vote. But it was far from fair during the recession to go on collecting £26 billion a year from hard-pressed firms based on an arbitrary multiplier applied to out-of-date rental valuations, in many cases long after those values had slumped to the point at which the rates were a higher cost than the rents.

The same firms were being charged all over again for basic services such as refuse disposal, and complaints that the system was poisoning small-business growth and town-centre regeneration were greeted by ministers only with issue-ducking deferrals of overdue revaluations. When I argued two years ago that ‘an across-the-board cut in the business-rates multiplier would swiftly pay for itself — and more — through new jobs, better profits and the taxes they generate’, no one seemed to be listening.

Well, now Osborne has done something at last; and as so often with this Chancellor, we are left to work out what its effect will be, and what is his political calculation. Henceforth, local authorities will keep the £26 billion (rather than remitting half of it to the Treasury) and will be able to cut business rates if they think that will attract new business investment and thereby increase total local revenues; authorities with elected mayors will also be able to increase rates, by a small margin, so long as the takings are spent on infrastructure improvements.

Those who believe Osborne’s ‘northern powerhouse’ is a political sham immediately howl that the new system will exacerbate the ‘north-south divide’ by sucking economic activity towards south-eastern authorities that can most easily afford to cut rates. Others think competition will be more localised, with enterprise-minded, cost-efficient (which most likely means Tory-run) councils attracting businesses from less dynamic, more budget-stressed neighbours — which will mostly turn out to be Labour or Lib Dem fiefdoms. And so we see Osborne’s political mind at work in a scheme that also takes heat off ministers by delegating troublesome decisions to lower levels of government. As a long-time critic of the previous business-rates regime, I greet the new one with cautious optimism: let’s wait and see what it really does for local prosperity.

Canadian lessons

Another cunning Osborne plan revealed in his conference speech is the pooling of 89 council pension funds — accounting for some £180 billion of investments — into six larger ‘wealth funds’ that will be encouraged to invest in infrastructure projects. The model for this is Canada, whose teachers’ and municipal employees’ pension schemes just can’t seem to buy enough public hardware at home and abroad, currently owning several of our ports and airports plus stakes in Anglian Water and Scottish gas as well as the High Speed One rail link to the Channel Tunnel.

The equivalent UK funds, by contrast, invest just half a per cent of their assets in infrastructure, compared with 8 per cent in countries with larger pooled funds. UK local authority fund trustees continue to place enormous sums — in an old-fashioned way that no doubt still involves lots of lunching, dining and Test match tickets — in passive ‘tracker’ funds run by City firms for fees that are as fat as competition allows. So pooling should lead to cost savings and smarter investing generally, as well as helping to rectify the dire shortage of UK infrastructure investors that recently sent Osborne kowtowing to Chinese institutions with a government guarantee pinned to his back in order to secure funds for the troubled Hinkley Point nuclear project.

And again there’s the politics: sticking it to Unison and other public-sector unions that are such thorns in the Conservatives’ side by redeploying their pension money to fund Osborne’s pet projects, and rubbing it in by hiring former Labour minister Lord Adonis to run a new National Infrastructure Commission that will assess future needs and ‘hold any government’s feet to the fire if it fails to deliver’.

Another long-held sentiment of this column is admiration for the brain (and political pragmatism) of Andrew Adonis. I’m only sorry he isn’t planning to combine this new job with that of Mayor of London, for which he was once tipped: he would have made a better fist of it than Zac Goldsmith or Sadiq Khan, and perhaps he could have offered himself as candidate for both major parties.

Good Yorkshiremen

Denis Healey and my father Deryk Vander Weyer — a big cheese at Barclays and spokesman for the high-street banks during Healey’s chancellorship — had a lot in common. Both were clever, cultured, iconoclastic products of good Yorkshire grammar schools; both wartime majors and post-war socialists (my father finally turned right when he began to appreciate the merits of Margaret Thatcher); both formidable in argument. ‘Now then, young Deryk,’ the then chancellor used to say, only half joking, ‘You’re the man to run the state bank for us after you’re all nationalised.’

Thirty years later, the mellower Healey of old age came north to Helmsley to give a talk about his photography. On the strength of the 1970s connection, I invited him to lunch: he was one of the most entertaining guests I’ve ever had, radiating bonhomie and mischief, flirting gallantly with my widowed mother, ranging wide across literature and history, battling gamely through blank moments of short-term memory failure. Afterwards I took him to the station, with a big old-fashioned camera slung round his neck. An elderly man (though at least a decade younger than Denis) approached and shook his hand. ‘Lord Healey? I never voted for your lot, but I want to thank you for your public service.’ Denis beamed benignly, and took a picture of him.

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  • fundamentallyflawed

    Local councils are a menace – like an even more inefficient Westminster. One of my local Councils is considering REMOVING free parking to encourage people to come to a run down town centre….. Nothing screams regeneration like additional car parking charges

    • Hamiltonian

      The evidence shows that free parking is in fact bad for cities. I suggest reading “The High Cost of Free Parking” by Donald Shoup.

      • jeremy Morfey

        Opinion rather than evidence.

        Whereas this may be true for cities, whose hinterlands are within walking, cycling or easy public transport distance of the centre, the opposite is true for market towns whose hinterlands are largely rural and poorly served by public transport on the grounds of unviability.

        For these, a place to drive in, shop for an hour and drive out again are crucial and should be free. The example I remember best is Leominster, a market town long with a history of free parking and which boasted a fine portfolio of thriving little shops in the centre.

        • Hamiltonian

          The Shoup book isn’t opinion, it’s highly researched facts. I’m sure there are a few communities that are fine with free parking, but typically local areas start to charge for parking when it becomes scarce. The idea is to prevent people from “dumping” their cars for long periods in the center of town so that more people can park for an hour or two while they shop.

          • jeremy Morfey

            Thus the 45 minute or 2 hour limited free waiting time used in many towns and cities is the best solution – enabling quick shoppers to go in and out, but forcing all-day parkers to pay or find alternative ways in.

  • Rockingham

    Osborne is only giving back the business rates Thatcher took away, at the time it was considered her way of subsiding the shire counties, remains to be seen if central government grants to councils, will not be reduced for heavy industrialised councils, my bet is that it will, and the shires will be given more.

  • Terry Field

    Healey was sophisticated, well read, fully connected with the richness of a broad intellectual life, but it was he who, as Chancellor, returned to his office during the 1976 collapse of the markets, and the appearance in London of the IMF, required to direct the activities of the State in return for funds, as a result of the monstrous lunacy of the maladministration of the foul and utterly incompetent Labour Party – Wilson was moving out for the incoming horror, Callaghan.
    No hagiography for the ‘tax the rich until the pips squeak’ chappie please. An amusing bruiser, but part of the catastrophe that destroyed the future prosperity and industrial competitiveness of Briain.

    • vieuxceps2

      Heartening to read a good old-fashioned rant whose every word is honestly believed.Perhaps because it’s true.

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  • jeremy Morfey

    About time Osborne reversed the dreadful 1990 National Business Rate.

    This seemed to favour estate agents, out of town shopping malls and charity shops and penalised the little ‘Open All Hours’ shops on the borderline financially, but provided a modest living and self respect for many, as well as enhancing the variety of niches on offer in the High Street. Contrary to what I voted for in 1979 in anticipation of respect for her father’s profession, Thatcher’s Conservatism seemed to hate these unaspiring versions of free enterprise and like a moth to flame drew to Big Ambition to justify her existence. Blair did the same.

    I remember well the Village Ventures competition of 1990. One of the entries was a video presentation of the little market town of Kington in Herefordshire. Two-thirds of the little shops featured in the video closed down as a direct consequence of the National Business Rate.

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