Mixed feelings over devolution of rates to Hampshire

But how will the major changes to business rates, announced by Chancellor George Osborne this week, actually affect councils and taxpayers in the south?

In one of the most eye-catching moments of this week’s Conservative Party conference, Mr Osborne announced described as the “biggest transfer of power in recent times”.

The move to transfer the power for £26 billion of business rates to councils will spell the end of the current annual grant each authority receives from Whitehall which is spent on frontline services.

But it is something that has been discussed by Hampshire’s civic chiefs for months already, as grabbing power over business rates is one of the most important parts of the joint bid by all 15 council leaders for devolution.

Top level talks over a devolution deal are continuing but it now appears that one of the central planks of the bid has already been given the thumbs up by Mr Osborne and will go to the rest of the country as well as Hampshire.

Currently businesses pay rates which are calculated by multiplying the rental value of their property by standard or lower rates of 49.5p or 48p respectively. Recent Changes have allowed councils to keep 50 per cent of that with the rest going to Government – £27.6 billion in 2015/16.

However that is now set to change by 2020. Councils will be able to cut business rates to attract new businesses and jobs, although only those in a combined authority with a directly-elected mayor – something that could happen in Hampshire – are expected to be able to add a premium of up to 2p to pay for major infrastructure projects.

Continued on page 16 It is estimated that the figures for the amount of money raised in business rates in Hampshire and the amount given to its councils in grants are both about £1bn, although more detailed work to provide exact figures is going on as part of the devolution process.

Conservative Fareham Borough Council leader Sean Woodward says he believes the nationwide announcement was influenced by Hampshire’s bid, saying: “Government doesn’t have complete control over all of the good ideas”.

He also says the county will not see an increase in money newly-available through business rates but said it will help to attract businesses and give more incentive to continue expanding Hampshire’s economy.

He said: “There won’t be a net benefit to us, we are in austere times, but the big, big advantage of this is that there is a huge incentive for councils to do what we already do in Hampshire to try to attract business to the area.

“The big advantages are that the better we do in attracting businesses the more money we will make and can be spent on services.”

Labour Southampton City Council leader Simon Letts says the amount currently given to Government in business rates from Hampshire outstrips the money handed to the county in grants by about £100m - but he does not expect the county to be handed a sudden cash windfall as a result of the changes.

He said: “We are £100m up but we think they will probably give us extra responsibilities as well - there is no way Hampshire will escape more cuts.

“We know that the Conservatives are committed to more reductions and this will just mask the effects.”

Cllr Woodward suggested that extra responsibilities could include taking on control of budgets for the county’s roads, which is something that also forms part of the bid for devolution.

Saying Hampshire is in the “vanguard” and may become a pilot for the new scheme, he said the councils will have to work together to balance out each other’s needs and earning power to make the system work.

He says safety nets will have to remain in place across the country to ensure councils with less potential for business rate increases do not suffer, and said that the Hampshire bid included the guarantee that no council would be made worse-off by the move.

If the Hampshire system is to work it will involve constant negotiations between the various councils, but Conservative Winchester City Council leader Stephen Godfrey says this will still be better than the current situation.

He said: “We have to develop a level of trust between the different authorities.

“You are never sure about how you neighbouring authorities may negotiate and what they might be trying to take off you in terms of money or arrangements, but if you know them then it is much easier to deal with someone you know and meet on a regular basis rather than a faceless bureaucrat in London.”

His counterpart at Test Valley Borough Council, Ian Carr, says he hopes the changes could encourage more businesses to set up shop in the region, therefore creating jobs and injecting investment into Hampshire.

He said: “We could reduce business rates if we wanted to and we could use business rate relief to attract new shops in.

“We don’t want to be out of pocket through any of this and we don’t want any control from Government on how we set it and what we can do with it.

“We’re not into taking 100 per cent of business rates if it’s going to cost residents in the long run, we’re about getting good value for services and maintaining those services for residents.”

However there have been some concerns that the Government is “blackmailing” councils in Hampshire into accepting a devolution deal by threatening cuts to funding.

Lucille Thompson, the leader of the Liberal Democrat group at Winchester City Council, this week spoke at a meeting saying plans for a county ‘super council’ could scupper the potential cash boost of keeping business rates.

She said: “It’s good news so far as the city council’s concerned because it’s always great when councils can take control of their own finances,” she said.

“I think where the danger lies is with the devolution package that the council is going for.”

“The government’s blackmailing councils to sign up to the deal.

“They’re saying ‘the carrot is that you will get all your business rates, and if you don’t sign up to the devolution deal we’re going to cut your rate support grant’.”