Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 700-704)


23 JUNE 2004

  Q700 Mr Betts: Each year they have paid a lower percentage since the business rate was linked to RPI.

  John Healey: Each year there has been an increase in the business rate, but that has been set consistently at the level of inflation. Businesses still contribute 22%—

  Q701 Mr Betts: It is dropping each year.

  John Healey: It is 22%.

  Q702 Mr Betts: And dropping each year.

  John Healey: That is right, ten years ago it was 27%. It is still a substantial amount and it is right that they make a contribution.

  Q703 Chairman: The balance is shifting from businesses to the local householders. You could argue that some of the extra duties that the local authorities have been given by central government have been more to help local businesses than to benefit the individual householder. So is it not fair that if extra is coming on, business should at least be increasing or going back to the proportion it used to pay?

  John Healey: I am not sure I agree with your proposition that those are the right reference points. The point is that business still makes a substantial contribution to local authority finances.

  Q704 Chairman: Yes, but so do the householders.

  John Healey: We have put in place other reforms which are better and more creative uses of the business rates. You will be aware of the local authority business growth incentive which comes into force in April next year. This is an incentive for local authorities in being able to keep a proportion of the increase in the business rates; it is to try to encourage local authorities to play a greater role in the economic development of their areas and if we had had that system in place over the last three years, it would have been worth an extra £1 billion to local authorities, an extra £1 billion which we have said would not have been knocked off and will not be knocked off the totals which have already been set in the spending review.

  Chairman: We are overrunning, so we shall have to close at that. May I thank you very much for coming; a very useful set of evidence. Thank you.

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