Gary Duncan, Economics Editor
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The Government will signal this week its willingness to give local authorities the power to raise extra business rates in order to fund specific infrastructure and transport projects.
Alongside a Treasury paper on regional development authorities, Alistair Darling, the Chancellor, is expected to pave the way for the change to local authority powers to enable them to fund projects such as city tramways and commuter systems.
Ministers’ readiness to devolve new tax-raising powers to councils through a “supplementary business rate” comes as Mr Darling faces an imminent decision on Crossrail, the proposed mainline train service to connect East and West London.
Both the Chancellor and Gordon Brown have made clear that they are eager to approve Crossrail - but only if the scheme, to cost up to £15 billion, is affordable. That will depend on whether there is a sufficient financial commitment, not only from the Treasury and from Transport for London, but also from business in the capital.
Mr Darling is considering whether to require businesses to commit themselves to the project through direct levies associated with Crossrail, or through an increase in local London business rates.
An early green light for new powers for councils to levy top-up rates on local businesses could provide a partial funding mechanism for Crossrail and other infrastructure projects nationwide. Other schemes that could benefit include plans to expand Greater Manchester’s tram system, and for Newcastle to extend its Metro.
Local taxes paid by business are determined in Whitehall through the “uniform business rate”, increases in which are pegged by law to inflation. However, in a report commissioned by Mr Brown, Sir Michael Lyons this year recommended a supplementary business rate to allow councils to levy a limited extra charge for capital projects. The extra levy would be limited to 4p in the pound, against the 44p in the pound basic level for the nationally set uniform business rate applied to business properties’ rateable value.
The additional levy could also be minimised if it were used to fund loans, permitting councils to borrow up to seven times as much as the annual income from the charge.
Any use of the power would be approved only after consultation with local businesses on planned projects.
However, although introduction of a supplementary rate may be supported by some sections of business, it is certain to be highly controversial.
The CBI and the British Chambers of Commerce are pressing for use of the levy to be possible only after a vote among firms that would be charged.
John Cridland, the CBI’s Deputy Director-General, said that, in a recent consultation with 600 company chiefs across Britain, the CBI found support for a local levy given widespread need for infrastructure improvements. Any support was based on businesses being allowed a deciding vote.
Mr Cridland said: “The CBI has long argued that more investment is needed in infrastructure and that it will need new forms of finance. We are open to it – but we think that the vote is the way to ensure that business is genuinely brought into the project and on board for it.”
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Yet another stupid idea from the government. Small business gets tax after tax thrust in them to satisfy Gordon Brown's desire for more money...
Reform Whitehall and save billions, then this can be invested in a proper national rail infrastructure like you get in most other countries. This will reduce local problems and a new string of piecemeal initiatives which don't join up or solve the porblem.
Why should small businesses take the burden again? Get the banks and other massive institutions to put up the finance from their obscene profits to fund national solutions.
This is just the contiunation of a string of events whereby the government abdicates responsibility for their manifesto and commitments. Just at the start of this month we saw the introduction of the ridiculous idea of all businesses being required to display no smoking signs to implement DoH policy. There was none of this rubbish in Scotland when they introduced their smoking ban. Now we pay more tax again
Mark, Warwick,
Why is it both the Labour government and local authorities can get away with such level of incompetency in public finance ? Why is it government ministers are never responsible for the mess they create, and does anybody remember Gordon Browne selling our gold reserves when prices were rock bottom? Why is it businesses and the middle class are always considered legitimate targets for yet more unfair taxation? To Tom from Belfast, I think the top up rates will hit local small businesses a lot harder than the private equity firms. Also what makes you think "buy-to-let" owners are making "obscene profits"? Please justify your statement with statistics. Can someone explain why some leaches can make thousands of pounds out of our benefit systems whilst hardworking middle class families get taxed at an obscene 40% (plus NI)? Self-improvement, entrepreneurship, risk-taking are no longer rewarded in this country. Welcome to the Socialist Republic of Great Britain!
Sam, Manchester, UK
Most businesses in this country are struggling let alone small, the exception are the privately owned who pretend they are not domiciled in this country. They are the ones who should be taxed to the hilt not the stugglers. Oh well, another nail in the coffin for the decline of British businesses !!
J Stephens, St.Leonards-on-Sea,
It would be helpful to local democracy, if councils could retain the business tax already levied.
Peter York, Tonbridge, Kent
This may be controversial: it is also necessary. Much has been made of the huge city bonuses given out to the hot young things who haven't the faintest interest on spending their money, except on themselves. This is unfair. I gather that getting individuals to cough up for the salary of even one day's work is very difficult. Businesses are or seem much more willing to "pay back". However their "interests" may also over -colour how the funds are spent. I know that in the art world that how an exhibition is presented to the public can depend on the corporation's sponsership. That is not as it should be. It should be with no strings attached: let the art institution decide. Then we would not have the anomily of free headsets (super-duper ones with pictures) at Tate Modern and the mess that was the Rodin Exhibition at the RA. Maybe the RA did have freedom: if it did it made bad choices! I was castigated for having the large print labels booklets on me: there were at least 2 to lug about!
Carlyle Braden, Croydon, U.K
What are we paying for now if it is not infrastructure? Health, NHS, welfare, etc. are paid for by personal taxes.
R Mason, London, UK
Are there any accountants in the treasury that can help to get us out of this one way street.Some one that can think outside the box so that more can be achieved for less.Did I read that £60bn was being wasted per annum or was that a dream?
Pete, Berkshire,
This government has given us a huge increase in red tape, tax increases (Employers NI and Corporation Tax for example), they want us to pay into our employees pension schemes (after they themselves have plundered pensions) and now they want this as well? You already get nothing for your business rates (not even waste disposal). How many people will give up running businesses with employees in the first place and become a consultant of some kind working from home? Sounds like you have a better chance of survival that way.
Lee Taylor, Southend,
The current business rates are already a huge burden on small business. This government seems intent on putting all small business out of business!
Keith, Diss, Norfolk
Good idea arriving none too soon. Given that business is the basis of our society, it is right that business should underwrite, directly, the costs of doing business, including the cost of getting people to and from work,keeping them healthy while in work, and enticing more people to come to work in a given area.
David, Birmingham, UK
Are there any accountants in the treasury that can help to get us out of this one way street.Some one that can think outside the box so that more can be achieved for less.Did I read that £60bn was being wasted per annum or was that a dream?
Pete, Berkshire,
Oh look,the Labour parties solution to every problem, more tax that they can waste.
A Hunt, Wisbech, Cambs
What's this ? Another Tax ? surprise, surprise ! If the Governent spent the tax they collect already, more efficiently, there would be billions left over, which would allow for a tax REDUCTION !
steve fisher, Brisbane, Australia
Could be a sensible move ! This would be a great opportunity to tax those people (private equity and buy-to-let) who have made obscence amounts of monies in recent years to the detriment of society as a whole). Tax them and use the monies to improve the country.
Tom, Belfast,
WE really do need a big input into up-to-date transport systems-a really bold step forward (like the Victorians made).I was in Bordeaux recently and enjoyed several days of hopping on and off the three interconnecting trams(only 3 years old ,clean,cheap and punctual)and then came back to the traffic mayhem of my nearest city of Bristol.Oh dearie me!
H.D, W.s.Mare, N.Somerset
Yet another tax that will crush the small business and push the margina over the edge. Then, we will have headlines in your paper wondering why we have so few small businesses...
A Mattinson, Leicester, England