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News - 30 April 2004
Tinker at your peril

Councils might regain control of UBR

A government committee tasked to explore alternatives to the increasingly unpopular council tax is looking at the possibility of allowing local authorities to control Uniform Business Rates (UBR), which are set nationally but collected locally. The move will not be popular with the business community.

John Prescott has indicated that there is very strong support for the idea from local council’s increasingly strapped for cash as central government places ever greater demands on them without necessarily providing extra funding. The County Councils Association (CCA) has made it clear that they feel reinstating local control of rates would be the best way to resolve their funding problems and encourage better partnership with businesses.

The business view is almost diametrically opposed. The UBR is a hated tax amongst the myriad small businesses in the UK because they claim they cannot see what they get for their money. Restoring local control would make the benefits of the tax much more transparent but they fear that it would make the amount collected much less predictable. When the rate was nationalised there was general relief at the end of huge variations across council boundaries that bore no relation to services delivered. Instead the rate is currently set nationally and reassessed every five years. Between assessments annual increases are tied to the retail price index (RPI) and so are fairly predictable (although element in the Treasury feel this link to RPI should be removed) The business community fears that cash strapped councils fearful of losing votes would simply put the burden of balancing budgets onto the UBR. Even if local authorities are reluctant to do this their hand may well be forced by central government placing even greater demands on them and expecting them to use the UBR to cover the cost.

This would seriously weaken the ability of businesses to plan their investment and cash flow. Also any tinkering with the UBR, either by restoring local control or removing the link to RPI may well kill off the fledgling Business Improvement Districts (BIDs) before they have even learned to fly.

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