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

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recession to go on collecting £26 billion a year from hard-pressed firms based on an arbitrary multiplier applied to out-of-date rental valuations, in many cases long after those values had slumped to the point at which the rates were a higher cost than the rents.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.