George Osborne is the man of the moment, the future Tory leadership contender who is riding high right now. So it was rather clever that instead of offering a showy speech to the Tory conference, the Chancellor announced a rather technical but big reform as his speech ‘rabbit’.
His refrain throughout the address to conference was that ‘we are the builders’, and to underline that, he announced his National Infrastructure Commission which was trailed overnight. But he also announced reform to local government funding. This will see the abolition of the local government grant (it will be phased out), and in return councils will be able to keep all the rates they collect, with local authorities getting 100 per cent of their rates by 2020. They will also have freedom over the rates in their area, as Osborne announced he was abolishing the uniform business rates. Once the reforms are in place, city mayors will be able to raise business rates by up to 2p in the pound with the approval of a majority of businesses represented on the local enterprise partnership in order to fund infrastructure projects. Councils will also be able to lower business rates to compete with one another for local trade. Asked after the speech whether the Chancellor was happy that this would mean local areas would steal businesses off one another by lowering their rates, one of Osborne’s aides said ‘yes’.
The Chancellor said that ‘any local area will be able to cut business rates as much as they like to win new jobs and generate wealth. It’s up to them to judge whether they can afford it. It’s called having power and taking responsibility.’ So areas with low growth could, if they can afford it, try to attract more businesses by cutting their rates.
For those who feel that this policy is rather familiar, that’s because it cropped up in this 2015 manifesto document:
‘We will enable city and county regions to retain 100 per cent of additional business rates raised from growth in their area.’
That’s Labour’s manifesto, by the way, a document Osborne seems remarkably fond of. But perhaps his willingness to adopt Labour policies can be explained by the fact that it was one Lord Adonis who came up with this plan for the business rates.
But what he is doing is shifting the responsibility for growth, and no growth, for good services and bad services down to councils. So if an area isn’t growing, it is the local council’s fault, not national government. Now given the local authority should, in theory, be best placed to know what is best for that area, this should be the best way of helping areas grow. But it’s also quite handy given the looming comprehensive spending review.