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Business Rates system changes

January 15, 2013 12:06 PM

Business rates, or National Non-Domestic Rates, are collected by local councils. Many people are under the impression that the council gets to keep the cash, but in practice the whole bag of loot is grabbed by central government.

As of this April though the system will change. The initial thinking behind the new arrangements was that if councils kept the money they would have an incentive to attract and encourage business development which would be good for both local and national economies. So HMG has decreed that councils can keep half of the revenue raised, with a corresponding reduction in government grant. However the government will still set the rate on a national basis, and there will be floors and ceilings to ensure that successful and enterprising councils will have to subsidise the dozy ones. There is an elaborate system controlled by government ministers to make sure local authorities don't show too much initiative or make too much money from the system.

The ideology is similar to the way in which council tax is controlled - in theory councils can vary their rates, but in practice local council tax rates are firmly controlled by central government. This government has taken centralisation even further than the previoius one by taking away the freedom previously enjoyed by parish councils to set their own rates.