AN INFLUENTIAL think-tank is backing a Government proposal on business rates that Liverpool City Council claims could see it lose more than £80m a year.
Centre for Cities is backing the proposal that could see local authorities keep up to 60% of the business rates they collect and use it to promote economic growth.
Currently, all the money collected by councils goes straight to central government, which then redistributes it back in the form of direct grants.
A Government review, due to be published in the coming weeks, will propose bringing in the change from 2013.
Paul Brant, the deputy leader of Liverpool’s Labour-controlled council, told LDP Business the move would be “catastrophic” for the city.
“Areas like Westminster and the City of London would make massive gains because of the huge level of business rates they collect,” he said.
“If you have a depressed area like Liverpool, with fewer businesses, then it will obviously lose out.”
In the last financial year, Liverpool collected £175.5m in business rates and was given £284m by the Government.
Centre for Cities says in a report out today that allowing cities to keep between 40% and 60% of future tax made on business property would create a long-term incentive for areas to support development.
Chief executive Joanna Averley said: “The Government must not miss this opportunity to be radical in revising the business rates system.
“Reviewing the system will not only reward councils for being pro-growth, but it will also make a real difference to the people they represent because the money raised could be ploughed straight back into the community, into things like roads and schools.”
The report said the current system offered no direct financial incentive for cities to develop their business base.
But Cllr Brant hit back, saying the council was already working hard to grow business in the city.
He added: “Councils already have a powerful incentive to create jobs and Liverpool has already been at the forefront of attracting businesses to the city.
“We have been to the Shanghai Expo, we have the entrepreneurs conference coming here next year and we have been working with Peel on LIverpool Waters.”
Both Centre for Cities and the Department for Communities and Local Government (DCLG) claim mechanisms will be put in place to ensure councils would not lose out under the new formula.
A DCLG spokeswoman said: “Protections will be in place.
“In year one, funding will be based on what it is now, and then after that there will be tariffs and top-ups. It will be monitored to make sure councils are not left financially worse off.”
Liverpool Chamber of Commerce chief executive Jack Stopforth told LDP Business: “If it is the case that no local authority would lose out, then we need to keep an open mind on the proposal.”
