From the FT
George Osborne announced the biggest shift in financial control from Whitehall to town halls in decades, pledging that local areas will fully benefit from growth in their business rates in the latest phase of his devolution “revolution”.
The chancellor on Monday said he would overhaul the system of local government finance introduced by Margaret Thatcher in 1990, vowing that he would also give councils the power to cut — but not raise — business rates, a uniform tax on the value of business premises.
It's not hard to see where the Tories are going on this one: give the local authorities the power to cut business rates and they will do it, eager to attract businesses to their "low rate area". No doubt businesses will come, lured by the promise of paying less in business rates, but wait. Almost immediately the price of commercial land will rise in these low-rate boroughs. So also will the rents on premises to let. Then rent review by rent review, the commercial rents will rise to the point where the entire saving in rates is absorbed by additional land costs. The net result will be that landlords will have more tenants and higher rents and the local authority, if it is lucky, will find that the increase in business might just about pay for the rate cut.
I think it's called "bait and switch".
Debate Magazine
