UK Ministers Consider Devolving Business Rates to Regional Mayors

The Proposal for Devolving Business Rates

Ministers are considering handing over billions of pounds raised by business rates to regional mayors as part of one of the biggest shake-ups of the English tax system in recent years.

Background and Context

Steve Reed, the local government secretary, said the government was working on plans to devolve the tax, which has been the subject of recent protests by pubs and other hospitality businesses.

The move is part of a wider plan to shift tax income to local leaders, due to be announced by the chancellor, Rachel Reeves, at this year’s budget.

Key Considerations and Challenges

Reed told the Guardian: “The chancellor pointed to devolving aspects of income tax, as we discussed, but certainly we look at business rates, too – or elements of business rates.”

He added that local areas would not simply be allowed to keep whatever they raised in business rates, given this could exacerbate regional inequality, but that the new tax system would reward those areas that grew their economies more quickly.

The Potential Impact on Regional Inequality

Experts say the centralisation of tax and power in the Westminster government is one of the reasons the UK has some of the worst regional inequality in the developed world.

JP Spencer, director of devolution policy at the thinktank ThinkLabour, said: “Devolving the revenue from income tax or business rates to local areas would be a huge change in how our tax system and country works.

“It would give places the longer-term certainty to invest, plan and deliver better services for their residents.”

The Future Outlook

The proposal is part of a broader push to give mayors more power over areas such as justice, health and education.

Reed said: “The sky’s the limit … nothing is off limits.”