Making the case for city to keep its own business rates

Can devolution unlock an extra £110 million a year for Cambridge?

The majority of business owners in Cambridge will see the amount they pay in business rates rise next year.

Questions are being raised about the value that Cambridgeshire businesses get for paying their rates, and while control is with Whitehall at present, by 2020, local authorities could be put in control of local business rates, which would be a game-changer for Cambridge and the surrounding area.

But there is a case being made for Cambridge to get control ahead of schedule. Liverpool and Greater Manchester, linked to their devolution deals, are heading pilot schemes to see how local control of business rates could affect the regions, and there is a strong case for Cambridge to get the same.

City council leader Cllr Lewis Herbert, pictured, said: “Devolution for Cambridgeshire and Peterborough offers real potential for future business rates being managed locally, making far better and more transparent use of the £110million a year raised from Cambridge, £100million from South Cambridgeshire and roughly £400million in total from across the county. We want a future deal to be agreed with government on the local reinvestment and management of all of these business rates.

“While we understand the need to share the Cambridge rates with worse-off areas, including within Cambridgeshire, it is a gross injustice that the city and county currently keep around 15 per cent, and the other 85 per cent from Cambridge is taken and decided by Whitehall.”

The city also pays the government £3billion annually in tax revenues – far more than is returned.

Cllr Herbert continued: “Greater Cambridge brings in business from across the world, and as with the wider surplus billions we generate in tax revenues for the Treasury, we can show Government that putting more into Cambridgeshire transport and affordable housing will generate even more for them in future decades, as well as benefit our residents and businesses. The benefits would depend on the deal struck with government, and Treasury is likely to drive a hard bargain.

“I expect Government will be persuaded if we show how we can use the money better, but if it’s a bad deal or there are uncosted extra obligations there’s also the risk that local councils would have no choice but to walk away from a bad deal.

“If it’s fair settlement, local businesses would be able to see what happens to the money they generate for the first time, and we would have far greater financial freedom and with it responsibilities too. One of the risks is that Whitehall tries to shift even more costs than local management of business rates will generate, and they have shown a tendency to renegotiate deals late on.”

By 2020, councils will no longer receive government grants.

“The county council is having its services damaged far worse than districts, so we think Cambridge City Council will balance the books thanks to a whole bunch of efficiency measures,” said Cllr Herbert. “Even at my most optimistic times, I cannot see government being over-generous, particularly with spiralling government borrowing and an uncertain national economy in the five years after Brexit and beyond, but what they can see is Cambridge is too valuable a community and economy to put at risk.”