Speaking ahead of the expected Lyons announcement on Wednesday (21st March), Westminster Council has warned the Government that the Capital will lose the most from a possible new council tax band and has urged the return of a fairer share of business rates.
Westminster would support the power for Local Authorities to levy a supplementary business rate in conjunction with the local community. However, the council's preference remains for business rates to be restored to local control in their entirety. Any supplementary rate should be set and spent locally by the 33 boroughs to reflect the priorities of local people and local businesses.
Central London is already subsidising the rest of the country to the tune of £870m in business rates with Westminster keeping just 13 pence in the pound raised locally.
Without an improvement on this situation, it will be difficult for the Government to deliver on its promise of devolving power to local authorities.
Speaking ahead of the Lyons announcement, Councillor Colin Barrow, Deputy Leader and Cabinet Member for Finance said:
‘An extra council tax band represents the imposition of an extra tax on high value properties and is yet another tax on London and the South East. This will therefore hit taxpayers in London harder than elsewhere in the country.
'This also comes at a time when already 87 pence in the pound of local business rates are taken out of London and spent across the country.
'Therefore the number of council tax bands should not be increased, but consideration should be given to a system of council tax regional banding.'
‘This means retaining a larger share of our business rates in order to spend on key infrastructure projects such as Crossrail and the action plan to renew the West End.
‘The present situation whereby Westminster receives just thirteen pence back from the government for every pound collected by us for the Chancellor from our business ratepayers is clearly inequitable in a city that needs significant investment in infrastructure projects to cope with the huge numbers of commuters and visitors. For example, 90% of visitors to the UK spend some time in the City of Westminster and one million workers visit our area every day.
‘Whilst we understand the need for an element of redistribution in general taxation, it is also critical to take into account the importance of economies like Westminster to the rest of the country. It cannot be acceptable that the business rates generated from Camden, Westminster and the Corporation of London alone fund 10% of the general grant used to subsidise local services across the other 400 or so English authorities.
‘Surely this situation cannot continue and must be remedied by the government following the Lyons review in order to maintain confidence in business rates and ensure that a fairer proportion of local business taxation is spent in the area in which it is collected. High performing low tax authorities like Westminster must also be given the right to set the level of their local business rate.’
‘The Government, and in particular the Treasury, now must act on these recommendations and not kick the Lyons report into the long grass.
‘Westminster also believes that in order for local authorities to have more say locally and deliver the ‘place shaping’ role, we must have an increased ability to raise, and keep, revenues locally.
-ENDS-
Notes to Editors:
For further information please contact Andrew Hadfield on 0207 641 2259 or email ahadfield@westminster.gov.uk
A briefing note on Westminster’s response to the Lyons review is available on request.
The Lyons report is split into two separate but interlinked areas: the finance and function of Local Government.
Further notes to editors:
COUNCIL TAX BANDINGS
Westminster believes that the number of council tax bands should not be increased as the value of the property in which a person lives is not directly related to their ability to pay. Introducing a new lower Band A for the lowest value properties as the Lyons review has proposed may help some people in the north of England but will do nothing to help the low paid in London as even one bedroom flats in the Capital are unlikely to fall within this new lower Band.
Consideration should instead be given to introducing a system of council tax regional banding which would reflect the difference in property prices in different parts of the country. It is unacceptable that low income earners and pensioners living in social rented flats in inner London should continue to be placed in the same tax band as high income earners residing in large family houses in the north simply because of differential regional house prices.
COUNCIL TAX BENEFIT
Westminster endorses the recommendations of the Lyons review that that people entitled to council tax benefit should gain it automatically instead of having to claim it and that the threshold on the savings which individuals may hold before losing their benefit entitlement will be increased. This will vastly improve take up rates amongst pensioners who are understandly reluctant to claim means tested benefits. It is also essential, however, that the council tax benefit system is also revised to take into account the higher costs of living (including housing costs) in London compared to other parts of the country. Having a single national system of savings and income thresholds is perverse.
SUPPLEMENTARY BUSINESS RATES
Westminster would support the power for boroughs (rather than the GLA) to levy a supplementary business rate although our preference remains for business rates to be restored to local control in their entirety. Any supplementary rate should be set and spent locally by the 33 boroughs to reflect the priorities of local people and local businesses.
Any tourism tax should only be introduced if appropriate safeguards are put in place to ensure that there is no negative impact on the UK tourism industry.
Facts and Figures:
It is a common misconception that Westminster makes huge amounts of money from business rates. Westminster Council therefore is making residents and businesses aware of this situation and that as a Local Authority we only actually receive a tiny fraction of the Business Rates we collect on behalf of the Government. The burden on Westminster Council and businesses in Central London therefore needs to be re-balanced.
Westminster keeps just 13p for every pound it raises in local business rates- £870 million is taken from the city out of a total of almost £1bn. If Westminster was able to keep an extra penny in the pound raised in business rates then it would generate £24m.
Westminster (£1bn) collects more than three times in business rates on behalf of the government than the City of Birmingham (£320m). Yet Birmingham gets £500m back in redistributed business rates from the government to fund local services compared to only £130m for Westminster.
Businesses in both Leeds and Manchester meanwhile each generate £250m of income for the government but both get more than £500m back from the national business rates pool to provide local services.
Newcastle receives almost the same amount back from the government as Westminster in redistributed business rates (£124.792m compared to £134.235) but contributes just one seventh of the amount in business rates (£140.96m) to the national economy.
Other London boroughs make significant contributions in business rates to subsidise the rest of the country. They include the Corporation of London (£560m), Camden (£167m), Kensington and Chelsea (£104m), Hillingdon - i.e. Heathrow airport - (£200m) and Tower Hamlets (£68m). Hammersmith and Fulham as well as Islington also lose smaller sums.
Westminster’s £860m annual business rates subsidy to the rest of the country would – in a single year - pay for the entire £550m of additional council tax which is being levied on Londoners by the GLA to fund the 2012 Olympics over the next ten years and still leave over £300m to spare!
Andrew Hadfield
Media Officer
Corporate Services
Westminster City Council
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T: 020 7641 1805
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ahadfield@westminster.gov.uk
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