Business leaders have reacted angrily to the proposed legislation allowing councils to levy a supplement on business rates from 2010 to pay for local economic development projects.
The proposal to permit local authorities to add 2p in the pound to the rates paid on larger properties has been bitterly opposed by businesses, which see it as a way for hard-pressed councils to plug their deficits.
But even those organisations sympathetic to the idea of raising additional revenue from business to pay for earmarked improvements say adding to business costs as the recession deepens would be highly damaging.
“Additional funding is needed for big infrastructure projects, especially Crossrail,” said John Cridland, deputy director-general of the CBI employers’ group. “But now is not the time to bring in new powers to raise tax more widely from business.” Miles Templeman of the Institute of Directors said it supported the use in principle of a supplementary business rate for Crossrail. “But any benefits from projects funded by these supplements will come after the recession, while the burden will be imposed during it.”
Defending the tax, John Healey, local government minister, said: “Timing will be a decision for any local authority that has this power to weigh up. There will be a new statutory requirement to consult with local businesses, however.”
The additional charge would be paid only on properties with a rateable value of more than £50,000, he added, so it would apply to fewer than 10 per cent of business properties.
But organisations representing retailers and the construction industry said they would be hit disproportionately.
The British Retail Consortium said the supplements could add an extra £160m ($236m) a year to the tax bills of retailers, who already paid £5bn a year in business rates – more than any other sector.
“This is the wrong tax at the wrong time,” said Alex Gourlay, Boots’ managing director. “It will simply lead to increased costs for retailers at a time when the sector’s margins are already being squeezed by a wide range of additional property costs and trading conditions are challenging.”
The Federation of Master Builders said the supplements would be “yet another kick in the teeth for a construction industry already suffering as a result of the credit crunch”.
Business organisations have demanded a ballot of the affected businesses before a supplementary rate can be levied – the government says a ballot would be required only if the levy will contribute more than a third of the cost of the project.
There are fears that local authorities will hold down council tax by spending less on roads and other services, knowing they could levy a supplementary business rate to reinstate the spending.
Pledge to ban ‘all you can drink’ promotions
A ban on “all you can drink” promotions in bars and pubs, and curbs on supermarkets tying discounts to the purchase of large quantities of alcohol were promised by the government on Wednesday, writes Nicholas Timmins.
Ministers will also consider the findings of government-commissioned research showing that – aside from a general price rise – the biggest single reduction in harm from excessive drinking would come from setting a minimum price for alcohol in both bars and off-licences.
“Targeting price increases at cheaper types of alcohol would affect harmful and hazardous drinkers far more than moderate drinkers,” according to Dr Petra Meier, the research leader from Sheffield university’s school of health, which carried out the study.
Ministers, however, remain worried about a middle-class backlash against an overall price rise, or the setting of a minimum price.
Alan Johnson, health secretary, said he was “not ruling out taking action on very cheap alcohol”.
But the study required greater evaluation. The government will also consult on banning drink promotions in bars and pubs, and on requiring pubs to have minimum-sized glasses.
It intends to raise the fine for drinking in public, strengthen police powers to confiscate alcohol from the young, and remove licences where vendors are found to have sold to children twice in three months.
The government will also consult on strengthening local authority powers to limit low-price alcohol sales, “happy hours” and organised pub crawls.