Business rate supplement is not a 'stealth tax', ministers insist

Published by Hannah Wooderson for 24dash.com in Local Government and also in Central Government

Plans to allow councils to charge an additional supplement of up to 2p on the national business rate will not amount to a "tax on business" ministers insisted today.

Local Government Minister John Healey said providing the extra fund-raising power to the Greater London Authority as well as county councils, metropolitan districts and unitary authorities in England and Wales would "boost" local economic growth.

The measure was recommended by the Lyons Report into local government and is set to be implemented in the Business Rate Supplements Bill.

London's crucial Crossrail railway link is the most high-profile project expected to be funded in part by a rate supplement of 2p per pound of rateable value.

But the Tories wish to block the powers, arguing they amount to a "stealth tax" on firms at a time when the economy is in recession. They also want local firms to be able to have a vote on any supplementary rate.

Opening Second Reading debate in the Commons Mr Healey said: "This legislation is part of the policy framework needed to prepare for the other side of the downturn.

"We are not imposing a new business tax but introducing a new power to allow local authorities, with strong safeguards for business, to raise some of the money needed to boost local business and the local economy in the longer term."

He said that in London, likely to be the area where such a power would first be used, it could raise £170 million a year.

This was an "essential element" in the funding for the capital's Crossrail project which would benefit businesses in London.

He added: "There are significant safeguards in this Bill which would mean in all likelihood that as many as nine in ten businesses would not be liable to pay a business rate supplement if it were introduced in their area."

Tory former Cabinet minister John Redwood (Wokingham) said: "This is in fact a tax on business."

But Mr Healey denied the charge and said it was "right" that all areas in England and Wales had the chance to use the power: "This legislation for the long-term investment and the upturn should not be stalled by short-term concerns, nor should the interests of London be placed ahead of other parts of England and Wales."