Why a levy on Business Rates?

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Thursday 2 March 2006 10.04am
Having been on the receiving end of the Inland Revenue's 'valuation process' I'm a little mystified as to why the BID scheme should be subsidised by a levy on Business Rates. Business Rates are a bureaucratic process which create jobs for the boys from the RICS. Surely anyone buying into the BID scheme should be rowing their own boat and not being subsidised by other businesses who are already being bled dry by the current system. Or am I missing something?
Thursday 2 March 2006 4.26pm
There are a lot of issues here and in your other thread, and I certainly wouldn't seek to countermand your view - as a holder of business premises, which I am not - on the justices and injustices of the current business ratings system.

However, while the BID levy is based on ratings valuations, and is collected by the Council through its UBR mechanism (prior to being passed to the BID company), it is not (I believe) actually a levy 'on' Business Rates.

With respect to the voluntary/compulsory argument, we did - as you know - have to go through a ballot of businesses before the BID could be put in place. Although there will no doubt still be businesses who resent paying the BID levy, the 'compulsory' nature of BIDs does create budgets with which the BID companies can actually effect some genuine improvement in the trading environment. The previous culture of 'voluntarism' often meant that Town Centre Managers (for example) spent as much of their time trying to raise funds as they did spending the money they raised.
Thursday 2 March 2006 6.17pm
Giles

I don't know how the BID scheme funding is structured but the basis of a BID scheme is (I thought) that businesses can opt out of services which are paid for through business rates. Those opting out are then in a position to provide those services themselves at competitive rates.

But everything that I read suggests that everyone else continues to pay their business rates normally (ie being bled dry) whilst the BID schemers get additional subsidy creamed off the UBR pot.

I also notice that Southwark and Lambeth have recently stated that their slice of the take from Council Tax will remain the same but they don't comment on why the global take will rise. Is it to subsidise 'touchy feelie' projects like the BID scheme.

Sorry if I sound a touch cynical but 20 years of Business Rates in SE1 tends to encourage cynicism.

Regards

Niall Connolly
Monday 6 March 2006 2.32pm
Niall - regrettably (for you at least!) that isn't the case. The Business Improvement District levy is additional to Business Rates although, as previously stated, it is not a charge 'on' Business Rates.

In return we are under an obligation only to provide services additional to those coming from statutory providers, such as Southwark Council and Transport for London.

Re Council Tax: by 'global take', do you mean the net increases announced in other authority areas? Or Ken's slice? Other than the investment which kicked off the five central London Business Improvement Districts (http://www.c-london.co.uk/output/Page127.asp)and some investment by some RDAs, we are not aware of there being a lot of cash available to would-be BIDs.

Best,

Giles
Monday 6 March 2006 10.23pm
Giles

If I understand you correctly, members of the BID scheme are paying additionally to the establsied Business Rate for services which they want but are not provided by statutory authorities. What sort of services would they be?

I had a look at the website to which you referred and the opening page contains this:

Through leadership of The Circle Initiative, CLP is supporting the development of BIDs in five areas of central London. This work has been funded through 4.6 million of regeneration funds from the London Development Agency (LDA).

and goes on to say:

By working alongside other local stakeholders, the private sector leads on long-term, sustainable management arrangements which are over and above the services traditionally provided by local government. Funding comes from a levy on commercial properties in the area - usually a very small percentage of the rateable value.

These two statements seem to suggest that funding for the BIDs schemes comes from within the defined geographic area - apart from the money that is pumped in from the LDA (ie from taxpayers).

I'm also intrigued to know if Business Rates in Bankside are being hiked by 60+% as they are on Bermondsey Street. Does that mean that the BID scheme will receive 60% more funding?

I would certainly support any process that actually delivered some benefit for business. When a small business is faced with a Business Rates bill for approaching 7,000 per annum whilst, at the same time, paying for their own security services, garbage collection, etc etc, it would be nice if the charging authority were required to quantify the cost of those services and therefore justify, or otherwise, the charge. Will the BID scheme lead to that sort of transparency?

Regards

Niall Connolly
Monday 13 March 2006 5.30pm
Niall,

Yes, you're right, the money does come from within the defined geographic area - in our case the area shown on our website at http://www.betterbankside.co.uk/site/bid/areamap.htm.

Better Bankside was one of the lucky recipients of the LDA funding, as was Waterloo Quarter Business Alliance, whose positive ballot result came through last week. Other BIDs have to try to locate other sources of 'development' funding - a difficult proposition unless the businesses themselves to choose to dig deep.

We became aware when we were campaigning that it was likely that the 2005 ratings list (the valuations being changed every five years, as you know) would show a significant (even huge...) increase in valuations. For a variety of reasons we chose to link our 'levy' to the 2000 list instead. That formula (levy x 2000 valuation) is now fixed for our five-year life, although we are allowed to add an RPI-linked increment every year.

I never analysed the figures to see what the total increase in valuations between 2000 and 2005 was, across the piece. But certainly businesses have told us about figures exceeding 50%, and expressed a signficant degree of disquiet. This prompted us to organise an event on ratings (focusing on appeals) soon after we went 'live' last year.

In terms of transparency, we are a company limited by guarantee, and are therefore subject to corporate governance - our AGM took place two weeks ago and we have recently published our annual review. We have also just had to put together a spending profile to go out with the 2006-07 bills.

Of course the dilemma with business rates is that, although they are collected by local government, they go to central government, meaning there is no direct correlation between what you pay and what you get back in services. The Council also has no say in either the valuations or the annual 'multiplier' by which actual rates are calculated.

The Council is meant to consult with you annually over rises in the UBR 'multiplier', and it does - I believe - invite businesses to an annual (no doubt poorly attended - why shoot the messenger?) meeting.

I believe there is some talk about reforming the system to allow a percentage of business rates to be retained locally. However I will have to bow to those with more knowledge on this issue.

Cheers,

Giles

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