According to the
BBC, a report due out shortly is likely to recommend that full control over
business rates should be devolved to the National Assembly as a move to help
businesses in Wales. The implicit assumption behind that, of
course, is that the result of devolution of control would be a reduction in the
level of business rates, although that is not the only possible consequence.
As one who favours
full devolution of all taxation to the Assembly, I’m hardly likely to oppose
the proposal in principle. And I’ve
argued before that reducing taxes on the operation of businesses and taxing the
money through Income Tax and CGT when it is taken out of the businesses would help
to boost GDP in Wales. (With the proviso, naturally, that there are
no loopholes which allow the money to be transferred to an alternative tax
regime before being withdrawn.)
There are, though,
two aspects of this proposal which concern me.
The first is that
calling for power over one form of taxation, and then for a reduction in that
tax, without the power to increase taxation elsewhere to recover any lost
revenue is tantamount to calling for the Assembly Government or local councils to cut spending
elsewhere. In effect, it means
transferring available funding out of fields such as education in order to give
Welsh businesses a competitive advantage over businesses elsewhere in the UK.
That implication
doesn’t seem to have been spelt out at all clearly. But it’s the reason that I would always argue
for devolution of a range of tax-varying powers rather than a single tax;
taxation needs to be considered in the round.
The second concern
is the suggestion that business rates should be retained by individual councils
rather than paid into the centre and then dispersed on the basis of some
formula. The idea is not without merit;
after all, the businesses concerned receive their services from the council in
whose area they are situated – why should the revenue not go to that authority?
However, the
current system allows for a degree of geographical redistribution. It may not be the right way, or even the best
way, of managing that redistribution, but merely removing it without putting
some sort of replacement mechanism in place is a recipe for widening
geographical disparities in Wales.
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