The City Growth Commission, which was established by the Royal Society of Arts 2020 Public Services Group, published its final report and recommendations on 21 October 2014. The Commissioners, who were chaired by Jim O’Neill and include a number of eminent economists, conducted a 12 month long independent inquiry into how best to enable the UK’s major cities to drive growth and respond to the fiscal and economic challenges of the future. Their final report, amongst a wide-ranging series of recommendations, suggests that devolved metro areas should be allowed to set and fully retain a suite of taxes including, as a minimum, the whole of Business Rates and Council Tax for their areas.
The report identifies 15 metro area throughout the UK, ranging in size from London (12.5 million people) to Leicester (0.5 million) and including Glasgow and Edinburgh in Scotland, Cardiff in Wales and Belfast in Northern Ireland. These areas in total represent a population of over 30 million people. Given the high property values associated with the metro areas, it is clear that they would represent significantly more than 50% of all Business Rates and Council Tax income. The recommendation of tax setting powers for these metro areas goes well beyond anything envisaged by the Coalition Government’s “localism” agenda. Taxpayers may be concerned that the stability and predictability of the Uniform Business Rate, a key benefit of the current business rates system, would be lost if the Commission’s recommendations were adopted.
Local authorities outside the metro areas may also be concerned about the prospect of a business rates system without the current redistributive mechanism.
That said, it does appear that the devolution genie is now well and truly out of the bottle, and with a general election coming next year it will be interesting to see which, if any, of the political parties pick up on the Commission’s recommendations.