The chancellor has promised rate relief to London businesses – but the north will foot the bill

Chancellor Philip Hammond plotting to do unspeakable things to the north. Image: Getty.

In his Budget last month, Chancellor Phillip Hammond set out the final parts of his relief package to help firms facing the largest increases in business rates cope with the changes they’re likely to face.

Many commentators have called for measures to ease the shock of these increases. What they probably haven’t realised is that the introductions will mainly help London businesses – and it will be northern companies that will foot the bill.

There are two parts to the overall relief package that the chancellor has put together to deal with changing business rate bills. The first includes the announcements made in the Budget: cuts for pubs, help for small businesses no longer eligible for relief as a result of the valuation of their property going up, and a £300m hardship fund for local politicians to help local businesses of their choosing. All of these changes will be funded by the Exchequer.

The second part is transitional relief, a fund that was used after the last revaluation of commercial property in 2010 to deal with cliff-edge increases, and will be used again from April. But there is a catch with this relief – unlike the other part of the relief package, it must be revenue neutral. So any cap on increases for businesses seeing the largest increase in their tax bill must be matched with a limit on the size of the decreases of those businesses set to see the largest falls.

Businesses in London will be hardest hit by the revaluation of commercial property. This means that it will be mainly the capital’s businesses that stand to benefit. And it will be companies further north footing the bill.

Source: VOA.

The delay to revaluation has meant that businesses in struggling areas have been paying too much tax in recent years, because their properties have been overvalued by the taxman. They will finally see a fall in their rates from this month. But this fall will not fully reflect the reduced valuation of their property – because their reductions have been limited to fund relief elsewhere.

The result is that these businesses will continue to pay more tax than they should. In Manchester we estimate that this will be to the tune of £42m, which will be used to help cover the near £500m of relief for London businesses.

The sector that stands to be hardest hit by this is retail (somewhat ironically given that the anti-rates lobby has focused on the impact that revaluation will have on small retailers). Retailers in London will get welcome relief; these include Harrods and Selfridges, which are set to get relief worth a combined £1.5m. But we estimate that the relief package will mean that the total business rates bill for shops in Birmingham will go up by £10m next year, while it will be £27m higher in Manchester.

To be clear, helping London businesses deal with the increases is a good thing – the cliff-edge increases they face are a fault of policy, and it’s right to help them. But making businesses elsewhere fund this, who have already been overpaying for many years, is not the way to do so.

How can we correct this fault in the system? The following two things need to happen:

  1. Make revaluation annual or bi-annual. In his budget, the chancellor committed to undertaking a consultation, and set out his preferred option for the future by 2022. This means that we are likely to face these issues all over again in five years’ time, with businesses facing large swings once more after five years of rent changes.
  2. Remove the requirement for the total amount of business rates generated in England to remain constant. The requirement for revenue neutrality means that any special treatment given to one group of businesses automatically means that other businesses have to pay elsewhere in the system. For example, relief for small businesses means big businesses must pay more: it’s a zero-sum game. And transitional relief will mainly help businesses in the Greater South East to the detriment of those further north.

Taking these steps would have helped to make business rates fairer, more accurate and less volatile. By failing to do so in the Budget, the government has missed a big opportunity to address the problems in the business rates system.

Paul Swinney is senior economist at the Centre for Cities, on whose blog this article was first published.

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Was the decline in Liverpool’s historic population really that unusual?

A view of Liverpool from Birkenhead. Image: Getty.

It is often reported that Liverpool’s population halved after the 1930s. But is this true? Or is it a myth?

Often, it’s simply assumed that it’s true. The end. Indeed, proud Londoner Lord Adonis – a leading proponent of the Liverpool-bypassing High Speed 2 railway, current chair of the National Infrastructure Commission, and generally a very influential person – stood on the stairs in Liverpool Town Hall in 2011 and said:

“The population of Liverpool has nearly halved in the last 50 years.”

This raises two questions. Firstly, did the population of the City of Liverpool really nearly halve in the 50 year period to 2011? That’s easy to check using this University of Portsmouth website – so I did just that (even though I knew he was wrong anyway). In 2011, the population of the City of Liverpool was 466,415. Fifty years earlier, in 1961, it was 737,637, which equates to a 37 per cent drop. Oops!

In fact, the City of Liverpool’s peak population was recorded in the 1931 Census as 846,302. Its lowest subsequent figure was recorded in the 2001 Census as 439,428 – which represents a 48 per cent decline from the peak population, over a 70 year period.

Compare this to the population figures for the similarly sized City of Manchester. Its peak population also recorded in the 1931 Census as 748,729, and its lowest subsequent figure was also recorded in the 2001 Census, as 392,830. This also represents a 48 per cent decline from the peak population, over the same 70 year period.

So, as can be seen here, Liverpool is not a special case at all. Which makes me wonder why it is often singled out or portrayed as exceptional in this regard, in the media and, indeed, by some badly briefed politicians. Even London has a similar story to tell, and it is told rather well in this recent article by a Londoner, for the Museum of London. (Editor’s note: It’s one of mine.)

This leads me onto the second question: where have all those people gone: London? The Moon? Mars?

Well, it turns out that the answer is bit boring and obvious actually: after World War 2, lots of people moved to the suburbs. You know: cars, commuter trains, slum clearance, the Blitz, all that stuff. In other words, Liverpool is just like many other places: after the war, this country experienced a depopulation bonanza.

So what form did this movement to the suburbs take, as far as Liverpool was concerned? Well, people moved and were moved to the suburbs of Greater Liverpool, in what are now the outer boroughs of the city region: Halton, Knowsley, St Helens, Sefton, Wirral. Others moved further, to Cheshire West & Chester, West Lancashire, Warrington, even nearby North Wales, as previously discussed here.

In common with many cities, indeed, Liverpool City Council actually built and owned large several ‘New Town’ council estates, to which they moved tens of thousands of people to from Liverpool’s inner districts: Winsford in Cheshire West (where comedian John Bishop grew up), Runcorn in Halton (where comedian John Bishop also grew up), Skelmersdale in West Lancashire, Kirkby in Knowsley. There is nothing unique or sinister here about Liverpool (apart from comedian John Bishop). This was common practice across the country – Indeed, it was central government policy – and resulted in about 160,000 people being ‘removed’ from the Liverpool local authority area.

Many other people also moved to the nearby suburbs of Greater Liverpool to private housing – another trend reflected across the country. It’s worth acknowledging, however, that cities across the world are subject to a level of ‘churn’ in population, whereby many people move out and many people move in, over time, too.

So how did those prominent images of derelict streets in the inner-city part of the City of Liverpool local authority area come about? For that, you have to blame the last Labour government’s over-zealous ‘Housing Market Renewal Initiative’ (HMRI) disaster – and the over enthusiastic participation of the then-Lib Dem controlled city council. On the promise of ‘free’ money from central government, the latter removed hundreds of people from their homes with a view to demolishing the Victorian terraces, and building new replacements. Many of these houses, in truth, were already fully modernised, owner-occupied houses within viable and longstanding communities, as can be seen here in Voelas Street, one of the famous Welsh Streets of Liverpool:

Voelas Street before HMRI implementation. Image:

The same picture after HMRI implementation Image: 

Nonetheless: the council bought the houses and ‘tinned them up’ ready for demolition. Then the coalition Conservative/Lib Dem government, elected in 2010, pulled the plug on the scheme. 

Fast forward to 2017 and many of the condemned houses have been renovated, in a process which is still ongoing. These are over-subscribed when they come to market, suggesting that the idea was never appropriate for Liverpool on that scale. 

At any rate, it turns out that the Liverpool metropolitan population is pretty much the same as it was at its peak in 1931 (depending where the local borough boundaries are arbitrarily drawn). It just begs the question: why are well educated and supposedly clever people misrepresenting the Liverpool metropolis, in particular, in this way so often? Surely they aren’t stupid are they?

And why are some people so determined to always isolate the City of Liverpool from its hinterland, while London is always described in terms of its whole urban area? It just confuses and undermines what would otherwise often be worthwhile comparisons and discussions. Or, to put it another way: “never, ever, compare apples with larger urban zones”.

In a recent Channel 4 documentary, for example, the well-known and respected journalist Michael Burke directly compared the forecast population growths, by 2039, of the City of Liverpool single local authority area against that of the combined 33 local authority areas of Greater London: 42,722 versus 2.187,708. I mean, what bizarre point is such an inappropriate comparison even trying to make? It is like comparing the projected growth of a normal sized-person’s head with the projected growth of the whole of an obese person, over a protracted period.

Having said all that, there is an important sensible conversation to be had as to why the populations of the Greater Liverpool metropolis and others haven’t grown as fast as maybe should have been the case, whilst, in recent times, the Greater London population has been burgeoning. But constantly pitching it as some sort of rare local apocalypse helps no one.

Dave Mail has declared himself CityMetric’s Liverpool City Region correspondent. He will be updating us on the brave new world of Liverpool City Region, mostly monthly, in ‘E-mail from Liverpool City Region’ and he is on twitter @davemail2017.