Will setting tax rates locally help to drive economic growth?

Whatever could be in that box? Image: Getty.

In its ongoing discussions about business rates devolution, the government is exploring the possibility of allowing local authorities to set their own rates.

This would probably be a popular move among local leaders: the latest communities department (DCLG) consultation on the subject reported that a significant number of local authorities were in favour of being granted powers to reduce the business rates in their areas, in order to gain more flexibility and encourage growth locally. But what impact might this have for local economic growth – and what issues might it raise?

While the What Works Centre for Local Economic Growth has not looked at the economic impact of setting taxation at the local level, it has looked at the impact of policies that offer local tax breaks, such as enterprise zones. Lessons can be drawn from these findings to help guide the localisation of the business rates multiplier.

The evidence found by the What Works Centre shows that enterprise zones can have a positive impact on both boosting employment and addressing unemployment inside the area they cover: out of 27 studies looking at the impact of enterprise zones on employment, 15 found a positive impact of enterprise zones, while seven out of nine studies looking at unemployment also found a positive impact. However, evidence of their impact on poverty and wages was mixed, with only half the studies investigating this issue finding a positive impact.

What’s missing from the existing studies is an assessment of the impact of the specific characteristics of different types of enterprise zones. For instance, some enterprise zones in the US and France only offer tax rebates on the basis that businesses hire a certain proportion of staff locally; but as there is no counterfactual (i.e. another similar area where firms would not have specific hiring requirements), there is no way to assess the influence of this precise characteristic on the overall success of the programme.

There are also potential risks associated with place-based tax rebates, although they are not fully understood. One major concern is displacement. Are enterprise zones successful at creating new activity? Or do they simply attract nearby companies, at the expense of those surrounding areas that do not benefit from the programme? Research seems to suggest that displacement effects are indeed common, meaning that the headline impacts of enterprise zones must be treated with caution.

Overall this suggests that local tax rebates can have a positive impact locally, but their precise factors of success and wider impact are not entirely clear.

Coming back to the current debate on business rates, this suggests that allowing local authorities to reduce the business rates multiplier could be investigated and implemented as a way to foster economic growth. But this would need to take into account a number of potential issues.


Firstly, there is a risk of job displacement between local authorities, with potential effects on neighbouring areas. Making sure there are specific safeguards to ensure good policy coordination (for instance, a limit on the multiplier reduction, a cross-authority pooling of revenues, etc.) will be critical.

Rates reduction should also be implemented under a strict assessment process, laying out clear objectives and risks. Local authorities are unlikely to provide the level of tax reduction that enterprise zones do – and in some areas a business rates rebate might be too modest to have a substantial impact of the economy, but large enough to significantly erode local revenues.

Ultimately, the effect of any fiscal incentive is unlikely to be significant, especially if applied in sluggish economies. The reason why some areas are less attractive to firms relates to their local characteristics, such as the level of skills of their population and the quality of their infrastructure.

Although fiscal incentives can act as an “extra push”, they do not tackle the core issues that must be addressed to make places more prosperous – and should not be considered as the Alpha and Omega for local economic growth.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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This election is our chance to treat housing as a right – but only if we listen to tenants

The Churchill Gardens Estate, Westminster, London. Image: Getty.

“You’re joking, not another one... there’s too much politics going on at the moment..!”

Brenda of Bristol’s televised comments in 2017, when told that another election was to take place, could just as well have been uttered when MPs voted to call a general election for 12 December this year. 

Almost immediately the politicking began. “A chance to transform our country”. “An opportunity to stop Brexit/get Brexit done”. ‘We can end austerity and inequality.” “A new revitalised parliament.” “Another referendum.”

Yet dig behind the language of electioneering and, for the first time that I can recall, there is mention of solving the housing crisis by all the major parties. I can welcome another election, if the result is a determination to build enough homes to meet everyone’s needs and everyone’s pocket.

That will require those who come to power to recognise that our housing system has never been fit for purpose. It has never matched the needs of the nation. It is not an accident that homelessness is increasing; not an accident that families are living in overcrowded accommodation or temporary accommodation, sometimes for years; not an accident that rents are going up and the opportunities to buy property are going down. It is not an accident that social housing stock continues to be sold off. These are the direct result of policy decisions by successive governments.

So with all the major parties stating their good intentions to build more homes, how do we ensure their determination results in enough homes of quality where people want to live, work and play? By insisting that current and prospective tenants are involved in the planning and decision making process from the start.

“Involved” is the key word. When we build new homes and alter the environment we must engage with the local community and prospective tenants. It is their homes and their communities we are impacting – they need to be involved in shaping their lived space. That means involvement before the bull-dozer moves in; involvement at thinking and solution finding stages, and with architects and contractors. It is not enough to ask tenants and community members for their views on plans and proposals which have already been agreed by the board or the development committee of some distant housing provider.


As more homes for social and affordable rent become a reality, we need tenants to be partners at the table deciding on where, how and why they should be built there, from that material, and with those facilities. We need them to have an effective voice in decision making. This means working together with tenants and community members to create good quality homes in inclusive and imaginatively designed environments.

I am a tenant of Phoenix Community Housing, a social housing provider. I am also the current Chair and one of six residents on the board of twelve. Phoenix is resident led with tenants embedded throughout the organisation as active members of committees and onto policy writing and scrutiny.

Tenants are part of the decision making process as we build to meet the needs of the community. Our recently completed award-winning extra care scheme has helped older people downsize and released larger under-occupied properties for families.

By being resident led, we can be community driven. Our venture into building is small scale at the moment, but we are building quality homes that residents want and are appropriate to their needs. Our newest development is being built to Passivhaus standard, meaning they are not only more affordable but they are sustainable for future generations.

There are a few resident led organisations throughout the country. We don’t have all the answers to the housing situation, nor do we get everything right first time. We do know how to listen, learn and act.

The shocking events after the last election, when disaster came to Grenfell Tower, should remind us that tenants have the knowledge and ability to work with housing providers for the benefit of all in the community – if we listen to them and involve them and act on their input.

This election is an opportunity for those of us who see appropriate housing as a right; housing as a lived space in which to thrive and build community; housing as home not commodity – to hold our MPs to account and challenge them to outline their proposals and guarantee good quality housing, not only for the most vulnerable but for people generally, and with tenants fully involved from the start.

Anne McGurk is a tenant and chair of Phoenix Community Housing, London’s only major resident-led housing association.