Local business rate top-up could hold the key to better transport and economic growth; new figures from the Centre for Cities

Date: 28/08/2007

Gaps in Britain’s urban transport systems and other infrastructure needs could be filled if our cities were able to raise and spend more of their own money, according to a new report published today (Tuesday) by the Centre for Cities.

If business supports Supplementary Business Rates (SBRs) – a local top-up to the national business rate, ring-fenced for investment in specific projects – then estimates of its fund raising potential indicate that it could raise over £10 billion in new resources for local transport and infrastructure over a 30-year period.

The report contains new figures which illustrate how much SBRs could raise in each of England’s main cities, demonstrating the significant potential of this new financial tool to promote business growth and strengthen local economies.

SBRs could offer particular scope in London, where a 4p supplement could generate over £400m a year. Assuming a thirty-year commitment, this could provide the capital with the potential to borrow over £6bn for key infrastructure projects, including Crossrail.

Greater London: A 4p SBR could raise over £400m annually, and lever in loans in excess of £6bn. This could be used to finance business’s contribution to Crossrail, and contribute to other high-profile infrastructure projects across the capital, including the proposed orbital Overground rail route, the Cross-River Tram, or selected road improvement schemes.

Greater Manchester: A 2p SBR could yield up to approximately £40m per year – and support a 30-year loan of around £600m. This could assist Greater Manchester to complete Metrolink Phase III.

Birmingham: A 2p SBR could yield around £15m per year, which could support a 30-year loan of over £200m. This could provide important funding towards the New Street Station redevelopment.

Newcastle: A 4p SBR could yield over £10m a year, and support a 30-year loan of around £150m – enough to fund a new Regional Conference and Exhibition Centre, critical to Newcastle City Council’s efforts to attract greater business tourism to the area.

Leeds: A 2p SBR could raise up to £13m per year and could underpin a 30-year loan of c. £200m. This could provide significant support towards the proposed £374m Bus Rapid Transit network – the successor scheme to the cancelled Leeds Supertram.

Milton Keynes: A 4p SBR could yield around £11m per year. This could support a 30-year loan of £170m, a critical source of infrastructure funding for an area designated for massive housing growth.

Analysis of 34 English cities and towns is available in the full report.


Dermot Finch, Director of the Centre for Cities, said: “Supplementary Business Rates have the potential to allow cities to invest over £10 billion in their transport systems and other infrastructure assuming an SBR is in place over thirty years. They would also give businesses greater input into local decision-making. Government and local councils need to work with businesses to reach a consensus on how SBRs would work in practice.”

Notes to Editors

  1. City Solutions: Towards a supplementary business rate? is part of the Centre for Cities’ and PricewaterhouseCoopers LLP’s joint City Solutions project, which is taking a close look at possible new finance and delivery mechanisms that England’s cities need to grow and flourish.
  2. The Centre for Cities is an independent urban research unit, currently based at ippr. It focuses on the economic drivers behind urban growth and change. Later this year, the Centre will spin out from ippr and set up on its own.
  3. Supplementary business rates (SBRs) would give local authorities the power to levy an additional supplement (e.g. 5-10%) on the national business rate within their area. Each local area would agree the size, coverage, exemptions and reliefs associated with an SBR. The funds generated by SBR could then be used to underpin prudent borrowing. Revenue would be retained locally, and could be ring-fenced to specific capital investment projects prioritised by local councils and business leaders. The paper published today discusses how revenues should be prioritised and committed, alongside questions such as the size and scope of an SBR.
  4. In order to illustrate the fund raising potential of SBR new analysis by the Centre for Cities and contained in today’s report suggests that a 4p supplement would: 
    • Collect over £400m a year in London, which could support loans of over £6bn if the SBR was committed over a thirty-year period.
    • Collect over £300m a year, in total, in 34 other English cities and towns. This sum could be used to lever in loans of around £4.5bn for new infrastructure.
    • The table below summarises what an SBR could generate in key cities. Additional details are available in the Annex to the City Solutions paper.
    5. Urban Area 4p SBR revenue 10 year loan
    £m     		20 year loan
    £m    		 30 year loan
    £m
    Greater London £426.6m 3187 5093 6372
    Greater Manchester £78.9m 590 942 1179
    West Midlands £74.0m 553 883 1105
    West Yorkshire £57.0m 433 691 865
             
    Birmingham £29.9m 223 356 445
    Leeds £25.7m 192 306 383
    Manchester £22.3m 166 266 333
    Sheffield £25.9m 119 190 237
    Bristol £13.2m 99 158 197
    Liverpool £13.0m 97 155 194
    Newcastle £10.7m 80 128 160
    Nottingham £10.6m 80 127 159
             
    Milton Keynes £11.4m 85 136 170
    Northampton £8.7m 65 104 130
    Leicester City £8.3m 62 99 124
    Swindon £8.2m 61 98 122
    Reading £8.2m 61 97 122
    Brighton & Hove £7.8m 58 93 117
    Southampton £7.7m 58 92 116
  5. Organisations on record supporting SBRs include: the Greater London Authority (and the Mayor of London); the Local Government Association; and Tony Travers at the London School of Economics.
  6. SBRs were endorsed by Sir Michael Lyons’ Inquiry into Local Government (March 2007), and by the Commons Communities and Local Government Select Committee (August 2007).

Related pages