The Budget is on 28 October, the earliest since 2021. Alongside it comes the fiscal devolution roadmap, and the share of business rates that mayors will keep from April 2027.
We all know by now that this Government is committed to moving money and power out of Westminster, something we’re in favour of (as long as places keep the proceeds of growth). But there isn’t much cash sloshing about. Quite the opposite. The Government’s fiscal headroom has collapsed (again): KPMG puts it at £11.6 billion, while Deutsche Bank puts it at £8.5 billion — down from £23.6 billion.
It is being reported that Treasury officials spent a fortnight in workshops with business groups on high street tax measures, and that raising the small business rates relief threshold is a central option.
Two changes are under consideration. The first concerns who pays nothing at all. A property with a rateable value of £12,000 or less is currently exempt from business rates, with partial relief tapering away to nothing by £15,000. The proposal would lift the exemption to around £17,000 — the figure the threshold would have reached had it been uprated with inflation over the decade it has been frozen — and the taper to £20,000, taking thousands of small firms out of the tax and reducing the bills of thousands more.
The second concerns how fast bills rise for everyone else. April’s revaluation pushed some rateable values up sharply, in places by as much as 80%, and transitional relief phases those increases in. For smaller properties, this is capped at 5% this year, 10% in 2027/28 and 25% in 2028/29, plus inflation. Healey is said to be weighing a longer phase-in.
Strong arguments can be made for both changes. But business rates retention begins in April 2027, and each of these narrows the base for mayors.
The roadmap has a second question to answer. Jim O’Neill, who advised Burnham informally in recent months, has raised a caution of his own. As reported in the Financial Times (paywall), he said devolving to places that are not ready could be a recipe for disaster — noting that of 37 devolution submissions from local areas during his time as a minister, four were credible. “This is probably the single most immediate challenge they’ve got,” he added of Burnham’s team. “With a lot of local areas putting their hands up saying ‘what about me, me, me’, they’ve got to be tough about it.”
Property developer Mike Ingall, whose firm Allied London built Manchester’s Spinningfields in close partnership with the city council in the 2000s, says: “My fear is if we devolve to all the mayoral departments, towns, cities, are they good enough?” … “That’s not a criticism of everyone, it’s just a question. Will we have to go through a process of educating these other local government officials? Because my experience elsewhere is not good.”
Mike Emmerich’s review of growth-capable devolution, which reports in October, published a first paper in August detailing the problem. Where Whitehall doubts an authority’s capability, departments retain detailed controls; those controls consume local capacity; the capacity never develops; the doubts are confirmed. Across 242 urban areas in 14 European countries, the OECD found productivity higher where the quality of government is higher, with the effect strengthening as local autonomy rises — but with weak institutions, greater autonomy makes outcomes worse.
Emmerich is no sceptic. He calls the assignment of income tax particularly welcome, and argues that strategic authorities need a tax base commensurate with the role now envisaged for them. The Budget will be a test of whether the Chancellor can get the balance right.
Data Points
Our friends at techUK have published a report bringing together chapters from different organisations on the role of technology in UK growth, covering everything from adoption and skills to regulation, data, investment and trade.
I recommend reading it in full, but I will point you specifically to the chapter from the Royal Academy of Engineering (RAEng), which was led by our Adviser (and former colleague) Anastasia Bektimirova.
The OECD’s Open, Useful and Re-usable Data Index scores the UK below the OECD average, with a particular weakness in turning available data into usable data. The UK’s three flagship data programmes — the National Data Library, Smart Data schemes and infrastructure data — are run separately by different bodies. The chapter recommends a joint delivery framework, tested on problems that need data from more than one of them.
Trinity Test
Blick Rothenberg, one of our Strategic Partners, is holding an event on Thursday, 1 October, as part of the Lloyds British Business Excellence Awards, and has asked us to share it with you.
It is a chance to hear from entrepreneurs, share experiences and make connections. It runs from 2.30pm at Ten Trinity Square Private Club in London. Register your interest here or contact Abi with any questions.