Clause 71: Transitional relief
41. Clause 71 contains proposals for a self-financing
transitional relief scheme when non-domestic rates are revalued.
We received evidence that such schemes have not been successful
in the past:
"The Partnership remembers the attempt by
a previous Government to operate a similar non-statutory scheme
in the 1990s, which was introduced in 1990-91 and abandoned in
1992-93, primarily because it attracted so much criticism from
the business community."
We heard that there is a risk that such mistakes
will be repeated. Mr Travers of the London School of Economics
and Political Science told us:
"Based on past experience there must be a
risk that the businesses and other non-domestic ratepayers who
should be achieving or having a lower bill and gaining out of
the reform will find that they are not getting their full gain
because they are paying towards the protection of losers. That
could well lead to resentment which I think would put pressure
on the Government to step in and then at some point simply pay
them all the money that they are entitled to, and that is what
they will feel they will want."
The optimum design of any transitional scheme can
only be decided on the basis of the results of a revaluation.
It does not make sense for the Government to close off the option
of Exchequer support even though in particular circumstances it
may provide the 'least worst' option for managing the transition.
We recommend the Government abandon its proposals in Clause
71 for a statutory requirement to make non-domestic rate transition
schemes be self-financing.