Business Improvement Districts (BID) & Business Rate Supplement (BRS)

1. Definitions:

Business Improvement Districts (BID): A business led partnership identifying projects which will benefit businesses within a specified area and/or sector. The business plan for the improvements requires a mandate from the relevant businesses through a dual key vote. The funding is through an additional levy to finance the business plan. A majority vote means all businesses in the area will be liable to pay this levy.

Business Rate Supplement (BRS) In October 2007 the Government published Business Rate Supplements: A White Paper which outlines a Government proposal for local authorities to raise and retain a compulsory levy on all businesses with a rateable value of £50,000 and above. The purpose is to allow LA’s to make investment decisions that more closely reflect local economic need. The BRS can only fund one third of each project (with the Local Authority raising the remaining two thirds) or the project will need a vote from the BRS payers. Consultation timescales on BRS have not yet been announced. Legislation is expected by April 2010.

4 levels of protection are offered for businesses:

Revenue from supplements will only be available for spending on economic development in addition to existing plans. Proposals will be subject to detailed statutory consultation.

A national upper limit of 2p in the pound will be set on the level on supplements that can be levied.

To protect smaller businesses from disproportionate burdens, properties liable for business rates with a rateable value of £50,000 or less will be exempted from paying supplements.

Where the supplement will support more than a third of the total cost of the project there will additionally be a full 'double-lock' vote of businesses affected.

(Source: www.hm-treasury.gov.uk)

2. Key Differences – BIDs versus BRS:

BIDS ........vs BRS.........

All NNDR payers within the study area are subject to the levy..........Only businesses with a rateable value of over £50,000 will be subject *

Can deliver any project or services agreed by the businesses. However, usually focus on marketing/promotion, safety and security or environmental improvements rather than larger scale, long term investments. The BID manager survey found the average spend per project is £60k...............Can only be spent on economic development such as infrastructure and new transport links

Businesses led...........Local government led

Flexible approach to levy applied. Currently, the highest is 4p in the pound, but typically around 2p in the pound........Maximum limit of 2p in the pound

A BID business plan has a maximum period of 5 years. A re-vote is required to continue. All projects / services are therefore time-constrained ...........Not subject to timescales, therefore can address longer term, larger scale projects

All proposed projects/services clearly stated in a business plan, which when voted upon must all be delivered.........Businesses can only vote on a project where the BRS represents over a third of the total project cost there will be a local business ballot vote (similar to BIDs style – dual key majority needed for both simple majority and rateable values). However, all proposals subject to statutory consultation and complete transparency.

3. Potential Impact on BIDs:

There is some debate as to how the introduction of BRS will affect the effectiveness and longevity of BIDs.

Nationally, excluding London and the South East, the likely impact in terms of numbers is low. Approximately 90% of businesses would be exempt from SBR levy if this remains at a £50,000 threshold. However, the bigger rateable values will still be affected so there is still some concern over this. This does not necessarily make a BID obsolete but projects will inevitably have to be on a smaller scale. The impact will be considerably higher on London and the SE, due to the higher quantity of £50k + rateable value properties.

The White Paper states that only the highest tier authorities in an area will be able to implement a BRS levy. It is unclear as to whether the BRS would apply countywide or for specific districts. In the case of the former there are then issues of getting all districts to agree to projects and indeed potentially finding a project(s) that equally benefit all districts.

The White Paper is sensitive to how BRS may affect BIDs and state their continued support of BIDS (2.66 The Government is committed to the continued success of BIDs and to district’s key role in their design and delivery) and no substantive changes to BIDs are currently proposed).

The Paper also provides the following comments in regard to potential business resentment at possibilities of being charged a BID and SBR simultaneously:

2.81 The Government believes that the decision as to whether or not BID levies should be offset against business rate supplement liability should be made at a local level rather than uniformly. Local authorities, in developing proposals, will wish to consider whether or not existing or new BID levies will be offset. In some cases this will not be appropriate as the additional liability for the BID, as well as the business rate supplement, will reflect the additional benefits received by those in the BID.

2.82 The arrangements for local accountability set out above will provide businesses, including those in BIDs, to raise concerns if they feel that the proposed treatment under a supplement is not appropriate. As with BIDs, provision will be made to enable owners of occupied properties to make voluntary contributions equivalent to a business rate supplement.

4. Summary:

Despite the publication of Business Rate Supplements: A White Paper, areas are still pressing ahead with BIDs. Over ten areas have still voted for a BID since October 2007, with a number of others continuing the process of a BID.

On face value (certainly outside of London and the SE), it appears that the simplest solution is to exclude those paying BRS from the BID levy. This means that most short term and less tangible projects can be achieved from BIDs and larger scale infrastructure projects funding through BRS.