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London
Friday
29 January 2010
Editor © Muhammad Haque
KHOODEELAAR! TOLD London FT for six years: Crossrail is crass. Crossrail will stifle business. It will be debts-causing, wasteful. Now, the FT confesses! Yet it fails to correlate all key facts and events. Causes, effect and costs
[To be continued]
Business faces maximum Crossrail levy
By Bob Sherwood, London and South-East Correspondent
Published: January 29 2010 00:03 | Last updated: January 29 2010 00:03
London businesses will pay the maximum extra levy to fund Crossrail for the next 25 years, in spite of warnings that the tax will hurt companies’ chances of recovering from recession.
Boris Johnson, London’s mayor, will announce his decision on Friday to impose the maximum allowable 2p in the pound business rate supplement from April, coinciding with a big jump in rates for many central London companies.
EDITOR’S CHOICE
Business organisations had advised him to hold back from levying the full rate, which is being introduced to finance £4.1bn of the Greater London Authority’s contribution to the £16bn Crossrail scheme.
The British Retail Consortium warned last year that there would be “considerable opposition” to the levy, while London First, which represents large businesses and has been a champion of Crossrail funding, urged the mayor to set the supplement at less than the maximum and phase it in.
But the only concession the mayor will make is to raise the threshold for the increase to businesses with a rateable value of £55,000 from £50,000. He said that would exempt up to 4,000 properties, excusing more small and medium-sized businesses from the levy. However, many of those properties will be occupied by public sector and not-for-profit bodies such as schools, meaning the number of companies excused will be lower than the 4,000 headline figure.
The timing of the supplement has been a problem for the mayor as a national revaluation, also taking effect in April, has pushed up average London rates while those in almost every other region have fallen.
But Sir Simon Milton, the mayor’s chief of staff, said the rate revaluation would raise up to £20m more than budgeted, which allowed the mayor to increase the threshold to help more small businesses. He denied that delaying the levy or phasing it in was a realistic option as it would increase borrowing costs. He told the Financial Times: “Delay will end up costing more.”
Advisers indicated that the mayor was determined not to renege on London’s commitment to pay for Crossrail for fear a future government might also backtrack on the deal. Sir Simon added: “When one part of the funding agreement starts to get unstitched, you are increasing the risk of unstitching the rest.”
The supplement will continue for 24-31 years. As businesses in the core districts of Westminster, the City and Canary Wharf have higher rateable values, those companies in boroughs with Crossrail stations will automatically contribute more to the cost of the rail project. Those in Westminster are expected to contribute £67m towards the £219m raised in 2010-11.
Mr Johnson said: “I understand that in these difficult times the additional business rate will be a greater burden to our smaller businesses.
“Our final proposals now set the right balance by exempting a further 4,000 of those firms that initially faced a disproportionate burden to those larger organisations in the centre, the West End and the financial districts that will benefit significantly from Crossrail and should therefore pay the greatest share of the construction costs.’”
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