City of London urged against business rates hikes to cover £70m shortfall

The City of London Corporation has been cautioned that raising business rates to cover a £70 million budget shortfall could negatively impact the Square Mile's global competitiveness. While business rates are set nationally and typically covered by central government taxes, London charges an additional multiplier, known as the City Premium, to fund local services like the City police.

During an emergency finance meeting last week, the corporation discussed potential hikes to this multiplier to generate more income, according to the Financial Times. Stephen Hodgson, a City councillor and member of the finance committee, urged the corporation to resist further hikes to the business rates multiplier, emphasizing that a higher tax burden could undermine the city's reputation.

Hodgson argued that the decision should be based on the city's attractiveness, competitiveness, and economic growth rather than just a spreadsheet calculation. The City Premium, introduced in 1990, has recently been increased, leading to a noticeable gap in the premiums charged in the Square Mile compared to other areas. The City set an additional 3.2p business rates multiplier for the 2026/27 financial year, up from 0.8p in 2020/21.

Hodgson noted that there is a growing discussion within the corporation about the need for further hikes, but he is working to prevent a "spreadsheet" approach. The corporation is considering various options for the budget-setting process, with a five-year financial plan expected to be released in March next year. Hodgson pointed to upcoming Budget tax raids, including the bank surcharge and government-set business rates multipliers for office buildings, which will impact the city significantly.