What do business rates measure?

In the context of proposals to re-localize business rates, the article considers whether using business rates as a measure of economic activity would give rise to distortions caused by valuation methodology, liability to pay or by more general differences between property values and economic activity. Over the long term, property values have shown negative growth in real terms whereas GDP has grown around 2.5 percent p.a. Moreover, this overall difference in performance masks major distortions and differences between types of property, types of occupier and locations. It also distorts the relationship between business rates and GVA. This poses some big questions for the re-localization of local government finance but even more important questions for local economic development.