Roll-out of 100% business rates retention to LG by 2019-20 ‘unrealistic’

Meeting the target of rolling out 100% business rates retention nationally by 2019-20, which was set out by the last government, is now “unrealistic,” London Councils has stated.

In a report that will be discussed at a full committee meeting tomorrow, the body said that the previous government’s aim to meet this deadline was probably unrealistic as there will be no Local Government Finance Bill within the next two years.

However, the report added that both piloting and significant changes to the national level of retention could potentially be achieved through secondary legislation.

It comes after London Councils revealed that local authority resources in the capital would be ‘pooled’ together ahead of 100% business rates retention being piloted by authorities in the region.

And it will also be seen as a set back by some within local government, including the LGA after its chairman Lord Porter last week called for the government to grant councils the right to keep the full amount of money raised from business rates.

“Even if the government remained committed to implementing 100% retention in full nationally, the previous deadline of 2019-20 is now unrealistic as there will be no Local Government Finance Bill within the next two years – although both piloting and significant changes to the national level of retention could potentially be achieved through secondary legislation,” the report, prepared by Guy Ware, London Councils’ director of finance, performance and procurement, stated.

“If the government wishes to pursue this approach, there is, therefore, a potential opportunity for a pilot pool to run for more than one year,” it continued. “However, as with other existing pools, participation would be entirely voluntary and members would be given the opportunity to give notice to leave before each financial year.”

The report also raised concern that even though the Conservatives had promised to give local government greater control over its finances through the review of funding distribution, there had been no mention of it in the Queen’s speech a few weeks ago.

“At the time of writing, the government has indicated that it remains committed to the objective of giving councils greater control over their income, but has not yet provided any clarity over whether that objective will be achieved through greater rate retention as previously envisaged, or whether it intends to continue piloting approaches to rate retention,” the London Councils report continued.

It also said that the basis for distribution would be a case for London mayor Sadiq Khan and the leaders and chief executive of councils involved in the development of the pilot. The document added that the pooling pilot could yield positive results for councils involved through incentivising growth, recognising the contribution of all boroughs, recognising need and facilitating collective investment.

The document added that it “will shortly circulate a ‘draft prospectus’ to Leaders and the Mayor for consideration over the summer, in order that they can be in a position to debate options and indicate in-principle support for a pilot pool in October, should the government renew its commitment to developing the policy of increased business rate retention”.

In a separate report from London Councils updating the committee on progress with devolution in other key areas, a number of other powers that could be handed to the capital’s boroughs were discussed.

With transport, it was revealed that the mayor of London had reiterated ambitions for suburban rail to be devolved to TfL, creating a London suburban metro.

And commitments to devolving the Adult Education Budget to London was also reiterated, along with the fact that central government had now committed to a second Memorandum of Understanding to support London’s plan for greater devolution of health power to allow for a more place-based, integrated health and social care system.

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