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26.01.17

GM business rates pilot ‘less ambitious in scope’ than planned

The Greater Manchester Combined Authority (GMCA) has agreed to take part in the government’s 100% business rates retention pilot despite it being “less ambitious in scope” than originally planned, saying it would put the region “at the front of the queue” for further devolution powers.

In the local government settlement last year communities secretary Sajid Javid announced that he had agreed to pilot the 100% retention of business rates with three devolved regions including GM starting this April, with three further regions now having agreed to take part in the pilot.

While the GMCA said that the pilot is “less ambitious in scope” than had previously been envisaged, the decision has been made to agree to the deal.

A joint GMCA & Association of Greater Manchester Authorities (AGMA) executive board meeting report read: “Following consultation with the 10 GM leaders and interim mayor, GM has indicated to CLG that it will participate in the 100% Business Rates Retention Pilot.

“Whilst the pilot is less ambitious in scope than originally envisaged it has been agreed that the decision is made to progress on the basis that there is a financial advantage to GM and the Districts in taking part; an underpinning no detriment agreement that guarantees that individual districts cannot be worse off.”

Under the government’s proposals, local councils in England will have control of around an additional £12.5bn of business rates revenue, with some specific grants to be rerouted through the local share in order for the government to remain fiscally neutral.

The GMCA has been reassured that while the move does not represent additional funding for local government, the business rates baseline will be reworked to ensure that more deprived authorities do not suffer as a result of the new arrangements.

“The GMCA Treasurer is now satisfied that the arrangements in place will ensure that the ten districts involved cannot be any worse off through participation in the pilot,” the report read.

“In addition, with the move from 50% to 100% retention there could be an additional financial advantage over and above that from the existing 100% Growth Retention Pilot and Pool.”

The GMCA confirmed that it is undergoing discussions with the government as to how the authority can create ‘longer term head room’ under the plans to allow it further capacity for future investment.

The authority expressed optimism that by proceeding with the pilot, Greater Manchester will be put “at the front of the queue” when the government considers devolving further devolution functions in the future. Last year, GMCA became the first city-region to take control of its health budget in a £6bn devolution deal.  

The government believes that the 100% retention rate will allow devolved regions to see the long-term rewards from growth, giving authorities an incentive to grow their local tax base, and help local authorities maintain a predictable income stream to provide local services.

However, last year the Institute for Fiscal Studies warned that there will be “significant winners and losers” after 100% business rates devolution is introduced in 2020.

(Image c. Joe Mott)

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Comments

David Sheard   30/01/2017 at 12:21

Why was the deal for Manchester agreed when the Leeds City Region Deal on a similar area and size of economy was vetoed by Tory MP's. They seem to not mind their constituents suffering as a result of their gerrymandering.

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