Latest Public Sector News

11.07.16

Government urged to consider impact of business tax overhaul on ‘vital’ public services

The funding consequences for local government must not be secondary to the needs of businesses as the government considers increasing the frequency of business rates revaluations, the chair of London Councils has said.

Mayor of Hackney Jules Pipe said that while the organisation, which represents London’s 32 borough councils and the City of London, is supportive of “an overhaul of the appeals system and the need to resolve it before local government moves to 100% retention, the government must pay close attention to the effect these proposals could have on vital public services, not just on businesses”.

London Councils noted that under the current arrangements – where local government retains 50% of the business rates it raises and revaluations take place every five years – councils have to reserve substantial portion of their budgets for potential losses from businesses appealing their tax bills. It added that by April 2017, councils in London will have set aside approximately £1.3bn.

Mayor Pipe said: “In the capital, some authorities have as much as 40% of their business rates income trapped in a lengthy appeals process, leading to significant financial risk. If this continues into a new system of more frequent valuations, services that rely on this funding may not be delivered.

“We need to create a system that is fair and one where councils are provided with the opportunity to grow their business rates tax bases and benefit from that growth. We are now urging government to take on board our recommendations.”

Last week, the DCLG said that that it is introducing a ‘check, challenge, appeal’ process, with three stages designed to check the facts are accurate and allow businesses to challenge the rateable value on which their bill is based, before going to an independent valuation tribunal as a last resort.

Communities secretary Greg Clark MP also launched a consultation at last week’s LGA Conference which contains proposals to reset the system for redistributing business rates income to balance financial growth and relative need.

Prior to the launch of the consultation, the influential think tank IPPR predicted failure for business rates devolution without reforms, the Communities and Local Government Committee warned that the appeals system as it exists poses a serious threat to the devolution of business rate, and the District Councils’ Network said any new system should be designed around ‘place’ and delivering better outcomes for communities.

London Councils has called for the government to explore the possibility of ‘de-coupling’ London from the national valuation system to strengthen growth incentives outside the capital, and stop London’s economic growth artificially constricting rateable values in the rest of the country.

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