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Javid: Attempts to ‘claw back’ business rates overpayments would have ‘significant negative impact’

Sajid Javid has called for an independent review of the processes that led to an overpayment of business rates to local councils.

In a letter to Melanie Dawes, permanent secretary for the Ministry of Housing, Communities and Local Government (MHCLG), Javid confirmed that the department should not seek repayment from local authorities.

Councils participating in the 100% business rates retention pilots were overpaid by a total of £36m in 2017-18, due to an error in the methodology used to calculate the payments.

However, Javid said that affected local authorities would lose 17.1% of the additional growth in business rates retained from being a part of the pilot, with eight councils losing a quarter.

For Cornwall this would mean that it was left worse off than a council that retains just 50% of its business rates, which would require the ministry to compensate it through the no detriment clause.

He warned that any attempt to “claw back the” overpayments would come at the very end of the financial year, when councils have most likely already spent the money on delivering stretching objectives as part of their devolution deals, and that seeking repayment would have a “significant negative impact.”

In order to avoid the need for the ministry to seek repayment, he has decided that it should reduce the pilot local authorities’ “on account” payments for 2018-19.

Top image: David Mirzoeff

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