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16.02.17

LGA: Proper needs assessment must underpin 100% business rates retention

The LGA has welcomed the DCLG’s consultation on the move towards 100% business rates retention reform in local councils that was launched yesterday, but reiterated that the move must be “fundamentally underpinned” by a proper needs assessment.

In a statement, the association said it was glad that the government was listening to the views of councils in determining how the new business rates system would work, and insisted that a continued dialogue between local authorities and DCLG was essential in making any fundamental decisions.

The consultation ruled out the possibility of the change to business rates leading to a transferral of responsibility to councils for administering Attendance Allowance, a move that the LGA has also claimed it is happy with, after it had united to oppose the option.

Cllr Claire Kober, chair of the LGA’s Resources Board, said: “It would have accounted for the majority of the extra business rates income kept by local government, leaving little left to fund the transfer of other services, and created a significant cost pressure for councils. 

“With local government facing an overall £5.8bn funding gap by 2020, we remain clear that councils must first and foremost be able to use extra business rates income to plug this growing gap before any extra responsibilities are considered.” 

She added that local authorities should then be able to invest the rest into services which support local economies and drive local growth, such as closing skills gaps and improving public transport. 

Cllr Kober also called for a clear and transparent process in terms of removing LEP approval of infrastructure supplements, and the need for it to remain up to local areas to decide to join a business rates pool to hand councils the power to set business rates and reliefs.

“Provisions for appeals to be managed centrally is also a significant step in the right direction towards protecting councils from the growing and costly risk of appeals,” she said. “This was a key priority for the LGA from the outset.”

The LGA added, though, that business rates retention must “fundamentally be underpinned” by a proper needs assessment which rewards areas for growing their local economies, but protects those less able to grow their business rates base. 

Last year, the communities secretary revealed in his local government finance settlement that London, Greater Manchester and Liverpool City Region had reached agreement on 100% business rates pilots. Greater Manchester Combined Authority stated that it will take part in the pilot, despite authority leaders arguing the plans were “less ambitious than planned.” 

During 2016, however, there were warnings from the IFS that since 50% business rate retention was introduced in 2013-14, there had been significant “winners and losers”, with 119 councils, mostly county and borough councils, seeing a decrease in funding following the change.

Counties similarly warned that a critical redesign, with particular consideration to the retention system in two-tier areas, would be vital to the scheme’s success.

(Imahe: c. Adam Tinworth)

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