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LGA: Reforms to appeals system ‘essential’ as DCLG launches business rates consultation

Local government representatives are being encouraged to take part in a new consultation on the government’s proposals to devolve full control of business rates, including suggestions for mitigating problems with the system.

Leaders of pilot areas for the scheme have warned that the proposals could lead to a loss of income for councils in low business activity areas, while the Communities and Local Government Committee has said that they could increase the risk of money lost through the appeals process.

The consultation, announced yesterday by communities and local government secretary Greg Clark at the LGA Annual Conference, contains proposals to reset the system for redistributing business rates income to balance financial growth and relative need.

These include full reset of the system frequently – for instance, every five years; setting a baseline for councils at a fixed point in time and then resetting the system every 20 years or later; or frequent, partial resets of the system.

The consultation also proposes that councils could mitigate the risks of the appeals system by pooling the risk with other councils, for instance at a Combined Authority level.

It suggests trialling different approaches to dealing with the appeals risk, at an individual, local, or national level, during pilots.

The consultation also says that a safety net will be needed to protect councils from financial shocks, and proposes that local authorities either pay into a national safety net, similar to the current system, or pool their income with other authorities in their local area.

Cllr Nick Forbes, senior vice-chair of the LGA, said: “It is important for the new system to be implemented in a way which balances rewarding councils for growing their local economies but avoids areas less able to generate business rates income suffering as a result.

“Decisions over which grants and responsibilities councils will have to pay for from any extra business rates income are also crucial.”

He said councils should be given responsibility for skills and transport services to help boost their local economies.

He added that the power to increase business rates must be given to all local authorities, not just those with elected mayors, and that reforms to the appeals system, which has cost councils £1.75bn in the past three years, were “essential”.

Cllr Forbes said that councils didn’t want responsibility for administering the Attendance Allowance for older people with care needs, which the consultation says could be funded through business rates, because demand for the service could grow faster than it would ake for councils to generate business rates income.

Other proposed grants to be financed by business rates include the revenue support grant, the public health grant, and the better care fund.

In a joint statement, Cllr David Borrow, finance spokesperson for the County Councils Network, and Cllr Neil Clarke, chair of the District Councils Network, said: “We welcome the publication of the consultation into business rate retention. Both organisations agree that counties and districts must work closely together to make a strong and compelling case for fairer funding and to ensure the new system is fit for purpose in our localities.

“Our areas face particular funding challenges, with a rapidly ageing population and housing growth. We must ensure that the system can safeguard essential frontline services to the public, whilst incentivising local areas to go for growth.

“Through our joint business rates working group, we will be making the case for the right level of baseline funding and new service responsibilities that allow both types of authority  to improve and integrate existing services and improve outcomes for local residents.”

The government plans to carry out another, more technical, consultation in the autumn, before introducing legislation for the reforms in early 2017 and pilot schemes in April 2017.

The consultation is open until 26 September. To take part, click here.

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