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Business rates announcement does not solve council funding uncertainty

The government has announced that business rates will be reduced by changing the basis from the Retail Price Index (RPI) to the lower Consumer Price Index (CPI).

Originally the switch was set for 2020 but plans have been brought forward by two years to April 2018. Changing from RPI to CPI means the annual inflationary uplift of the business rates tax will keep it below previous levels.

However, some council officials say not enough has been done to plan for future authority funding.

Jo Miller, president of the Society of Local Authority Chief Executives and Senior Managers (Solace), said the change in business rates was a good gesture but did not make funding more sustainable in the long-term.

She explained: “Changing the multiplier for business rates earlier than planned and changed revaluation timescales will be welcome relief for local businesses, but does nothing to make the financial base for local services more fit-for-purpose and sustainable.

“For local government, the Budget is most notable for what is missing from it: clarity on future funding arrangements.

“Councils cannot live hand to mouth. No business would be expected to run this way. At a minimum, we need a commitment that councils will be able to retain all business rates income to plug existing funding gaps, and a plan for the future to address the 2020 ‘no plan’ precipice.”

The chancellor also announced that 100% business rates retention would be trialled for some London councils this year.

The Mayor of London, Sadiq Khan, was more positive about the policy.

He said: "Today's announcement on business rates is welcome news for London as it means we will now have more control to spend more money on the things that matter most to Londoners, including infrastructure investment and support for businesses.

"This is an important step in devolving more control over the use of the capital's tax revenues to London government. It also highlights what London’s boroughs and the mayor can achieve working together for the benefit of the entire city.

“What we really need is for government to agree to full devolution of business rates to London, combined with genuine protection for business, so we can act in the interests of Londoners and their businesses."

Jonathan Carr-West, chief executive of LGiU, said the rate increase was positive policy but needed to have a more concrete plan of action.

“We welcome the commitment to business rates retention in London but councils still need to see progress on broader funding,” he continued. “Additional business rate retention pilots should be part of a coherent policy programme not just a free for all.”

Top image: Neustockimages

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