Pilots fail to soothe rates uncertainty

By Dan Peters | 06 September 2017

A lack of clarity on 100% business rates retention is fuelling growing concerns as resources get ever tighter.

Last week the Department for Communities and Local Government (DCLG) invited local authorities in England to participate in a second round of pilots, whereby pools across economic areas will be able to retain 100% of the growth in their business rates income in 2018/19.

However, the DCLG has given little indication of its wider plans for 100% business rates retention.

Senior finance directors have warned the issue is becoming increasingly critical as they have little idea of the numbers they will have to work with beyond the end of the four-year funding settlement, which runs until 2019/20.

The business rates retention steering group and sub-groups formed to help the Local Government Association (LGA) and DCLG advise ministers on a new local government finance system have officially been suspended but The MJ understands some of the participants have continued to meet to take stock without civil servants present.

Chair of the LGA’s resources board, Cllr Claire Kober, said: ‘Representatives took a step back from the Government’s original proposals to consider business rates retention in the wider context of local government finance. There was agreement that the proposed reforms cannot be considered in isolation from the fair funding review and the Government’s commitment in the Queen’s Speech to a consultation on options for putting adult social care on a more secure financial footing.’

Geoff Winterbottom, who represents the Special Interest Group of Municipal Authorities on the systems design working group, said: ‘Everything is very uncertain. It would be good to know what the minister wants. There is a policy vacuum but it does give us a chance to step back.

‘It’s a bit of a mess. It’s an inevitable consequence of the fact that we’re not getting anything out of government.

‘Everyone’s coming up with their own views about what should be happening. There are varying appetites for retention – from keeping it at 50%, right up to 100% and everything in between.’

In a briefing, LGiU associate David Marlow, wrote: ‘The suspension of the universal business rates retention scheme has undoubtedly set back fiscal devolution and raises questions about what the pilots are actually piloting.’

One senior finance director said: ‘I don’t know how anyone can forecast what the position will be in 2020/21. There are too many unknowns. Planning for a three-year budget is almost impossible.

‘I think the consensus is that it’s all a bit of a mess and we don’t know what’s going to come out of the other side of the four-year finance settlement.

‘Business rates retention is a red herring. It doesn’t matter where the money comes from. It just has to be the right amount.’

The LGA has publically remained enthusiastic about 100% business rates retention because it ties well into the devolution agenda.

It has argued that local authorities must be able to use any additional income from business rates to address existing funding pressures before additional responsibilities can be transferred.

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