Will 100% business rates deliver benefits?

By Michael Burton | 13 September 2017

The local government sector has long been keen on greater fiscal devolution and therefore welcomed the Government’s commitment to introducing the 100% business rate retention scheme (BRRS). However, recent analysis of poll findings among senior councillors and officers by the Institute for Fiscal Studies (IFS) suggests considerable scepticism that the scheme will bring fiscal benefits, particular in poorer areas. The analysis also shows a clear preference among respondents for retaining a redistributive system to protect poorer areas that may be losers under the BRRS, even at the expense of greater fiscal localism. Such findings can only reinforce sentiment in Whitehall that more work needs to be done before the BRRS is introduced as a replacement for government grant.

Since the abandonment of the Local Government Finance Bill, the Government has remained silent about whether it intends to stick to the timetable. Technically, 100% retention does not require primary legislation, but it is necessary for the centralisation of appeals risk and the mandating of pooling, both reforms planned alongside retention. The Government is however committed to the fair funding review and increasing the local share of revenues, though detail is so far limited.

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