Government scheme could leave more business rates cash with local authorities

James Brokenshire

Changes to the business rates rules feature in a range of measures just announced by Communities Secretary James Brokenshire, which means councils in England could share an extra £1.3 billion.

Mr Brokenshire says the plan gives councils a real-terms increase in core spending power for 2019 to 2020 – up from £45.1 billion in this financial year to £46.4 billion. He said: “I’m delivering a settlement which paves the way for a fairer, more self-sufficient and resilient future for local government and a brighter future for the people and places they serve.

“This settlement delivers a real-terms increase in spending for local authorities in 2019 to 2020 and gives them more control over the money they raise too, while protecting residents against excessive council tax rises.”

The government is aiming to increase the level of business rates retention from the current 50% to 75% from 2020 in a way that is fiscally neutral. It is also intending to implement reforms to the business rates retention system to ensure local councils have the levers and incentives they need to grow their local economies.

A consultation seeking views on the proposed reforms has also been launched today. The consultation seeks views on how the business rates system can be reformed to continue to provide a strong incentive for local authorities to grow their business rates bases. It proposes a change in how the system is administered to mitigate the volatility business rates appeals have on local authorities’ income and to help minimise complexity in the system.

To test out aspects of proposed business rates reforms in a wide range of areas across the country, the selection of 15 areas as 75% retention pilots for the 2019-20 financial year has also been announced.

The current business rates retention scheme is performing well, said Mr Brokenshire, with local authorities estimating in 2018 to 2019 they will keep around £2.4 billion in business rates growth.

As a result of increased growth in business rates income, the government has announced it is intending to distribute £180 million of the levy surplus to all local authorities and proposes to share it on the basis of need.

A consultation on this has been launched as part of the provisional settlement.