By Richard Johnstone in Birmingham | 30 June 2011
Plans
for local authorities to retain business rates will be ‘fair from the beginning
and fair over time’, ministers have told Public Finance, but some
council leaders are already warning of a ‘survival of the fittest’.
Deputy Prime Minister Nick Clegg yesterday told the Local Government Association conference that local authorities would be able to retain business rates. The reforms will be included in a Local Government Finance Bill to be published after a consultation in the summer. Clegg gave assurances that deprived areas would not lose out.
Speaking to PF following Clegg’s speech, decentralisation minister Greg Clark said the shift would ensure ‘fairness now and in the future’.
He said: ‘[Fairness] is one of the principles you will see. It’s the principal consideration that we’ve given to designing this system. Over time you need to re-assess whether the system continues to be fair.’
Local Government Secretary Eric Pickles has also told PF that ‘no authority will receive anything less than they currently get’.
In an exclusive interview, Pickles said: ‘It would be absolutely ridiculous to have losers – because if you do that, then you’d have to have floors and ceilings and it would take years and years to get it through. We’re hoping to move reasonably quickly.’
Theories are already beginning to emerge on the mechanisms that will be put in place to ensure such fairness.
Speaking at a conference workshop on the Local Government Resource Review this morning, Gerald Vernon-Jackson, the Liberal Democrat leader of Portsmouth City Council, said he understood that there would be an equalisation of the business rates across the country every five years to ensure fairness.
Stephen Houghton, the Labour leader of Barnsley Metropolitan Borough Council, told the workshop he had heard that there would be a system of tariffs and top-ups to provide some redistribution.
However, he added that currently non-domestic rates are pooled by government because ‘there’s no relationship between them and services and needs’.
Houghton warned that richer authorities would gain more from the changes, even if there was the same rate of economic growth around the country, leading to a ‘survival of the fittest’.
He said: ‘This will take no account of a community’s ability to pay and no account of future needs. Our ability to provide services is [to be] dependent on ability to grow business rates.’
Houghton called for a delay to the changes to ensure ‘buy-in’ from authorities that might lose out.
Peter Jones, the Conservative leader of East Sussex County Council, agreed there was a need to ‘end up with something that is reasonable’.
However, he said that while there was a long way to go in deciding the detail of the new system, it could be ‘very rewarding for citizens’ and potentially ‘very exciting’.
Jones added that the plan ‘could reopen the debate within my party about the question of two-tier or unitary councils.
‘That’s something that we will have to address [after the business rate changes.’
Westminster City Council, one of the authorities most likely to benefit from business rate retention, has welcomed the changes.
Brian Connell, Westminster’s Cabinet member for enterprise, said: ‘Under the current system, Westminster’s 33,000 businesses, for example, pay more than £1bn a year in business rates but we act merely as the government’s tax collector as most of this money goes to other parts of the country. But with these new plans we hope to be able to make a real difference and ensure that more of the money we collect locally is invested back into local neighbourhoods and communities.’
Additional reporting by Lucy Phillips
