Town halls fight business rate reform

23 May 02
Local government leaders are fighting attempts to incorporate business rates into the revenue support grant, a move that would extinguish all hope of their return to town hall control.

24 May 2002

Authorities have long campaigned for a restoration of the right to set the rate locally. Scrapping it as a separate element of the annual settlement would be seen as a hugely symbolic act.

Officials are pushing the proposal from the Department for Transport, Local Government and the Regions, as part of the government-led consultation on reforming the grant distribution system. The suggestion was reportedly going to be included in last December's local government white paper, but was removed at the last moment.

A paper presented to the last meeting of the RSG review group, the consultative panel responsible for shaping the new system, argued that combining the two funding streams into a single grant would have no effect on the overall financial position of authorities, but would make their allocations easier to understand.

But the Local Government Association is strongly opposed to the suggestion because it fears it would kill their campaign for local tax-raising powers. As Public Finance went to press, a meeting of the LGA executive scheduled for May 23 was expected to confirm the body's rejection of the plan.

Stephen Lord, the LGA's head of grant distribution, told PF: 'Business rates are a local tax and should not be under central government control. The argument is not so much about what this would mean in strict legal terms, but what it would signify for local government's aspirations.

'If we accepted this proposal it would be difficult for us to continue to argue for a local tax.'

LGA executive members were also expected to repeat demands for ministers to allow time for 'meaningful' consultations with authorities. The government is committed to introducing changes for the 2003/04 financial year, so they must be in place before the provisional finance settlement in November.

Ministers have said they will publish firm plans 'in the summer', but officials have privately admitted that this could mean as late as September, allowing little time for consultation.

LGA leaders are pressing for the options to be exemplified, a time-consuming exercise that would spell out to each council the financial effects of any changes.

Department officials have accepted the need for exemplification. DTLR minister Nick Raynsford is thought to support the idea, but Local Government Secretary Stephen Byers is said to be unconvinced.

There are fears that if the financial implications are spelled out, self-interest, rather than the proposals' merits, will determine authorities' responses.

But Lord said authorities had to know the effects of the reforms. 'It is difficult to make any judgements on what is sensible and what isn't, unless authorities have some indication of what they mean in terms of pounds,' he said.

PFmay2002

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