04 June 2004
Firms are not paying their share of the cost of running local services under the business rates system, a new paper from CIPFA has concluded.
Yearly increases in national non-domestic rates have failed to keep pace with the rise in council taxes borne by residents and as a result, companies are now paying proportionately less towards the cost of local services than at any time since 1981/82.
The paper, published jointly by Rita Hale & Associates and CIPFA, has been submitted for consideration at the next meeting of the Balance of Funding review. It says that while the business rate multiplier has increased by only 26.9% since 1994/95, average Band D council taxes have gone up by 93.6% over the same period.
In 2003/04, NNDR funded 21.6% of local authorities' expenditure, council tax 26.1%, government grant 51.8% and balance and other adjustments the remaining 0.5%.
The report says that there is 'no technical obstacle' to the relocalisation of business rates. Problems associated with the equalisation of resources, to ensure that authorities with small tax bases do not lose out, could be overcome.
Report author Rita Hale said: 'The analyses… show that it would be possible to return the NNDR to local control and still equalise between local authorities for differences in their spending needs and their ability to raise money from local taxes.'
Maureen Wellen, CIPFA's assistant director, local government finance and policy, said the institute backed the report's conclusions.
'There should be a re-examination of the current legislative link between rises in business rate and inflation,' she added.
PFjun2004
