By Richard Johnstone | 6 December 2013
Local Government Secretary Eric Pickles has confirmed that the government will meet the costs of the business rate reliefs set out in the Autumn Statement.
Chancellor George Osborne announced yesterday the annual uprating of business rates would be capped at 2% from next April, below the 3.2% increase expected based on inflation figures. When added to rate exemptions set out yesterday – such as extension of the relief programme for small business and a £1,000 discount for small shops, pubs and restaurants – business rate support will cost more than £1bn next year.
Following the chancellor’s statement, both the Local Government Association and CIPFA called on ministers to confirm the Treasury would meet these costs, rather than passing them onto councils who retain half of rates growth.
Writing to council leaders yesterday, Pickles said the package was intended to boost local growth. ‘Local authorities will be fully refunded for the loss in revenue resulting from these changes,’ he added.
Responding to the letter, CIPFA chief executive Rob Whiteman said limiting rate increases would support economic growth locally.
He added: ‘The reassurance from the government that the costs of this policy will not be passed on to local authorities is great news and will ensure that councils across the country have more certainty around funding as they continue to serve their communities.’
In his letter to council chiefs, Pickles also said yesterday’s decision to halt the planned £400m top-slice of the New Homes Bonus to part-fund the proposed Single Local Growth Fund had come as a result of concerns raised by the authorities.
County councils had warned decisions could reduce investment in local infrastructure projects intended to boost growth, and Pickles said: ‘We have listened and carefully considered the responses to the recent consultation on allocating an element of the New Homes Bonus to local enterprise partnerships.
‘In light of the powerful arguments made by colleagues in local government, we will not be making changes to the New Homes Bonus for councils outside London – in London, there is a stronger case for pooling given the Greater London Authority’s role in planning.’
The total £2bn Local Growth Fund, which will devolve funding to LEPs, will be made up from other decentralised budgets, he said.
County councils said the decision to halt pooling had addressed their concerns.
‘The evidence showed that such a move could lead to a counter-productive “no homes bonus”,’ said County Councils chair David Hodge.
‘We consider this a pragmatic and far-sighted decision. This will allow CCN members to concentrate on promoting growth and ensuring the provision of services that make new communities sustainable.’
Pickles also revealed that the government would set out plans in the new year to give councils flexibility to use receipts from asset sales to pay for some improvements to public services.
‘To incentivise asset sales and support investment in transforming local services, the government will allow local authorities new flexibility to use £200m of receipts from asset sales over 2015/16 and 2016/17 to pay for the one-off costs of service reforms,’ he said.
‘We will publish a prospectus inviting bids to access a share of this flexibility in the new year.’
