In its submission to the Treasury’s business rates review, the umbrella group of local authorities said that the current regime, whereby councils had to meet any refunds following successful appeals, undermines local services.
It exposes councils to financial risk even though the property valuations themselves were undertaken by the independent Valuation Office Agency, the LGA argues.
Appeals currently underway for the period since 2010 include a claim by telecommunication firm Virgin Media to merge business rate payments for its broadband fibre optic network. If this was successful, the company would pay one single rate and 68 affected councils would have to refund five years’ worth of rates totalling around £75m, the association highlighted. The affected councils would also suffer significant future losses in income.
Claire Kober, chair of the LGA’s resources board, said that for the business rates system to be fit for the 21st century, it must respond to local needs and promote growth.
However she said the financial risk faced by town halls through the appeals process was “one of the biggest weaknesses of the current system”.
“The government has promised to reform the appeals system in its Enterprise Bill and we look forward to seeing the details,” Kober stated.
“Business rates account for almost a fifth of local government income and raised around £23bn in 2012/13 to fund local services. Councils must be able to contribute to the appeals process. This would not only enhance its accuracy but would help discourage speculative appeals like the one we have seen from Virgin Media.”
Kober called for councils to be named as “interested parties” on appeals to allow them to defend their income. Those bringing the appeals should also be required to give much clearer reasons.
The submission also reiterated the LGA’s call for councils to be able to locally retain all of business rate revenue.
Changes announced in the March Budget to allow Greater Manchester, Cheshire East, Cambridgeshire and Peterborough to retain a greater share of should be extended to more areas as a first step, the group said.
“Councils could do so much more to support small businesses if we were given the freedom and finance to set rates and discounts locally,” Kober added.
“If all business rates income was retained by local government we could also invest in infrastructure and vital public services.”
The LGA submission comes one week after CIPFA joined organisations including London Councils, Westminster Council and the Greater Manchester Chamber of Commerce to also call for increased local retention of rates.
