Labour demands clarity on business rate localisation

8 Jun 16

Labour has called for greater clarity on the impact of business rates localisation on council funding to allay fears about “back door cuts” under the plan.

Shadow local government minister Steve Reed asked Department for Communities and Local Government minister James Wharton to rule out further cuts to council funding as a result of the localisation proposals, which are set to be implemented in 2020-21.

Responding, Wharton highlighted that the sector had long sought the localisation of business rates to help it drive local growth.

However, Reed said the lack of a certainty on local government funding was causing town halls concern.

The localisation plans, which will lead to revenue support grant being scrapped, were first set out by chancellor George Osborne in October. Legislation to implement the change was included in the Queen’s Speech. Under the current system, the Treasury currently retains 50% of business rate income, with local authorities retaining the other half from a baseline set in 2013.

The government has called on local authorities to submit proposals for service responsibilities to be devolved to councils as part of business rates localisation in order to ensure that the full devolution of all £26bn of business rates from 2020 is cost neutral. In addition, senior DCLG figures have said a full re-examination of levels of need in council areas will be undertaken.

Reed said Labour backed the principle of allowing all business rate income to be retained by councils. However, he urged ministers to provide more clarity on which services the money will have to fund and how it will be distributed between councils.

“Councils across the country are right to be worried about future funding since the government cannot give a basic commitment that the new system will be fair,” he stated.

“Ministers promised to provide detail last year but we have still heard nothing.

“Local government has suffered enormously over the last few years.  Business rate localisation must not become an excuse for yet more back door cuts to the basic services communities rely on.”

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