Counties and districts demand funding top up when business rates fall short

8 Sep 16

County and district councils have called on the government to commit to providing additional funding for local services where demand outstrips business rate growth following the forthcoming localisation of the levy.

In a joint statement of shared principles on the government’s business rate retention proposals, the County Councils Network, District Councils’ Network and Rural Services Network warned services could be hit without funding guarantees.

The government plans to devolve business rates to authorities by 2019-20. A funding baseline is likely to be set for town halls using local business rates as well as either a top up or tariff payment to reflect a new assessment of local need. Authorities will then retain all local growth – up from the 50% share currently allotted to the sector – and will be financially self-sufficient. Together with other locally raised revenue, mainly council tax, business rates growth will be used to provide council services.

However, the groups said today that the system would need to be monitored to ensure funding matches local demand over time.

“If core statutory demand-led service pressures, such as social care, are set to outstrip resources over time, central government should work with local government to agree additional funding sources,” the document stated.

“Local and central government should consider and agree a way of managing additional risks to local authorities of full retention and find a way of compensating against sharp changes in income or need.”

The groups also called for all areas to have the ability to both lower and raise the rates multiplier. Under the current proposals, authorities will only be able to cut the levy, although city region combined authorities will be able to increase the rate to pay for specific infrastructure projects.

A consultation on the basis for the devolved system is open until 26 September. Views are also being sought on areas where local authorities could take on the funding of services in order to make the plan initially fiscally neutral. Areas suggested by government include public health, early years, youth justice and the attendance allowance paid to help meet care costs.

Ahead of the baseline being set for the localised system, the groups said all current and future funding gaps for statutory demand-led services and unfunded burdens must be accounted for before additional responsibilities are decided upon.

For two-tier areas, the joint statement called for localisation to support a “cohesive approach to population and economic growth”. Although it does not set out a split in rates for two tier areas – currently split 80-20 to districts – it states “the system should properly support and incentivise economic growth, skills, infrastructure and housing development…in district/county areas and allow all areas to develop a virtuous circle of growth and investment”.

In a joint statement, the groups said: “We remain committed to working with the Local Government Association, professional organisations such as CIPFA, ministers and relevant Whitehall departments, to support the re-localisation of business rates. While our networks will reply individually to these consultations, our responses will also reflect the shared principles that we have identified in this document.”

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