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A lack of transparency over business rates

Emma Maier
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Technical papers setting out the government’s business rate reforms appear to be increasing rather than allaying concerns that the plans might fail to provide enough of an incentive while penalising more deprived areas

The eight technical papers setting out details of the government’s business rate reforms appear to be increasing rather than allaying concerns that the plans might fail to provide enough of an incentive while penalising more deprived areas.

The problem is exacerbated by the lack of clarity from government about its priorities

Those fears will not be quelled by the secretary of state’s confirmation this week to the communities and local government select committee that under the reforms councils will face a zero-sum game until 2015.

The problem is exacerbated by the lack of clarity from government about its priorities - an issue teased out by the public accounts committee this week.

Chair Margaret Hodge (Lab) set out her intention to become “much more cross-government in approach”, before directing a robust line of questioning about the complexity and lack of transparency in funding formulas.

Focus fell on the extent to which local need is a guiding principle, against a desire to maintain stability by minimising significant year-on-year changes to funding levels. While panel members, including Department for Communities & Local Government permanent secretary Sir Bob Kerslake, gave a comprehensive account, ultimately this is a political question.

As Sir Bob observed, successive governments have focused on stability over need. There are good reasons to focus on stability. As Sir Bob told the committee: “It is not conducive for efficiency to see sudden lurches year on year.”

Neither this nor the previous government made a policy decision to shift that balance in favour of need. Yet ministers have not been willing to say so in so many words. Consequently, under the present system the highly complex formula used by DCLG takes account of need and past years’ funding before the resultant figures are ‘damped’ to bring them more closely into line again with previous years’ funding.

The result is a convoluted formula and a lack of transparency over the decisions of ministers, who have been known to hide behind the complexity of the formula.

As the system changes, it must become more transparent. Ministers must be more open about their priorities - and accept the challenge that will result.

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