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DCLG: Business rates appeals could be funded from a national pot

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The Department for Communities & Local Government is considering creating a national pot for business rates appeals, and is rethinking giving local enterprise partnerships a vote on whether to let mayoral combined authorities raise an infrastructure levy, a senior official has revealed.

Speaking at the Local Government Association’s finance conference yesterday DCLG’s deputy director for local government finance reform and settlement Stuart Hoggan said he had heard the sector’s representations on the appeals system “loud and strong”.

He said legislation to pave the way for councils to retain 100% of business rates - the Local Growth and Jobs Bill announced in the Queen’s Speech last May - is due to be laid in parliament “reasonably soon”.  

“We are thinking about a way of improving the way of handling [appeals] in the new system where effectively the risk is taken to central government,” said Mr Hoggan. “We hold the pot to do the refunds on the successful appeals and pay that out as they arise.”

Mr Hoggan said the pot would be funded by top-slicing business rates funds nationally, rather than no an individual authority basis as happens currently. 

“We don’t use [that money] as well as we might,” he said. “Looking at the new system we would hold that money centrally and pay it out to authorities as and when successful appeals come through.”

Under the reforms there are also plans to give mayoral combined authorities the power to increase the business rates multiplier by 2p to fund new infrastructure, but only if the plans are approved by local enterprise partnerships.

Mr Hoggan acknowledged that proposals “didn’t go down terribly well” and added “we might have to think about that again”.

“Maybe it’s a consultation rather than an approval mechanism,” he said.

As a “trade off” there would be a narrower definition of what infrastructure projects the money raised can be spent on as a way to give greater confidence to businesses, said Mr Hoggan.

While there is a “consensus” in relation to the need for a partial reset of the system whereby councils will get to keep a set proportion of their growth, what that level will be and over how many years has not yet been decided.

Mike Thomas, Sheffield City Council’s finance manager, who sits on the business rates system design working group, told attendees at yesterday’s conference that modelling had been based on allowing councils to keep anything between 25% and 50% of growth indefinitely at each reset.

However, he warned the final proposal is “probably going to be the lower end of the spectrum” but added there was “an awful lot of modelling to be done”.

Reset periods could be between five and 10 years, Mr Hoggan said.

The government also wants to review the local and central ratings lists as that task was “well overdue an examination”, said Mr Hoggan.

“Properties should only be on the central lists where they really need to be,” he said.

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