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More areas set to pilot 100% retention

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At least seven areas are now in discussions with government about piloting the move to 100% business rates retention from next April, LGC has learned.

One area, West of England, expects to gain millions of pounds from the pilot due to the abolition of the levy on growth, which would have channelled extra receipts to central government. LGC understands the area, along with Cornwall, is expecting confirmation of the terms of the pilot from the Department for Communities & Local Government this week. The West Midlands has also recently begun talks on a pilot while, as LGC has previously reported, the Sheffield City Region is also in discussions.

These four come on top of the three announced in the Budget in March – Greater Manchester, Liverpool City Region and London – when then chancellor George Osborne said the deal was open to any area with a ratified devolution deal.

In the West of England agreement has been reached subject to its devolution deal being ratified. The pilot will see the combined authority take an estimated 5% share of the business rates.

Like all the other pilots, the West of England’s will have a ‘no detriment’ clause, which commits the government to ensuring areas are not be worse off than under the existing 50% retention scheme. However, in West of England this will be take across the whole combined authority area rather than individual councils, meaning the first call on any growth could be safety net payments to any participating council that sees a significant fall in business rates income.

Other areas are less keen on adopting this approach. However, as all three West of England councils – Bristol City Council, Bath & North East Somerset and South Gloucestershire Council, are high growth authorities they stand to gain through the abolition of the levy on business rates growth.

A paper to Bristol’s cabinet last week said the combined effect of the abolition of the levy and the retention of 100% of growth could mean the combined authority area retained up to three times as much growth income. It said Bristol could be up to £6m better off.

In a press release Bath & North East Somerset said taking part in the pilot could help offset the impact of cuts.

The pilot will also see highways maintenance funding paid for out of the additional business rates, as will transport capital funding which will be pooled at a combined authority level.

DCLG officials had wanted to roll in public health funding but that has been ruled out by the Department of Health until the ringfence is removed from the funding in 2018-19.

Cornwall has agreed a similar deal that will also see the rural services delivery grant and bus services operator grant funded out of additional business rates. The council will still require a top-up payment.

While Greater Manchester and Liverpool City Region are still in discussions about their submissions which included calls for significant extra freedoms from year one, Cornwall and West of England are expecting the pilots will develop further in subsequent years.

In the West Midlands discussions only started relatively recently. All seven constituent authorities will need to agree if the pilot is to go ahead.

A spokesman for the combined authority said participation in a pilot would “facilitate our on-going discussions with government on the further devolution of powers”. LGC understands this includes fiscal devolution.

A DCLG spokesman said: “We have listened to councils and paved the way for them to retain 100% of business rates… We are continuing to work with them on the design of the scheme to ensure that when it is rolled out nationally no authority is left behind.”

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