Areas involved in 100% business rates retention pilots without devolution deals are set to be downgraded while a ‘no detriment’ clause is to be withdrawn, meaning areas will have to contend with greater risk.
While the “government will continue to have separate discussions with the devolution deal areas about their” 100% business rates retention pilot programmes, areas which agreed pilots in December last year for the duration of 2018-19 will be invited to be “apply to become 75% business rates retention pilots in 2019-20”.
According to the Ministry of Housing, Communities & Local Government’s document inviting bids: “Applications from current pilot authorities will not be influenced by the success of those authorities in last year’s application process. Authorities may reference their previous experiences of piloting increased business rates retention when writing their applications. However, all applications for the 2019-20 pilots, whether from piloting or non-piloting authorities, will be assessed on their merits and on an equal footing.”
The ministry said it wanted to explore “how 75% rates retention can operate across more than one authority to promote financial sustainability and to support coherent strategic decision-making across functional economic areas”.
As a result the government wants bids from areas which will pool together but these areas will all need to agree on the process by which they work together and how they will split any proceeds from growth and manage risk.
Previous pilots have operated under a principle whereby they would be no worse off than under the previous system. However, in 2019-20 that will change.
“As the pilots are testing the pooled authorities’ approach to risk, the government has agreed that a ‘no detriment’ clause will not be applied to the 2019-20 pilots,” the ministry’s document said. “Instead, selected areas will test a 95% safety net to reflect increased risk in the proposed increased business rates retention system. Applying a ‘no detriment’ clause to the pilots would not be reflective of the reformed business rates retention system that the government aims to introduce in 2020-21.”
Any proposals for new pilots must be received by the ministry by 25 September. It is expected that successful applications will be announced before or alongside the publication of the provisional local government finance settlement.