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Ministers confirm safety net and levy rates

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Ministers have reconsidered the levy rates and safety net rules of the new funding system for local government following warnings councils would not receive enough reward for growing business rates.

Local government minister Brandon Lewis revealed the levy rate on councils experiencing disproportionate growth would be capped at 50p in the pound, significantly less than the 95p which councils feared they could face under the 1:1 levy ratio set by the government.

Mr Lewis also announced the safety net is to be activated for any authority whose income falls below 7.5% of its baseline funding level, providing more security for councils than the 10% net trigger point which was also being considered.

“Today, after listening to councils, we are setting the central principles for how the new rate retention scheme will work next year,” he said. “Ahead of the formal funding settlement next month this will give councils the certainty and security to begin planning their budgets for next year.”

While ministers listened to sector concerns on some fronts, the details published on Wednesday show they have resisted calls to reconsider the 50-50 split of business rate growth between local and central government.

The government has also confirmed the 20-80 county-district split of retained business rate growth between despite complaints that this approach provides no growth incentive for districts.

Other details announced:

  • Data to calculate proportionate funding shares to be based on two years’ worth of data (2010-11 and 2011-12) rather than give (2007-08 to 2011-12) in order to “balance the need to smooth the effects of volatility with the benefits of using the most recent data available”
  • Confirmation that New Homes Bonus funding of £500m in 2013-14 and £800m in 2014-15 will be held back
  • Floor damping to be applied at authority rather than service tier level

Read the policy statement in full

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