Proposals for councils to retain business rates are funding cuts dressed up as localism, according to Labour.
Shadow communities secretary Caroline Flint said plans published by the Department for Communities & Local Government would leave the sector facing a funding black hole worth billions.
Ms Flint’s criticism echoed concerns raised by the Local Government Association that the Treasury would siphon off much of the growth in business rates for itself.
She said: “Despite promising to let councils keep any increase in local business rates, the government plan to take a cut for themselves; and the government’s cut will get bigger every year, as councils chase their elusive growth targets.
“Letting central government top-slice business rate growth is the worst of all worlds and a raw deal for local government.
“If a town’s business base shrinks the council will take the loss, but if it does well the government gets a bigger cut. People will be rightly sceptical that the plans to localise business rates are just funding cuts dressed up as localism.”
As first reported by LGC, the LGA raised fears that detailed technical papers on the plans published indicated that the Treasury may take an additional top-slice from local government.
The lobby group said it was “disappointed” that the long-awaited proposals suggested government might retain both “inflationary increases in business rates yield” and “an element of forecast growth above inflation”.
The LGA added: “Business rates retention needs to allow local government to retain the full proceeds of growth.”
However, communities secretary Eric Pickles dismissed claims that Whitehall would be top slicing cash which should remain under local government’s control.
Speaking during communities & local government questions in the House of Commons, he said: “The only top-slicing that will take place is with regard to disproportionate gains [of business rates], and I am pretty confident that Kensington and Chelsea and Westminster councils will see enormous increases in their rates.
“It is only right that we take that money away and see that it is distributed to other parts of the country, such as to Barnsley.”
The eight technical papers on the proposals have prompted criticism from localists.
Tony Travers, director of the Greater London Group at the London School of Economics, has warned that the incentives ministers have tried to create could be eroded by the amount they propose to siphon off and by the complicated nature of the redistribution system.
Mr Travers told LGC: “Effectively the new system expects councils to try to fill a bucket that the government has drilled a hole in the bottom of. It’s asking can councils fill up the bucket quicker than ministers can empty it,” said Mr Travers.
“The proposals outline a very top-down, highly centralised system that has many of the attributes of the much-maligned local authority business rates incentive growth scheme.”
Mr Travers added it would also be “incredibly complex and rule bound” and that officers would have problems explaining it to councillors and the general public.