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Concerns raised of raid on council funds   

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Fears ministers could be gearing up for a raid on a major local government revenue stream have been raised following projections on business rates outlined in the spending review document.

Councils will be handed £21.9bn of formula grant for 2014/15 - but this is some £2.2bn less than the amount expected to be collected in business rates, a pool ministers are legally bound to hand back to councils and which makes up the lion’s share of formula grant.

Local Government Association finance director Stephen Jones said: “The expected business rates would be more than the total settlement figure for formula grant contributed through CLG.

“Where this business rate going? In my optimistic moments I think perhaps the government is going to relocalise parts of the business rates and this is what the white paper on growth is going to say. In my darker moments I think they are going to pinch the money.”  

Mr Jones added that Treasury sources had told him an announcement on the matter was expected next week.

Questions also remain about a large chunk of the estimated £5bn of local government money handed to councils in the form of area-based grant. 

Mr Jones said: “Certainly some of area-based grant will be transformed into formula based grant in the future. In particular, we can see well over £2bn of transfers identified in the CLG letter, but the remainder of area based grant has a very unclear fate.”

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