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Javid moots 'graduated approach' to full rates retention

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Ministers are considering stopping short of devolving 100% of business rates to local governent as a way of getting around the absence of primary legislation to roll the policy out nationally, the communities secretary has revealed.

Instead of going for the “big bang” straight away, Sajid Javid said the Department for Communities & Local Government is exploring a “graduated approach” to business rates reforms.

Under the government’s original plans for 100% business rates retention local authorities were to take on new responsibilities equivalent to the additional £26bn that would become available. 

The Local Government Finance Bill would have paved the way for that to happen in 2019-20 but the bill was dropped ahead of the general election and never made it into the subsequent Queen’s Speech.

Appearing before the communities and local government committee on Wednesday, Mr Javid said the policy’s implementation ”will be delayed from the original schedule” but added: “One of the options we are looking at and discussing with the LGA through the [business rates] steering group is we transfer fewer responsibilities but it’s not quite 100% [rates retention].

“For local authorities you still have a big step towards [full] business rates retention but by transferring fewer responsibilities there’s no need to take it up to 100%.

“If that means we can do it more quickly… and it is something the sector prefers to get it sooner… then there may be a way to do it gradually rather than going straight to 100%.

“If it didn’t require transferring new responsibilities it’s likely it wouldn’t require primary legislation.”

Later Mr Javid said: “We are looking at this graduated approach and having discussions with the sector to see if that’s a preference [as opposed to going] for the big bang approach.

“But the point remains we are very much committed to business rates retention and the fair funding review.”

He said he hoped to say more “in due course” about what the government plans to do.

LGC reported earlier how local government in London had reached an agreement locally to voluntarily pool all of its business rates as part of a 100% rates retention pilot. The plan is subject to the government’s approval.

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