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LGA set to avoid rates challenge

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The Local Government Association is unlikely to take legal action against ministers over £102m of business rates cash the group claims should be handed to councils but is set to remain unallocated.

A senior LGA officer has advised members there is “little mileage” in pursuing the argument surrounding the distribution of a surplus of undistributed business rates forecast to be £102m.

The group’s executive will discuss the matter on Thursday 10 February.

The advice follows the LGA receiving legal advice indicating that ministers have no legal power to plan for a surplus on the business rates account.

The paper, by LGA finance director Stephen Jones, said: “The settlement maintains the original proposal for a business rates distribution of just £19bn in 2011-12. With distribution at this level, a surplus of undistributed business rates of £102m is forecast.

“The LGA has received legal advice indicating that the Secretary of State has no legal power to plan for a surplus on the business rates account.

“However, the response from ministers has been that the government would seek in any event to maintain the total of business rates and Revenue Support Grant determined in the spending review. Given that position, there seems little mileage in pursuing the argument.”

The paper said the LGA would monitor the outcome of future movements on the business rates account and prepare further lobbying proposals if it appears that forecasts of yield, on which the spending review decisions were based, prove too pessimistic.

Ministers have a statutory obligation to redistribute all funds raised through business back to local government. The rates, which make up the lion’s share of local government formula grant funding, are collected by councils, sent back to the Treasury and then re-distributed according to a needs formula.     

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