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London reaches agreement to voluntarily pool business rates

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London boroughs have reached an agreement with the city’s mayor Sadiq Khan to voluntarily pool all of the capital’s business rates from next April – subject to government approval.

The move has been hailed as an “important step” in the capital taking more control of the money it raises, Mr Khan said.

London generates more than £8bn a year in business rates, but about £2bn is paid back to the government to be distributed to councils elsewhere in England. That will still happen as part of what London describes as a 100% rates retention pilot.

Claire Kober (Lab), chair of London Councils, said: “Agreeing a business rates pool for London will unlock more business rates revenue and although we have a long way to go to conclude the deal, this decision signals our collective ambition to better serve London’s residents and businesses by gaining more control over our city’s finances.”

LGC reported in July how a prospectus was circulating around London’s boroughs outlining how the business rates pool would work.

This showed that it will require unanimous agreement from all participants to decide how benefits from business rates growth will be distributed among the boroughs and mayor. The prospectus also proposed developing a needs assessment formula, allowing boroughs to retain a proportion of the growth in their areas, and creating a collective investment pot which would be used to “lever additional investment funding from other sources”.

Mr Khan (Lab) said: “Today’s agreement highlights how London boroughs of different political colours, in both inner and outer London can join forces to act in the best interests of the whole city.

“We will now have more control to spend more money on the things that matter most to Londoners, including social care, affordable housing, infrastructure investment and support for businesses.

“This is an important step in devolving more control over the use of the capital’s tax revenues to London government. But it is only a first step as the government will still retain control of business rates tax policy, revaluations and the business rates appeals system.

“What we really need is for government to agree to full devolution of business rates to London, combined with genuine protection for business, so that we, like the devolved administrations of Scotland, Wales and Northern Ireland, can act in the interests of Londoners and their businesses.”

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