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‘No benefit’ from reforms until 2015

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Eric Pickles has confirmed that there is no chance the sector will be able to benefit as a whole from plans to allow councils to retain the business rates they collect. 

Giving evidence to the communities and local government select committee on Monday, Mr Pickles said “individual authorities should be able to [benefit]” but was adamant that spending totals set out by the chancellor in the spending review would not alter regardless of business rates collected.

The communities secretary added: “In the next spending round I am hoping we can better match between levels of non domestic rates and the level of local government expenditure.”  

Confirmation that councils face a zero-sum game, at least for the first years of the new system, will fuel deprived areas’ concerns that if more prosperous areas benefit from the system, it will come at their expense.

Mr Pickles also told the committee he could not see any other fundamental financial powers being handed to councils until 2015.

He said plans to hand councils more financial autonomy needed to be “incremental” and on the basis of “consensus” and that changes could come by 2015.

“You have to be a few years ahead in terms of what is happening. I think once authorities get used to operating this system, it will enable greater freedoms to slot in much easier,” he added.

The former party chairman also flatly ruled out any suggestion that councils would be able to set their own business rates in the future.

Other issues which remain up for discussion included whether or not the tariffs and top-ups which are handed to councils as part of the new arrangements will be pegged to inflation, an issue over which Mr Pickles said he was “genuinely torn” over.

He said he was minded to have long period between any “reset” to the system, which are to be carried out to stop authorities’ relative needs and funding levels from diverging. Resets could become aligned with revaluations, he suggested.  

Read a beginners guide to local government finance reform here

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