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Shires caution over 'unfair' business rates pilots

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Pilots of the 100% business rates system must not set a precedent which sees some cities retain a greater share of the extra funds available, counties and districts have warned.

In a joint statement setting out shared principles for the move from 50% to 100% rates retention, the County Councils Network, District Councils Network and Rural Services Network say this would be “unfair”. They also warn against funding bespoke elements of devolution deals from the quantum of additional funds that will become available under the new system, currently estimated at about £12.5bn.

Both moves, which would lead to differing responsibilities being devolved in different parts of the country, were suggested by the Department for Communities & Local Government in its current consultation on the reforms. The document asks for views on whether budgets could be devolved on a combined authority level, paving the way for planned pilots in London, Greater Manchester and the Liverpool City Region to become permanent.

The principles say: “100% business rate retention pilots should not set a precedent which sees the cities involved retain an unfair share of national resource before the national system is designed.”

The DCLG consultation also asks for views on whether “some or all” of the commitments in devolution deals could be funded through retained business rates.

LGC understands shire authorities would support the funding of budgets that may form part of existing devolution deals if they were universally devolved under the new system, such as adult skills, but not agreement to fund specific projects such as infrastructure.

The principles state: “Local and central government should come to an agreement on what aspects of devolution deals are bespoke and so are paid for outside of the business rates system and which are universal and so should be devolved to all areas through the business rates system.”

The 25 principles also support the recently published position of county and district treasurers that new baselines for the distribution of business rates funding must not “rely on higher levels of council tax” in shire areas.

They call for greater fiscal devolution and for the government to ensure shire areas receive their fair share of infrastructure funding.

In a foreword to the principles, CCN chair Paul Carter (Con), DCN chair Neil Clarke (Con) and RSN chair Cecilia Motley (Con) say they support the government’s ambition “on the basis that it will enable further local autonomy and self-reliance, as well as encouraging and rewarding future growth”.

They add: “Both district and county areas will have a significant national role to play in supporting, encouraging and promoting growth.

“However, this must be adequately supported by government through a system of appropriate incentives and rewards. And government funding and strategies for capital infrastructure investment must be demand-led and not purely focused on cities.”

The DCLG’s consultation runs until 26 September.


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