Counties and districts look set to clash over the future split of business rates growth after their responses to the government’s consultation on the issue set out diametrically opposed positions.
From April 2020, local government is set to retain 75% of the business rates collected nationally, up from the 50% that has been retained since 2013.
In two tier areas, districts retain four fifths of this and counties receive the remainder.
In its response to the government’s consultation on the reforms, the District Councils Network said altering this split should only be considered for the additional 25% councils will keep. However, the County Councils Network has told ministers that the existing tier split should “not in any way be used as a baseline for establishing a national tier split”.
The CCN’s response said a higher tier split would “better balance risk and reward between councils”.
The two groups are also at odds over the government’s plans to fully reset the current system in 2020-21. This will mean councils will lose any growth they have retained since the introduction of 50% business rates retention in 2013.
As LGC reported earlier today, the districts would like to see the reset delayed by a year, warning resetting at the same time as introducing a new funding formula could destabilise the system. However, the CCN has backed the government’s proposals saying many councils were “currently benefitting excessively from the business rate system”.
Nick Rushton (Con), CCN finance spokesman and leader of Leicestershire CC, said: “The government’s aim is to reset the dial on local government funding from next year, with the introduction of a fairer funding formula to fix a broken system, and greater fiscal autonomy through increased business rate repatriation.
“With some councils benefitting excessively from business rate retention, the only way to effectively do this is for a full baseline reset to take place in 2020 – with phased reset after this point – to create a fair distribution of rates as the new finance system comes in.”
DCN chair John Fuller (Con) told LGC the call for a delay was a response to the lack of urgency around the government’s spending review, which will set the amount of money available to the sector as a whole going forward.
“If government isn’t going to keep to the timetable [for a spending review in March], we are going to need more time to adjust. It’s not a fundamental difference with the CCN, it’s a pragmatic response.”
The DCN has called for a presumption that future tier splits will be agreed locally, backed up by national guidance on the remaining 25% where agreement cannot be reached.
However, the CCN said it was “imperative” that government outlines a default national tier split.
Cllr Fuller said discussions were ongoing on the tier split but they should remain private.
Cllr Rushton added: “There is a lot of goodwill on both sides to create a joint position on tier splits and we will meet shortly with colleagues from DCN to discuss the issue further.”