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Districts call for rates retention delay

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The District Councils Network is calling for a one-year delay in the implementation of 75% business rates retention to avoid what it says is a “real risk of destabilising the system”.

In its response to the government’s consultation on the reforms, the DCN says member are “extremely concerned” that the government wants to fully reset the business rates retention system which has been in operation since 2013-14. This would mean councils losing any growth in business rates income that they had retained since then.

The DCN says doing this at the same time as introducing a new methodology for distributing central government funding to councils following the fair funding review could be too complex.

The response said: ”The complexity of the changes being made to the local government finance system introduces a real risk of destabilising the system if all the planned changes are introduced in the same year. 

“We therefore call for a one-year delay in the introduction of all changes to business rates, to allow the changes from fair funding and the spending review to bed in successfully.”

Under the MInistry for Housing, Communities & Local Government’s proposals the business rates system would be fully reset in 2020-21, before moving to a phased or partial resets once the new system is up and running. 

The DCN points to the ministry’s own comments that a full reset creates a ’cliff edge’ and a ”perverse incentive for authorities to control when growth comes ‘on stream’”. This is so they can maximise the amount of growth in business rates income they retain.

The response also suggests members were caught by surprise by the plans for a full reset, sayng that the ministry has not clearly spelt out this intention before. 

The consultations on 75% business rates retention and fair funding closed today.

On fair funding, the DCN backs calls for inclusion of deprivation in the foundation formula and is also calling for greater account to be taken of fixed costs.

It is calling on the government to allow districts to put a 3% “prevention precept” on council tax which it says could raise up to £42m.

The response says: “In order to access this additional precept, we would expect districts to work with partners to set out a strategic ‘Prevention Plan’ showing how the additional council tax raised will be invested in services that manage demand and reduce costs elsewhere in the public sector, particularly in social care and health.”

The full responses will be published on the DCN’s website later today. 

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