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Two-tier areas renegotiate business rates splits in pilot bids

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Some two-tier areas have renegotiated the way they will split any uplift in business rates between different types of councils if they become a pilot area in 2018-19, LGC research has found.

Under the current 50% rates retention system, districts retain 80% of the growth and county councils 20%. However, Department for Communities & Local Government guidance on submitting a bid indicates areas chosen to become pilots will have demonstrated plans to use growth funds strategically to further enhance the local economy.

Leith Hill, Surrey

Leith Hill, Surrey

Source: Picture taken by Peter Pearson

Surrey CC is on an ‘equal footing’ with other bids, despite previous commitments from the communities secretary

A report which went before West Sussex CC’s cabinet last month said a 70:30 split between the county and its districts respectively had been agreed.

“This would be on the basis of agreeing that the proceeds from being a pilot status should be used jointly on strategic, countywide issues, rather than being allocated back to authorities,” the report said.



Harrogate BC has not joined other North Yorkshire districts in a bid to pilot 100% business rates retention, preferring to maintain current arrangements with Leeds City region

In Worcestershire, local authorities propose to distribute the “additional retained levy” – the tariff it currently pays on the area’s growth – on the basis of 20:80 between the districts and the county council”, according to a report which went before Worcester City Council’s policy and resources committee last week.

The Department for Communities & Local Government has expressed an interest in focusing on rural areas in this round of pilots.

In February leaders in Surrey struck a deal with ministers to become a pilot only for that plan to be scuppered due to uncertainty over the future of the policy in the aftermath of the general election.

Sheila Little, Surrey CC’s director of finance, told LGC leaders had submitted a bid to participate in the programme but added the area was “on an equal footing” to all of the other applications.

In total 20 two-tier areas have prepared proposals, a number of which also include unitary councils within the historic county boundary: Leicestershire’s bid, includes the county council, its districts, and unitary Leicester City Council; all councils in Derbyshire including Derby City Council have submitted a bid as have those in Essex, including Southend BC and Thurrock Council, and Staffordshire, including Stoke-on-Trent City Council. 

North Yorkshire CC has prepared a proposal with unitary East Riding of Yorkshire Council and the county’s districts, except Harrogate BC and York City Council which want to remain a part of the Leeds City Region business rates pool.

In September LGC revealed research which showed county councils could end up with a funding gap of between £550m and £700m within 10 years of the introduction of a system of fully retained business rates.

LGC understands the number of bids submitted by two-tier areas is not necessarily a show of support for the reforms in their current form but are instead seen as a way of getting more control of the money their areas generate for a year. There are also hopes they will be able to better influence the policy’s future direction.

Six county areas did not, however, submit bids for a variety of reasons. They are Buckinghamshire, Dorset, East Sussex, Hampshire, Nottinghamshire, and Lancashire.

Simon Blackburn (Lab), Blackpool BC’s leader, told LGC his “key focus” is on trying to get the shadow Lancashire Combined Authority, which he chairs, up and running but added he would be watching other pilot areas “with interest”.

In a report to cabinet last month, East Sussex CC chief executive Becky Shaw said bidding to become a pilot “would require a great deal of effort in a short time, for little long-term benefit”. She also questioned if “business rates growth will ever keep up with the growth in demand for services and whether a property based tax is the right way to fund public services in the future”.

Meanwhile, two groups of unitary authorities have also submitted bids. These include the six unitaries in Berkshire, and Herefordshire Council, Shropshire Council, and Telford & Wrekin Council which all currently work together as part of The Marches Local Enterprise Partnership.

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