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Returning business rates to local control in their entirety is 'pretty unrealistic', according to Local Government ...
Returning business rates to local control in their entirety is 'pretty unrealistic', according to Local Government Association finance director Neil Kinghan.

Speaking at last week's Institute of Revenues, Rating and Valuation conference in Torquay, Mr Kinghan said a total return was problematic because the current business rate base was so uneven.

The future of business rates is a key area for debate in the review of local government finance by the Department of the Environment, Transport and the Regions. But many experts now believe an initial return of something like 20% of business rates to local control is a likely outcome.

Mr Kinghan said Westminster City Council had a business rate base 50 times the size of South Tyneside MBC's, and predicted there would be 'some degree of equalisation'.

He also raised the possibility of tying business rates to council tax levels and insisted that small businesses would need protection within any new system.

Mr Kinghan told delegates the review was 'certainly the best opportunity we are likely to get' to change the present system of local government finance. Ministers have promised a white paper covering the issue by next spring.

The return of business rates is central to the LGA's aim of winning local government greater command over its own funding. Apart from restoring a tax raising power to councils, such a move is viewed by local government finance experts as a necessary precursor to the abolition of capping because it would help to ameliorate gearing problems.

Mr Kinghan said the average gearing rate across councils meant that a 1% budget increase required a 4.5% council tax increase.

On capping, he suggested that small district councils - hit hard by budget increases of just 0.5% in each of the last three years - could be exempted from the legislation by returning to a system of thresholds. This would see councils with budgets of, say,£15 million freed from capping rules.

The LGA believes local government faces a shortfall in total standard spending of more than£1 billion next year on a standstill budget. But Mr Kinghan revealed that paymaster general Geoffrey Robinson had confirmed at a recent meeting between ministers and the association that there is no chance of any more money for local government services.

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