Tuesday, October 6, 2015

News: Business rates devolution

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Rotherham Council could see a major change to its income as the Government set out plans for local government to retain 100% of local taxes – including all revenue from business rates – to spend on local government services.

Business rates are a tax based on property values and help pay for public services. Local councils collect Non Domestic Rates (business rates) from the owners and occupiers of commercial properties on behalf of central Government.

A business rates retention scheme was introduced in April 2013 aimed at providing a direct link between business rates growth and the amount of money councils have to spend on local people and local services. Councils retained 49% of the rates collected and received a top up grant. Councils are also able to keep a proportion of the revenue growth in rates.

By the end of the Parliament, local government will be able to retain 100% of the business rates. The government will also abolish the Uniform Business Rate and at the same time, the core grant from Whitehall will be phased out, and local government will take on new responsibilities.

For 2014/15, Rotherham Council's income from business rates was £73.925m (allowing for mandatory and discretionary reliefs) on behalf of central Government. Of the income, it retained £36.940m and was given £24.391m in Business Rates grants from the Government. Non Ring-fenced government grants amounted to £82.446m.

The authority already estimates a "budget challenge" of £41m - where further savings will need to be made over the next three years. Grants from central government could be reduced by 40% as early as next year.

Local authorities will be given the power to cut business rates to boost enterprise and economic activity in their areas, for example in the town centre, or on business parks. Rotherham has a number of Enterprise Zones which offer a business rate discount worth up to £275,000 per eligible business over a five year period. All business rates growth within the zone for a period of at least 25 years is being retained by the local enterprise partnership (LEP)

Rotherham Council helped to secure a £16m investment from KP Nuts by agreeing to cover a limited total of £161,290 of KP's business rates for three years.

The proposals also set out how directly elected mayors, including the one proposed for the Sheffield city region, will be able to add a premium to business rates to pay for new infrastructure. Support will be needed from local business leaders through a majority vote of the business members of the Local Enterprise Partnership and this power will be limited by a cap, likely to be set at 2p on the rate.

In its negotiations for further devolution the Sheffield city region asked for "England's first fully localised Business Rates model" including full localisation of Business Rates and Business Rate growth.

The Government responded by agreeing to pilot a scheme in Sheffield City Region Combined Authority which will enable the area to retain 100% of any additional business rate growth beyond expected forecasts. These pilots will begin in April 2016, subject to further detailed discussions. The Government continues to discuss wider localisation of business rates with the Sheffield City Region Combined Authority.

Images: Caddick Developments

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