(Secretary of State for
Housing, Communities and Local Government): Today,
my department has published the “2019-20 Local
Government Finance Settlement: technical
consultation” as well as an “Invitation to
Local Authorities in England to pilot 75% Business Rates
Retention in 2019/20”.
The technical consultation reiterates this Government’s intention
for the 2019-20 Settlement to confirm the final year of the
2016-17 multi-year settlement accepted by 97% of authorities, and
to implement council tax referendum principles as announced at
the final 2018-19 Settlement last year.
Looking to the longer term, the 2019 Spending Review will confirm
funding from 2020-21. The Government is working towards
significant reform in the local government finance system in
2020-21, including an updated, more robust and transparent
distribution methodology to set baseline funding levels, and
resetting business rates baselines.
This Government is committed to rewarding councils for supporting
local firms and local jobs. The business rate retention system
ensures that local authorities directly benefit from the proceeds
of economic growth – with more funding to support local frontline
services. All councils, including those which are currently less
prosperous, have the opportunity to gain from this system.
The current 50% business rates retention scheme and piloting
programme is yielding strong results. Local authorities estimate
that in 2018-19 they will keep around £2.4 billion in business
rates growth. Our continued reforms to this system will continue
to give local authorities even greater control of their finances,
but, to ensure a successful implementation, this Government is
committed to testing aspects of the proposed new system.
This 2019-20 prospectus invites all local authorities (except for
those with on-going pilots in devolution deal areas and London)
to apply to pilot 75% business rates retention in 2019-20. From
2020-21 we are aiming to roll in additional grants, with a target
of reaching 75% retention based on the current 2019-20 values of
these grants. These pilots will help us test the retention system
at this level. Given the limited time before 2020-21, when we aim
to roll out increased business rates retention to all local
authorities, there are fewer issues we can usefully test in
pilots. It is therefore likely that this pilot programme will be
smaller than in 2018-19.
Separately, the Government can confirm that local authorities in
areas with a previously agreed devolution deal will continue to
pilot 100% business rates retention in 2019-20. Separate
conversations will happen with London authorities to decide
arrangements following their 100% pilot this year.
Finally, I have noted the strength of feeling in local government
around the issue of ‘Negative RSG’ and this technical
consultation sets out the Government’s preferred approach to
resolving the issue in 2019-20.
This preferred approach recognises the commitment made by the
Government during the implementation of the business rate
retention scheme in 2013-14, that tariff and top-ups would be
fixed until the system was reset.
This commitment was made so that local authorities would benefit
directly from supporting local business growth and the
Government's preferred approach does not reverse this commitment.
In practice this will mean that the Government meets the cost of
Negative RSG through forgone business rates.
I am placing a copy of the “2019-20 Local Government
Finance Settlement: technical consultation” and
the “Invitation to Local Authorities in England to
pilot 75% Business Rates Retention in 2019/20” in the
House library.
