Cash for councils from the further retention of business rates
should be in addition to and not replace existing sources of
revenue, in recognition of cost pressures faced by local
authorities, the HCLG Committee has concluded.
The Committee’s report on business rates retention also calls on
the Government to clearly set out the timescale for
implementation and the outcome of the Fair Funding Review,
warning that uncertainty has resulted in councils making
‘pessimistic assumptions’ about their budgets which ‘could
unnecessarily impact on service levels’.
MP, Chair of the Housing,
Communities and Local Government Committee, said:
“Many councils across the country are in a difficult
financial position, with huge pressures on a whole range of
provisions from children’s services through to road repairs.
After many years of financial constraints, the Government now
has an opportunity to go some way towards protecting vital
services for taxpayers by ensuring that any extra revenue from
the retention of business rates can be kept by councils on top of
current funding.
The Government also needs to move quickly to spell out a
detailed timetable for funding reform. The current uncertainty
means councils are being pessimistic about their financial
futures, which risks impacting on the frontline services that
residents rely on.”
The report says the Government’s proposed 75 per cent business
rate retention in 2020-21 will generate around an extra £6
billion for local government, although it is the intention of
Ministers that this additional revenue will replace existing
grants to local government.
As well as calling for the income to be in addition to current
revenue, the Committee suggests that the Government must ensure
that any new responsibilities placed on councils from further
business rate retention are linked to stimulating and promoting
economic growth.
The Committee is also calling for consideration by the Government
of giving groups of local authorities more comprehensive fiscal
powers and for greater recognition of the links between local
government funding and social care funding while preparing the
social care Green Paper.
ENDS
The inquiry was set up to examine how councils had been affected
by the longer than planned implementation period for reforms to
local government finance - the move from 50 to 100 per cent
retention of business rates revenue in 2019-20 and a ‘Fair
Funding Review’ of the formula determining the amount of business
rates revenue councils will retain. The Government announced
during the inquiry that local government would retain 75 per cent
business rates in 2020-21.
In November 2017, the Committee published independent
analysis suggesting ways in which the current needs and funding
assessments for councils could be made simpler and more
transparent.
