Leader sceptical over business rate proposals
Reporter: Laura Wild
Date online: 20 July 2011
The Leader of Rochdale Council, Councillor Colin Lambert, is sceptical over proposals that would allow councils to keep their own business rates – because it could mean that Rochdale loses out on millions of pounds.
The Government has published proposals to allow the local retention of business rates by councils and to let them borrow against future rate income. Legislation will be set out later this year so changes start as soon as possible.
The proposals will shift councils away from their dependence on Government grant, where pleas of poverty earned a bigger share.
Any council that grows its business base would see increased business rates that they would keep. Importantly, there will be no change to the way business pays the tax, who is eligible for discount, or the way it is set nationally.
The Leader of Rochdale Council, Councillor Colin Lambert, said: “The devil, as always, is in the detail.
“This can ultimately mean another £75 million a year taken from Rochdale; the desire of Mr Pickles to feed his friends in the South of England will hit the poorest regions.”
Andy Zuntz, Executive Director, Rochdale Borough Council, added: "It's an interesting idea, but the devil is in the detail, so we will be examining the plans closely. There are lots of questions to be answered."
A system of new ‘tariffs or top ups’ would be put in place to ensure a fair starting point for all councils - north, south, metropolitan or district - by balancing out those with business rates income above a baseline funding level and those with income falling below it. A safety net levy on disproportionate gain will also provide extra protection where needed. The detailed mechanism will be set out later this year following consultation.
Ministers believe a new system is needed to end a long-standing problem where councils have no direct growth incentive, to build stronger relationships with business and to put councils in charge of their own financial circumstances.
Secretary of State for Communities and Local Government Eric Pickles said: "Our proposals to repatriate business rate income are balanced, fair and equitable creating self-sufficiency, the right incentives for all areas to grow and protecting the most vulnerable places. This is what councils want and precisely what we mean by localism.
"It will be much more straightforward, by letting councils keep the products of enterprise we will end their disparaging dependence on government handouts, finally start rewarding economic growth and support local firms and new jobs.
"The top up and tariff measures will safeguard those places that have relied on grant by making sure successful areas share a slice of their income - from the offset no area will see less funding than they would have got under the old grant system.
"Central redistribution weakened local accountability, gave councils no reason to promote business growth and meant local funding was dictated by bureaucratic formula not local need."
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