Business rates: the future Mike Heiser Senior Adviser, Local - - PowerPoint PPT Presentation

Business rates: the future

Mike Heiser Senior Adviser, Local Government Finance

29 January 2016 www.local.gov.uk

Summary

• 100% business rates retention: main points
• How it might work
• New responsibilities
• Equalisation – top-ups and tariffs
• Flexibility to vary up and down
• Other flexibilities
• Business rates appeals
• Next steps

www.local.gov.uk

Story so far

2008-2011 2012 2013 2014 2015 2016

Self-funded local government through council tax, business rates and other taxes Locally retained share of business rate income increased to 100 per cent Reform: 50:50 split into local and national Improved LABGI scheme 50% business rates retention introduced Greater Manchester & Cambridgeshire pilots announced Retention of 100% of business rates growth Introduction of Enterprise Zones Chancellor announces 100% business rate retention

100% Retention – main points

• 100% local tax retention by the end of the Parliament
• Cost neutral – phase out grants, add in new

responsibilities

• Protection against volatility and continue

redistribution within the system (top ups / tariffs)

• Councils can reduce business rates
• Metro mayors powers to fund new infrastructure

through increasing business rates (with LEP agreement)

How it might look – start in 2020

5 10 15 20 25 30 35 40 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 £bn

100% business rates retention - one possible model

Other grants outside business rates Other grants within centrally determined business rates RSG outside business rates RSG within centrally determined business rates Negative RSG Locally retained business rates

100% retention & new responsibilities

Central share of business rates 13,000 Revenue support grant 2,131 Public health grant 3,130 Attendance Allowance caseload 5,500 TfL capital grant 1,000 Housing benefit administration grant 200 Minimum yet to be found 1,039 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Central share of business rates, 2019/20 Grants and responsibilities as per Government proposals, 2019/20

£000s

New responsibilities?

• Around £11bn of grants in addition to residual RSG; can be baselined

according to a formula

• Once in, will go up according to rules of business rates retention: formula

cannot be changed each year without changing predictability of incentive

• Consultations likely on:

– Public Health (£2.5bn?) – Greater London Authority transport capital (£1bn) – Housing benefit administration (£200m) – Attendance Allowance (£5bn?)

• Improved Better Care Fund could also be incorporated
• Not yet clear what happens to funding for New Homes Bonus (£900m by

19-20)

• LGA would like to see more skills funding included

Equalisation – top-ups and tariffs

• Top ups and tariffs balance each other
• Based on difference between funding baseline and business rates

baseline

• Likely to be reset when the new system starts – 2020 or earlier
• A reset will

– Update data used in formulae – population, council tax and

• ther

– Consider any evidence for changing formulae – Consider what formula to use for grants incorporated into the baseline

• Top-ups and tariffs updated by multiplier each year
• Pressure for fundamental review of the needs basis

Flexibility to vary rate

• All will have flexibility to vary multiplier down
• Power to increase

– ‘Directly elected metro mayors’ will have the power – limit

• f 2p in the £ mentioned in speech

– Subject to agreement of business members of LEP

• Questions

– What level of granularity? – Which mayors will have the power? – Any limits to increases after lowering?

Reliefs

• Current system has £3.3bn reliefs – of that £2.4bn, is for 80%

mandatory relief – mainly for charities

• Application for rate relief for NHS trusts – could be around

£1.5bn if applied in full

• LGA is arguing for discretion in reliefs – linked to power to

tackle avoidance

• Grant funding to enable reliefs in support of Government

priorities (eg flooding, SMEs)

Appeals

• Too many unsolved appeals – currently 300,000

– Councils have to bear 50% - will rise to 100%

• Provision in Enterprise Bill plus consultation

– Check, Challenge, Appeal – due to come in from April 2017 – Aim to reduce number of appeals; must go through the three stages – Individual ratepayer accounts – Provision for fining ratepayers and agents

• LGA reaction

– Welcome proposals to reform appeals – councils are making significant provisions to deal with uncertainty’ – Individual ratepayer accounts could lead to online valuation by ratepayer – thus reducing uncertainty

100% business rates retention – tasks

LGA will work together with DCLG, local authorities, businesses and others to address –

• Devolution of responsibilities: identification of grants/

responsibilities, analysis of implications, implementation plans

• Needs and redistribution: measuring needs & resources,

future proofing

• Risk and reward: management of risk, pooling, Enterprise

Zones

• Multiplier flexibilities: 2-tier areas, link to main rating multiplier,

securing business approval