New Report: Independent Study on Business Rates Retention in County Areas

CCN News 2016 | 16 August 2016

Default Post Feature

A new independent study by Pixel Financial Management, commissioned by the County Councils Network, explores the implications of full business rates retention in county areas.

The report shows that income from business rates in urban areas, particularly London, far outstrips the amounts raised in rural counties.

The research also revealed a wide variation in business rates across a county area, with individual districts within a single county seeing markedly different income from business rates since 2010.

Download the Report here.

The findings show that despite Shire Counties producing 41% of GVA in England, they have much larger numbers of business ratepayers claiming reliefs, meaning CCN authorities receive dramatically less business rate income per head compared to urban areas, especially London. Rateable values per head in the capital now average £3,700 compared to £851 in county areas.

If the new system is not properly designed, it could leave underfunded services for the vulnerable and elderly in county areas worse off at a time of growing demand. The study reveals that while spending pressures on services such as adults and children’s social care are set to increase most in shire counties, income from business rates is unlikely to keep up.

The research also showed that within individual counties, district authorities experienced markedly different growth in business rates. CCN said it was evidence that two-tier areas needed to put forward a viable option for business rates strategy across an area, one that ensured that all areas could benefit from the locally retained system and a sustainable approach to funding services across a county area. CCN is working closely with the District Councils Network (DCN) on the retention system in two-tier areas.

In its response, CCN said the design of the new business rates regime is absolutely critical, with safety nets and frequent ‘resets’ to ensure urban areas such as London do not receive disproportionate funding allocations. To ensure counties are able to sustainably grow their economies, they require increased fiscal freedoms, including the ability to increase business rates without an elected mayor, supplemented by a national infrastructure investment strategy for rural counties to allow counties to grow their economies and reap the rewards of the new system.

They also urged the government to deliver fairer funding allocations through the needs-based review of funding. They say getting review of council funding right, and properly accounting for counties’ current and future needs and pressures, will set a template for a sustainable and fair rates retention system.

Download CCN’s Response here.

David Borrow

Responding to the report, Cllr David Borrow, CCN Vice-Chairman & Finance Spokesman, said:

“We welcome the move towards financial self-sufficiency. But we urge Whitehall to work with county and district authorities to ensure that growth is not concentrated in small pockets of the country.

“A policy that undoubtedly is well intentioned could end up being unfair, with areas outside the major conurbations being left behind other parts of the country.”
“This study shines the spotlight on just how complex the system is to create a scheme that delivers for local authorities, businesses and residents, particularly in two-tier areas. The rate retention is system needs to be designed in a carefully considered in an open, transparent and fair manner.”

“But before that, we must get the needs-based review of funding right, to set a baseline that properly assesses what counties need to fund an acceptable level of services, both in the present, and future. Then we can look at setting a sustainable rates retention system that does not simply deliver for small pockets of the country.”