More warnings over LAs being worse off with devolved business rates

There’s a small steering group that has just started to meet, with the catchy name of the “Local Government Association (LGA) and Department for Communities and Local Government (DCLG) Joint Steering Committee”.

It was set up to establish information and expert advice on the new devolved business rates scheme and the first papers have been released from its inaugural meeting.

According to the public sector executive website, the existing proposals unveiled by George Osborne could leave councils worse off by putting them at the mercy of the success or otherwise of local business. And despite the promise of full financial devolution, we will still be left with a system that requires a safety net to protect some local authorities funded by the rest.

It stated: “Under 100% rates retention, the potential instability of rates income becomes even more critical to authorities, since a larger proportion of their service funding is dependent on their rates income – and this is particularly true for authorities who are heavily dependent on their assigned share of business rates, rather than top-up funding.

“Notwithstanding any measures under 100% rates retention to reduce volatility, it is likely that some form of “safety net” will still be needed to provide for authorities in the event that the loss of business rates income is too great for them to continue to deliver appropriate services. For example, where a council is faced with a significant loss of income following the closure of a major ratepayer. This situation will not (and cannot) be anticipated through an accounting provision.”

The paper suggests that part of implementing the scheme should involve systems to minimise the impact of volatility on individual councils, or find ways to calculate council provisions to predict income shortfalls. Another idea mooted was a systematic pooling of risk between local councils.

This latest instalment comes only a few weeks after council leaders in Liverpool, Cambridgeshire and Greater Manchester, where business rates devolution is already being piloted, warned there were several inequalities in the scheme which could lead to many LAs being worse off. At the time I said that surely that was the purpose of having pilots to find and then iron out these wrinkles and I am sure the steering group is now gamely employed to do the same thing.

Let’s hope we can quickly move beyond the urging and suggesting to the revising and implementing!