The risk of business rate behemoths

I saw a story recently about the closure of Rugeley Power Station in Staffordshire which will see a £1m hole appear in Cannock Chase District Council’s budget thanks to the disappearing business rates.

This one enterprise alone makes up 9% of the authority’s business rate income as one of the biggest rate payers in the district. But it got me thinking about other local authorities which similarly have all or many of their business rate eggs in one basket.

Sheffield City Council, for example, gains 18% of its city region business rates from Meadowhall Shopping Centre, equating to £176m over the last five years – that’s a lot of eggs! The Trafford Centre and its retailers similarly pay around £44m every year in business rates (give or take a few hundred thousand) but at least Trafford Council does have a more diverse spread of business and enterprise to spread any risk than its Yorkshire neighbour.

Another risk comes from when a major business rate contributor challenges its original rating valuation.

It was revealed only recently that Copeland Council in Cumbria must use £9m of reserves to cover a business rates overpayment by the Nuclear Decommissioning Authority (NDA), which runs the Sellafield reprocessing site after it recently won an appeal against the original valuation.

More than 70% of its business rates come from Sellafield Limited but now Copeland Council, the government and Cumbria County Council must jointly return £31.5m following the ruling.

All these examples show how reliant Local Authorities have become on business rate income but if you withdraw the financial lifeline, some authorities’ finances will be looking decidedly sickly after business rates devolution kicks in.

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This is true, and demonstrates the need for accurate rateable values and keeping the lists accurate. No doubt VOA has been and is doing its best with the resources available to it; but Whitehall seems to have lost sight of the statutory duty of a Valuation Officer and regards the rating system as just another means of squeezing as much money as possible. VOA’s problems(and those of the Valuation Tribunal Service) make formal problems for ratepayers and, as the piece points out, for local authorities which have to make provision for possible refunds and which simply cannot afford, in some cases, to make sufficient provision to cover the likely consequences for them of maintaining the rating list