Neil Benn Business Rates: The Latest Developments

The Presentation Basics of the new scheme Baseline issues / SPARSE campaign Latest DCLG plans What happens next?

What Happens Now Formulae assess need Deduct what you might raise from council tax Pay the balance as cash Limits on year-to-year changes

What Happens Now District councils collect rates and send them to Government Everything else is irrelevant

Basics Target funding level Target business rates collection Target rates > funding – pay tariff Target rates < funding – receive top-up

Basics Districts still collect rates Notionally shared between districts, counties, fire Funding target Formulae assess needs Deduct what you might raise in council tax Target is the balance Limit on year-to-year change

SPARSE Campaign Close gap to urban from 60% to 50% Changes to EPCS and domiciliary social services Specific mention in DCLG response

SPARSE Campaign Our council tax is higher So: We are relatively over-providing; or We are relatively inefficient; or We are relatively under-funded Hard evidence is difficult to gather DCLG is not looking for any

Baseline / Funding Target Further cuts – 11% on average for Up to 4% returned through New Homes Bonus Transfers of function? Damping Locked-in for 10 years

New Scheme – Tier Splits Unitary with Fire Area collects £144m in rates Assigned 100% = £144m in rates Funding target £191m Top-up = £191m - £144m = £47m Each 1% change in rates is  £1.44m Which is 0.8% of funding

New Scheme – Tier Splits County without Fire Area collects £194m in rates Assigned 20% = £39m in rates Funding target £105m Top-up = £105m - £39m = £66m Each 1% change in rates is  £0.39m Which is 0.4% of funding

New Scheme – Tier Splits Shire District Area collects £32m in rates Assigned 80% = £25m in rates Funding target £4m Tariff = £25m - £4m = £21m Each 1% change in rates is  £0.25m Which is 5.7% of funding

Levies To fund a safety net for losers On “disproportionate gains” “A 1% increase in rates should cause the same increase in funding everywhere”

Levies Huge levies on shire districts? Boosts for shire counties? How far in arrears for the calculations?

Levies Authority invests £5m in a scheme to generate £1m p.a. rates N Warwickshire would keep about £100,000 Northumberland would keep all £1m

Safety Nets To protect local services Based on funding changes since start of scheme No protection for year-on-year falls

Safety Nets A 10% safety net on scheme income: Would restrict Surrey’s cuts to 1.7% Would restrict Breckland’s cuts to 6.2% Would restrict Westminster’s cuts to 7.0%

Pooling Arrangements Minimise risk by pooling with others… …but also reduces potential gain Weakens incentive You pay for others’ failures or bad luck Why would fast growers want to pool?

What I Like Incentive to promote business development The idea of levies and a safety net

What I Don’t Like Beyond reasonable influence Randomness Casino shire districts Proportionate levy – nonsensical formulation Proportionate levy – unequal returns

What I Don’t Like Damping being increased, not phased-out Safety net based on grant not budgets Authorities bearing VOA error losses No incentive to tackle bad debts Huge transfer of risk

What I Don’t Like Potential waste / poaching Enterprise zone effects Different treatment of fire services

Worries Delegations of services with little or no cash Cash flow / other timing issues Ministers will want to tinker Perfect storm

What Happens Next? Further semi-secret discussions Bill passing through House Further consultation over summer Full scheme details in late-autumn April 2013 start

Neil Benn Business Rates: The Latest Developments