Business Rates:
The Latest Developments
Neil Benn
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
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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 2013-14
 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
Business Rates:
The Latest Developments
Neil Benn
07869 37 35 35
[email protected]