Councils will get to keep their own business rates under new local government financing proposals that will be fair and benefit those that grow financially.
Local Government Secretary Eric Pickles has presented the findings of a six-month review into council finance that sought to repatriate rates; create a financial incentive for councils to promote local growth; reduce dependency upon central Government grant; and maintain protections for business and vulnerable areas.
The National Audit Office has criticised the current system maintained by Labour as ‘highly complex and not transparent’. Ministers believe a new system is needed to end a long-standing problem where councils have no direct growth incentive, to build stronger relationships with business and to put councils in charge of their own financial circumstances.
Importantly, there will be no change to the way business pays the tax, who is eligible for discount, or the way it is set nationally. National discounts and rate relief will also continue to be supported, meaning no change to such groups as charities, amateur sports clubs, voluntary groups, those in hardship, and eligible rural or small firms. By contrast, Labour increased rates by stealth via cutting rate relief.
The Government has doubled small business rate relief, to help half a million small firms, funding the extra scheme for two years from 2010 to 2012, and is making it easier for small firms to get small business rate relief automatically, through changes in the Localism Bill.
Jake Berry said:
‘The current system of local government funding inherited from Labour is broken. It is confusing, arbitrary, complex and widely seen as unfair.
‘Our plans to allow councils to retain their locally-raised business rates will free councils from dependence upon central Government grant and give them a strong financial incentive to drive local economic growth.
‘No longer will local areas’ money be snatched away by Whitehall. This is localism in action and exactly what councils want.
‘It will be much more straightforward. By letting councils keep the products of enterprise we will end their disparaging dependence on government handouts, finally start rewarding economic growth and support local firms and new jobs’.