business rates: the latest developments

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 needsDeduct what you might raise in council taxTarget is the balanceLimit 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; orWe are relatively inefficient; orWe 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 ratesAssigned 100% = £144m in ratesFunding target £191mTop-up = £191m - £144m = £47mEach 1% change in rates is £1.44mWhich is 0.8% of funding

New Scheme – Tier Splits

County without Fire

Area collects £194m in ratesAssigned 20% = £39m in ratesFunding target £105mTop-up = £105m - £39m = £66mEach 1% change in rates is £0.39mWhich is 0.4% of funding

New Scheme – Tier Splits

Shire District

Area collects £32m in ratesAssigned 80% = £25m in ratesFunding target £4mTariff = £25m - £4m = £21mEach 1% change in rates is £0.25mWhich 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 Benn07869 37 35 35

nmbenn@hotmail.com

Business Rates:The Latest Developments