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Leaders voice concerns over Business Rates proposal

Local Authority Leaders across Yorkshire and Humber have come together to voice their concerns about the Government’s proposals to fund Councils in the future from the business rates in their areas. Leaders are concerned that this could create unfairness between Councils and further widen the gap between local economies in the North and those in London and the South East.

Councillor Peter Box, Chair of LGYH and Leader of Wakefield Council said: “The Government’s proposals that Councils’ funding will be based on business growth, not the needs of their communities, could seriously damage our ability to deliver services that are essential to our communities and local people. If we are forced to have our budgets reliant on the numbers of businesses paying rates in our local areas, then valuable services such as those for the elderly, the young and for vulnerable people could be put at risk.”

The Government is proposing to allow Councils to keep the Business Rates that are raised from their local areas so that public services can be funded from the amount raised rather than via central Government grants. Currently Business Rates are pooled nationally before being distributed throughout the Country on the basis of local community and public service needs in a council’s area .

The Government is now consulting on a system of “tariffs” and “top-ups”, where wealthier councils pay a levy to support poorer councils, whilst also getting to keep any extra income from business growth. Councils that have difficulty attracting new businesses will receive top-ups to fund basic service needs, but will not be able to gain the extra funding from new businesses. The concern is that this could mean that rich councils, with the most successful businesses – such at those in central London and the wider South East – will get richer, while others will struggle in comparison to fund the services that communities really need.

Crucially, there is no link between the amount of rates paid by businesses in any area and the public services the people living there actually need to be provided for example. social workers, bin collections, libraries, leisure centres.

Councillor Box continued: “Under the new funding set up, Councils with strong economies that are business rich will receive the lion’s share of any funding rewards, while other areas – particularly those in the North - disproportionately lose out. This will not only further widen the gap between places like Yorkshire and Humber and London, but will also see already cash strapped Councils in the North struggle even further to fund local services, while rich Councils in the South East could see their budgets grow even more.

As Leaders we recognise the need to work with our local businesses and encourage more business investment in our areas. However, this new arrangement could severely affect many of the Local Authorities in Yorkshire and Humber, which do not have the right types of businesses - such as big business parks or large-scale shopping centres and hypermarkets - that pay high Business Rates. The Government’s proposals are also likely to favour urban over rural areas, and retail development over manufacturing growth. As a region with such great advanced manufacturing potential and with such great expanses of countryside, we could easily lose out.

The Government’s proposals take little, if any, account of differences between Councils and between local areas – instead they assume that we can all develop businesses and fund public services in the same way as places like Westminster and the City of London, which just isn’t the case.

These risks around unfairness and inequality have pulled Leaders together across Yorkshire and Humber to speak out as one on this issue. With our Councils already facing difficult decisions because of cuts to our funding we do not want to see any more changes that could force even further public service cuts on our citizens. We need to ensure that whatever changes in local government finance are taken forward are fair, based on the needs of our communities and local people, and can really support our local economies grow.

The Government’s consultation runs until October, with more detail still due to be set out over the summer. The initial submission from LGYH can be found below

LGYH Resource Review Submission - 21 July

LGYH: 1st Floor, 19 King Street, Wakefield, WF1 2SQ Telephone: 01924 200 262 email: mail@lgyh.gov.uk

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