Agenda item

-        Strategic Director of Resources to report.

Councillor Akhtar, Deputy Leader, introduced a report by the Strategic Director of Resources, which summarised five papers relating to the proposed Business Rates Retention Scheme published by the Department for Communities and Local Government (DCLG) on 17^th May, 2012.

The report set out in detail:-

Central and Local Shares of Business Rates

-        It had always been intended that the Scheme would operate within the spending control totals set out in the 2010 Spending Review to support the Government’s policy of deficit reduction.  As business rates receipts were forecast to be higher than planned local authority spending, this was to have been achieved by the Government taking back the extra business rates receipts; as this was a fixed sum all the risk of lower rates receipts fell on authorities.  It was now proposed that a percentage of receipts would be retained centrally.

-        The Statement of Intent indicated that the Government’s central share would be set at 50%, fixed until the system was reset – DCLG had indicated resets would occur every 10 years

-        Setting the central share at 50% would be below the level of local government spending set out for 2013/14 and 2014/15 in the 2010 Spending Review

-        Such an approach would allow the DCLG greater flexibility with respect to the resources it provided to local government

-        Consideration was still to be given and further consultation planned on the treatment of factors such as reliefs, costs of collection, losses on collection, payments to major precepting authorities

-        A number of specific grants would be rolled into Revenue Support Grants including the 2011/12 Council Tax Freeze Grant and funding for Council Tax Support as well as environmental and health grants

-        Revenue Support Grant allocations for 2013/14 and 2014/15 would be published in the 2013/14 Local Government Finance Report released in late November/early December, 2012

Safety Net and Levy

-        Safety Net would be triggered if an authority saw its income drop below its baseline funding by more than a set percentage

-        The levy would be proportional for every 1% increase in business rates an authority’s income would increase by 1%.  For top up authorities, like Rotherham, this meant no levy was payable

Renewable Energy

-              All business rates revenue from new (post 1st April, 2013) renewable energy projects would be retained in full by authorities

Pooling Prospectus

-        This was were local authorities across a geographical area shared the benefits of economic growth investment across the wider area and managing volatility in business rates income levels

-        Pooling was voluntary

-        Authorities could belong to 1 pool only  with 1 pool member acting as lead authority

-        There would be no additional financial incentive for pooling and the Government may refuse to authorities pools if it was considered that their operation would affect the funding for the safety net

-        Expressions of interest in pooling had to be submitted by 27^th July, 2012, consultation in September and designations announced in November

The Economic Benefits of Local Business Rates Retention

-        In order to gauge the likely economic impact of business rates retention, simulation exercises had been undertaken that showed over a 7 year reset period, a 50% localisation scheme would create an increase in Gross Domestic Product of between £1.7bn and £19.9bn with a middle case scenario of £10.1bn

-        The analysis indicated that the incentive for Councils would be larger if there were no central share

The current proposals with respect to the central share of the rates pool were significantly different from the initial assumptions with some major elements still to be consulted upon.  The detailed implications of the new scheme for Rotherham and other local authorities would not be able to be fully assessed until the 2013/14 and 2014/15 settlements were announced later in the year.

At present, authorities in Yorkshire and Humberside had in general not expressed an interest in pooling.  In light of this, the tight timescales for rates, localisation, the other changes to local authority funding being brought in from April, 2013, and the additional complexity that pooling would introduce to the proposals, it would proposed that Rotherham did not seek to participate in a Business Rates Pool at this moment in time.

Resolved:-  (1)  That the report be noted.

(2)  That the Council does not, at the present time, seek to participate in a Business Rates Pool.