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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 - PowerPoint PPT Presentation
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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
