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LGA – Businesses want rates to stay local

The poll found that of those businesses:

• 66% preferred business rates to be retained by their council and distributed locally, compared to 20% who favoured them being sent to central government and redistributed according to a nationally determined formula

• 44% thought their local economic climate would remain the same over the next year; 32% believed it would worsen and 22% thought it would improve. Businesses in the South of England were the most optimistic (30%), those in the East were most pessimistic that it will improve (13%)

• 69% expected to have the same number of staff in a year’s time as they do now; 16% expected to have more and 13% less. Businesses in London were the most optimistic about recruiting staff (17%), whilst those in the East were the most likely to believe they would have less (16%)
The findings are published after a consultation by the LG Group of almost 90 councils found overwhelming support for reform of the business rates system.
Currently, councils collect business rates and pay them into a central pool, which is then redistributed to all authorities in the form of a grant that is allocated according to different levels of need and different council tax yields. Business rate income accounts for approximately 26 percent of total government grant to local authorities. By 2014-15, the Government will be taking in £2 billion more from local business rate income than they intend to distribute back to local areas.
The Local Government Group has also today published a 10-point plan for reform of the business rates system (see notes).
Baroness Margaret Eaton, Chairman of the Local Government Association, said:
"Now more than ever, we need to put in place a funding system that will support local public services and generate economic growth. This poll shows that there is clear support amongst the business community for giving more control over local public spending to the people that know their areas best.
"Councils dealing with the consequences of steep reductions in central government grant, and so it makes sense to move towards a system that makes them less reliant on what goes on in the corridors of Whitehall.
"The current system of funding local government is incredibly complex and does not meet the needs of the people we serve. Even though many councils raise more money than they spend, all are having to make deep spending cuts at the behest of central government. This undermines local accountability and democracy.
"It is clear that the current system is in need of reform. Local residents and businesses do not understand the relationship between the money they pay and how much the council has to spend on services. However, it is important that the Government recognises the current imbalance in local economies and ensures that there is no localisation without a fair system that allows every community in the country to benefit from the nation’s economic growth. Any new system must ensure that those areas that do not have the capacity to raise huge amounts of funding through business rates do not lose out.
"Most businesses believe their local economic climate will not get any better or could get worse over the next year. Now is the right time to look at a system that could unlock the potential to boost the economy."

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