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Business rates retention inquiry launched

02 November 2017

The Communities and Local Government Committee launches an inquiry into the impact of the longer implementation period for 100% retention of business rate revenue amid uncertainty for councils about what happens when their current funding settlements come to an end in 2020.

Follows on from initial inquiry

The inquiry follows on from, and seeks to complete, an initial inquiry by the previous Committee on 100% business rate retention which also explored which responsibilities councils could take on in return for the increase in revenue. It made various recommendations in its interim report about how 100% business rate revenue should be implemented.

The new funding system was originally due to be implemented in 2019-20, with the Revenue Support Grant (RSG) phased out and councils taking on new responsibilities in return for the increase in their business rate revenue.

However the Local Government Finance Bill, which contained provision for 100% retention, fell when Parliament was dissolved for the General Election. It was not revived in the Queen’s Speech but the Government has confirmed it is still committed to the reforms.

The new inquiry will assess the implications of the extended implementation period and how it is affecting councils’ financial planning.

It will also examine the consequences of implementing the Fair Funding Review - the Government’s review into needs and redistribution – in 2020-21.

Chair's comments

Clive Betts MP, Chair of the Communities and Local Government Committee, said:

"The proposal to allow authorities to retain 100% of revenue raised from business rates is a significant reform to local government finance.

The Secretary of State told us last month that, although the Government still intends to push ahead with the policy, it will be delayed from the original schedule. This will undoubtedly have an effect on how local councils make future financial decisions.

We’re keen to explore some of these impacts and also examine how the outcome of the Government’s Fair Funding Review in 2020-21 will affect councils."

Written submissions – terms of reference

The Committee is inviting written submissions in relation to the points below:

  • What are the consequences for councils of the longer implementation period for 100% retention in the context of the four-year settlement?
  • What are the consequences for councils of implementing the outcome of the Fair Funding Review in 2020-21?
  • How are these changes to the original implementation schedule affecting councils’ financial planning from 2020 onwards?

The closing date for submissions is 14 December.

Please use this link to submit written evidence.

Further information

Image: iStockphoto

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