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Retained business rates should be extra revenue source for councils

24 April 2018

Cash for councils from the further retention of business rates should be in addition to and not replace existing sources of revenue, in recognition of cost pressures faced by local authorities, the Housing Communities and Local Government Committee concludes.

Set out timeframe for implementation of Fair Funding Review

The Committee's report on business rates retention also calls on the Government to clearly set out the timescale for implementation and the outcome of the Fair Funding Review, warning that uncertainty has resulted in councils making 'pessimistic assumptions' about their budgets which 'could unnecessarily impact on service levels'.

Protect vital services for taxpayers

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

"Many councils across the country are in a difficult financial position, with huge pressures on a whole range of provisions from children's services through to road repairs.

After many years of financial constraints, the Government now has an opportunity to go some way towards protecting vital services for taxpayers by ensuring that any extra revenue from the retention of business rates can be kept by councils on top of current funding.

The Government also needs to move quickly to spell out a detailed timetable for funding reform. The current uncertainty means councils are being pessimistic about their financial futures, which risks impacting on the frontline services that residents rely on."

An extra £6 billion for local government

The report says the Government's proposed 75 per cent business rate retention in 2020-21 will generate around an extra £6 billion for local government, although it is the intention of Ministers that this additional revenue will replace existing grants to local government.

As well as calling for the income to be in addition to current revenue, the Committee suggests that the Government must ensure that any new responsibilities placed on councils from further business rate retention are linked to stimulating and promoting economic growth.

The Committee is also calling for consideration by the Government of giving groups of local authorities more comprehensive fiscal powers and for greater recognition of the links between local government funding and social care funding while preparing the social care Green Paper.

Further information

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