July 19, 2011

Government determined to reform business rates

by Jan Harris

Communities Secretary Eric Pickles has told MPs that the government is determined to reform business rates.

Announcing the findings of a six-month review into council finance, Mr Pickles re-affirmed his commitment to allowing councils to keep the business rates they raise, with effect from 2013.

Under the current system, business rates from all councils go into a central fund and are then redistributed, providing funding for services, including emergency services.

Allowing councils to keep their own business rates is expected to encourage councils to support businesses in their area.

At the moment, councils raise less than half their income, but ‘localising’ business rates is expected to allow them to raise up to 80%.

However, there is concern that poorer areas, which are less attractive to businesses, could suffer under the new scheme.

Each council would receive a basic level of funding through grants and top-up tariffs, and would be able to keep any funds raised above this level.

A Sunderland MP has warned that the proposed change could see Wearside lose a further £58 million-a-year in funding for public services.

On the other hand, affluent areas such as Westminster, which currently contributes around £1 billion to the central pot, would be much better off.

There is serious concern that the scheme could make the North / South divide much worse than it already is.

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