100 per cent business rate retention posing challenges

New independent research has revealed that 100 per cent business rate retention could harm the finances of county authorities.

Undertaken by Pixel Financial Management for the County Councils Network (CCN), the analysis shows that under full business rate retention, the funding gap for county authorities could increase by £700 million by 2029 on top of any existing gap at that point. This is because business rate growth would likely fail to keep pace with acute demographic and service pressures.

Of more concern, other parts of the sector, such as London boroughs and district councils, could disproportionately benefit.

CCN argues that the research raises a question whether it is equitable that the 2018-19 pilots are treated differently to the first round where a ‘no detriment’ clause ensured those councils would not be adversely impacted.

Nick Rushton, CCN finance spokesman, said: “CCN is looking to set the pace in discussions over how local government could be funded during this reflective period. Our research does not aim to dissuade counties from taking part in the pilots, but as a supporting body of evidence to inform their decisions.

“The modelling we have released shows the unique challenges facing county authorities in implementing 100 per cent business rates retention. CCN is supportive of moves towards greater local retention, alongside wider fiscal devolution, but we must ensure the system provides sustainable long-term funding and a platform to truly incentivise growth and self-sufficiency. Therefore, we believe more options should be on the table, something which ministers have indicated is the case in halting the legislation. CCN will undertake further analysis to inform the debate and potential options.”

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