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Business Rates: The Latest Developments. Neil Benn. The Presentation. Basics of the new scheme Baseline issues / SPARSE campaign Latest DCLG plans What happens next?. What Happens Now. Formulae assess need Deduct what you might raise from council tax Pay the balance as cash
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Business Rates:The Latest Developments Neil Benn
The Presentation • Basics of the new scheme • Baseline issues / SPARSE campaign • Latest DCLG plans • What happens next?
What Happens Now • Formulae assess need • Deduct what you might raise from council tax • Pay the balance as cash • Limits on year-to-year changes
What Happens Now • District councils collect rates and send them to Government • Everything else is irrelevant
Basics • Target funding level • Target business rates collection • Target rates > funding – pay tariff • Target rates < funding – receive top-up
Basics • Districts still collect rates • Notionally shared between districts, counties, fire • Funding target • Formulae assess needs • Deduct what you might raise in council tax • Target is the balance • Limit on year-to-year change
SPARSE Campaign • Close gap to urban from 60% to 50% • Changes to EPCS and domiciliary social services • Specific mention in DCLG response
SPARSE Campaign • Our council tax is higher • So: • We are relatively over-providing; or • We are relatively inefficient; or • We are relatively under-funded • Hard evidence is difficult to gather • DCLG is not looking for any
Baseline / Funding Target • Further cuts – 11% on average for 2013-14 • Up to 4% returned through New Homes Bonus • Transfers of function? • Damping • Locked-in for 10 years
New Scheme – Tier Splits Unitary with Fire • Area collects £144m in rates • Assigned 100% = £144m in rates • Funding target £191m • Top-up = £191m - £144m = £47m • Each 1% change in rates is £1.44m • Which is 0.8% of funding
New Scheme – Tier Splits County without Fire • Area collects £194m in rates • Assigned 20% = £39m in rates • Funding target £105m • Top-up = £105m - £39m = £66m • Each 1% change in rates is £0.39m • Which is 0.4% of funding
New Scheme – Tier Splits Shire District • Area collects £32m in rates • Assigned 80% = £25m in rates • Funding target £4m • Tariff = £25m - £4m = £21m • Each 1% change in rates is £0.25m • Which is 5.7% of funding
Levies • To fund a safety net for losers • On “disproportionate gains” • “A 1% increase in rates should cause the same increase in funding everywhere”
Levies • Huge levies on shire districts? • Boosts for shire counties? • How far in arrears for the calculations?
Levies • Authority invests £5m in a scheme to generate £1m p.a. rates • N Warwickshire would keep about £100,000 • Northumberland would keep all £1m
Safety Nets • To protect local services • Based on funding changes since start of scheme • No protection for year-on-year falls
Safety Nets • A 10% safety net on scheme income: • Would restrict Surrey’s cuts to 1.7% • Would restrict Breckland’s cuts to 6.2% • Would restrict Westminster’s cuts to 7.0%
Pooling Arrangements • Minimise risk by pooling with others… • …but also reduces potential gain • Weakens incentive • You pay for others’ failures or bad luck • Why would fast growers want to pool?
What I Like • Incentive to promote business development • The idea of levies and a safety net
What I Don’t Like • Beyond reasonable influence • Randomness • Casino shire districts • Proportionate levy – nonsensical formulation • Proportionate levy – unequal returns
What I Don’t Like • Damping being increased, not phased-out • Safety net based on grant not budgets • Authorities bearing VOA error losses • No incentive to tackle bad debts • Huge transfer of risk
What I Don’t Like • Potential waste / poaching • Enterprise zone effects • Different treatment of fire services
Worries • Delegations of services with little or no cash • Cash flow / other timing issues • Ministers will want to tinker • Perfect storm
What Happens Next? • Further semi-secret discussions • Bill passing through House • Further consultation over summer • Full scheme details in late-autumn • April 2013 start
Business Rates:The Latest Developments Neil Benn 07869 37 35 35 nmbenn@hotmail.com