Download - Business Rates: The Latest Developments
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Neil Benn
Business Rates:The Latest Developments
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The Presentation
Basics of the new scheme
Baseline issues / SPARSE campaign
Latest DCLG plans
What happens next?
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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
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What Happens Now
District councils collect rates and send them to Government
Everything else is irrelevant
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Basics
Target funding level
Target business rates collection
Target rates > funding – pay tariff
Target rates < funding – receive top-up
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Basics
Districts still collect rates
Notionally shared between districts, counties, fire
Funding target
Formulae assess needsDeduct what you might raise in council taxTarget is the balanceLimit on year-to-year change
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SPARSE Campaign
Close gap to urban from 60% to 50%
Changes to EPCS and domiciliary social services
Specific mention in DCLG response
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SPARSE Campaign
Our council tax is higher
So:We are relatively over-providing; orWe are relatively inefficient; orWe are relatively under-funded
Hard evidence is difficult to gather
DCLG is not looking for any
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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
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New Scheme – Tier Splits
Unitary with Fire
Area collects £144m in ratesAssigned 100% = £144m in ratesFunding target £191mTop-up = £191m - £144m = £47mEach 1% change in rates is £1.44mWhich is 0.8% of funding
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New Scheme – Tier Splits
County without Fire
Area collects £194m in ratesAssigned 20% = £39m in ratesFunding target £105mTop-up = £105m - £39m = £66mEach 1% change in rates is £0.39mWhich is 0.4% of funding
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New Scheme – Tier Splits
Shire District
Area collects £32m in ratesAssigned 80% = £25m in ratesFunding target £4mTariff = £25m - £4m = £21mEach 1% change in rates is £0.25mWhich is 5.7% of funding
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Levies
To fund a safety net for losers
On “disproportionate gains”
“A 1% increase in rates should cause the same increase in funding everywhere”
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Levies
Huge levies on shire districts?
Boosts for shire counties?
How far in arrears for the calculations?
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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
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Safety Nets
To protect local services
Based on funding changes since start of scheme
No protection for year-on-year falls
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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%
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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?
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What I Like
Incentive to promote business development
The idea of levies and a safety net
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What I Don’t Like
Beyond reasonable influence
Randomness
Casino shire districts
Proportionate levy – nonsensical formulation
Proportionate levy – unequal returns
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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
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What I Don’t Like
Potential waste / poaching
Enterprise zone effects
Different treatment of fire services
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Worries
Delegations of services with little or no cash
Cash flow / other timing issues
Ministers will want to tinker
Perfect storm
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What Happens Next?
Further semi-secret discussions
Bill passing through House
Further consultation over summer
Full scheme details in late-autumn
April 2013 start