Pickles backs plan for councils to keep business rates

Published by Ross Macmillan for 24dash.com in Local Government and also in Communities, Housing

Local councils in England could be given the right to retain money raised from business rates as part of a drive to reduce their dependency on central government funding.

The idea is the central proposal of a review launched by Local Government Secretary Eric Pickles, who said it could put councils "in control of their own destiny".

At present, £20 billion of business rates are collected locally but then sent to Whitehall for redistribution to councils through a complicated grant system which allocates money according to need.

Mr Pickles said that allowing councils to keep the money they raise would encourage them to foster growth, jobs and enterprise in their areas.

Areas where businesses do not generate enough revenue from rates to fund local services will be protected under the new system with funding from central Government to cover the gap, he promised.

"We want every community to be open for business and rewarded for economic growth, but at the moment there is no motivation for councils to support local firms or create new jobs," said Mr Pickles.

"One of the best ways we can change that is to free councils from their enslavement to Government grants and put them in control of their own destiny.

"By letting councils repatriate their business rate income, you make the system more straightforward and councils more self-sufficient in one fell swoop whilst deprived councils would still get the support they need.

"Scaling back central government's historic control and redistribution of this local business tax would also give councils a sudden shot of financial adrenaline and a legitimate stake in their economy, with direct benefits for supporting new business and growth. It is what councils want and precisely what we mean by localism."

But Labour warned that councils in the poorest areas could lose out from the proposed change.

Shadow local government secretary Caroline Flint said: "The Tory-led Government is already hitting the least well-off councils with bigger funding cuts than the better-off, and the danger is their reforms to business rates will introduce a system which penalises lower and middle-income areas again.

"Fairness and incentives to boost enterprise right across the country should be at the heart of any reform.

"The Government must look at ways to ensure those currently reliant on redistribution do not lose millions of pounds in funding, which would have dire consequences for local jobs and growth as well as frontline services."

The Local Government Resources Review launched today will consult with councils and business before reaching conclusions in July.