Business Rates Retention

Local Government Resource Review: Proposals for Business Rates Retention

The Department for Communities and Local Government have released details of proposals for business rates retention as part of the Local Government Resource Review. It has also launched a consultation on the proposals.

It has produced a Plain English guide to the Local Government Resource Review: Proposals for Business Rates Retention:

http://www.communities.gov.uk/documents/localgovernment/pdf/1947119.pdf

Full document:

http://www.communities.gov.uk/documents/localgovernment/pdf/1947200.pdf

This page presents analysis and comment to inform Sandwell's response to the consultation on this significant proposes change to the way local government is funded. Sandwell's Strategy Team has produced a policy briefing, which can be downloaded here

Within the current formula grant system, the redistribution of National Non-Domestic Rates amongst the billing authorities means that some authorities are net beneficiaries, whilst other are net contributors. The chart above shows the distribution of such authorities (based on £s per head of population). The green circles represent LAs that are net contributors, whilst those in red are net beneficiaries. The size of the gain or loss is further indicated by the size of the circle.

Sandwell's position is picked out on the chart above, showing that there is a difference of some £240 per head between the amount collected by Sandwell and the amount received within Sandwell's formula grant allocation. As a net beneficiary, this would be the amount that Sandwell would stand to lose, should the change to local retention of business rates involve no protection of current funding requirements. Other local authorities can be identified by hovering over the circles.

The chart to the left shows local authority average IMD scores (ID2010, CLG) on the Y axis and business rate contribution per head of population on the X axis. Authorities that receive back more than they contribute to the central pool are coloured red. Click the zoom button to see a larger version of this chart.

Since the way that formula grant is calculated reflects local need, with respect to deprivation characteristics, it is unsurprising that this chart confirms the proposition that the majority of deprived areas are net beneficiaries of the current redistribution of NNDR. There are some interesting exceptions, however, notably Tower Hamlets and Burnley, which despite their high deprivation score are actually net contributors to the central pool.

The general clustering of the majority of LAs within the £200 to £400 per head business rate contribution range may suggest that there is limited scope for most authorities to significantly increase their local take. In order to achieve significant change, they are likely to be competing with the relatively small number of LAs making significantly larger contributions.

The chart on the far left shows Sandwell's position, in respect of number of hereditaments (per thousand population) is not untypical, whereas the chart immediately to the left shows that the amount of rateable floorspace (thousands sq m per 1000 population) is comparatively very high.

In some respects a more extensive character to the non-domestic floorspace may seem surprising within an area that is so densely populated and industrialised, but is probably reflective of the greater preponderance of factories and warehouses vis-a-vis retail and office uses within Sandwell.

From the perspective of optimising the local business rate return, which the proposed reform espouses, this characteristic of Sandwell's non-domestic stock may be viewed as both a challenge and an opportunity. There may well be opportunities to increase the number of business units and to favour commercial and retail uses over industrial, which are likely to be of higher rateable value. However, Sandwell has traditionally had a significant manufacturing role, which could be key to a sustainable economic future.