Posted tagged ‘Business rates’

Moving money around

November 21, 2011

Fifty here, fifty there; sooner or later it'll be real money

As councils prepare their budget savings for the year ahead they are often forced to do some quite ridiculous things in order to meet their savings targets.

I was put onto this topic by the excellent Richard Taylor who writes an extremely detailed blog looking at the detail of decisions made by Cambridge Council and other public bodies. In this particular piece he was commenting on the local leisure contract being awarded by the council. This particular contract was delivering savings of £500,000; all of which were coming from the fact that the outsourced company had charitable status and could therefore claim an exemption on local business rates.

As Richard pointed out:

It is obvious to me that we need to elect MPs who will exempt local councils from paying rates on swimming pools and libraries. It’s bonkers that when such facilities are run by councils they have to pay rates, but if run by others they can be rate free.

This surely that can’t be right. The company aren’t doing anything different to that which the council could do; the only difference is that they get an exemption on a tax which eventually comes back to the council in its funding.

The change being made is not making a real benefit to the overall health of the nation’s finances. The £500,000 saving is simply a £500,000 reduction in money being spent by local government and received by local government.

And yet local councils up and down the land are considering making similar changes as it helps them protect their bottom line. Apparently, even the Government’s proposed reforms of NNDR do not address these issues.

I had a bit of a rant about this being ridiculous in the office and was met with a number of raised eyebrows. Apparently, this is all too common.

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National Non-Domestic Rates

August 1, 2011

Just in case you weren't following...

Credit to the Government; when they published their ‘Local Government Resource Review: Proposals for Business Rates Retention’ they also published a plain English version (you can tell one is needed from the title alone) of the report for those of us who choose not to be bored to death by the full technical majesty of it.

However, I think this might be where the credit stops.

The general principle of the review of business rates (otherwise known as a the National Non-Domestic Rate – see I told you the plain English guide was a good idea) is that each local authority should be free to profit from growth in their own local business rates.

At the moment business rates are passed straight to national Government and then passed back to Local Authorities in the form of grants. As the plain English paper helpfully points out:

This dependence on central government funding also means there is a greater incentive to design services in order to secure government funding, rather than to respond to local communities’ needs or align spending with citizens’ service preferences

The Government are therefore keen to ensure that local authorities are not pursuing the agenda of central government but are rather free to collect their own rates and spend them on things that will benefit their local community.

So far so uncontroversial.

The problem with the general theory is that this would be massively unfair if done unilaterally. I feel bad picking on London(well, I don’t really) but some local authorities in London would massively benefit from this and others (perhaps in areas with more houses and farms than huge tower blocks of offices) would suffer.

Therefore, the clever people in the DCLG came up with a plan. They would baseline the rates each authority receives and any increase in the rates received locally would be kept by the local authority.

This is meant to be seen as the Government passing power back to the local authorities but in reality it is simply removing the tyranny of the Performance Indicator and Dedicated Grant so beloved of Labour and replacing it with the tyranny of economic growth.

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