England & Wales

LGiU reaction to Local Government Resource Review

Localisation of business rates is attractive in principle because it incentivises councils to encourage local economic growth and allows them to benefit from it.

It’s also an important early step in shifting the centre of political and economic gravity more towards the local.

At the same time, it is an issue that looks very different depending on where in the country you sit. About a third of councils would not need a government grant if they could retain their business rates but, at the other end of the spectrum, there are others, including many of the most disadvantaged, who do not take in nearly enough in rates to be financially viable without additional funding.

The key question therefore, indeed arguably the only question, is how far you balance greater retention with a degree of redistribution. The measures announced today seek to achieve this through system of tariffs and top-ups. However, the detailed mechanism for this is yet to be announced. So while we can all agree on the desirability of a system that promotes local growth while protecting the revenue of poorer councils, it remains to be seen whether the government’s proposals can really achieve this

The Secretary of State states that no council would be worse off in the first year of the scheme but given that divergence and diversity are central to its conception we should not pretend that there will not over time be winners and losers. That’s OK provided local authorities and local communities have sufficient agency to make local choices that will improve their prospects. For many people, however, and possibly for the government such varying outcomes will be a real test of their commitment to localism