‘Shelve 75% business rates retention’ – LGA

Ministers should shelve plans to allow local government to keep 75 per cent of business rates income until the Treasury’s business rates review has reported, the LGA has said.

The call comes as part of the LGA’s evidence to the first part of the Government’s fundamental review of the business rates system, launched at the Budget in March. 

In its evidence, the LGA warns local economies are facing an unprecedented crisis, with high street footfall down more than 43 per cent on last year, and internet sales now making up nearly 33 per cent of all retail sales.

This is having a knock-on effect on business rates income at a time when councils need clarity and certainty about how local services will be funded over the next few years and beyond. 

The LGA had previously supported the increase to 75 per cent business rates retention from April 2021 but says local government’s confidence in business rates as a reliable income source with a future has reduced. 

The next revaluation of business rates will also be highly controversial, regardless of when it happens. 

Cllr Richard Watts, Chair of the LGA’s Resources Board, said: “Given the economic shock caused by the pandemic, the steady increase in reliefs and the belief of many that business rates pose too great a burden on business, we believe that the move to 75 per cent retention should now only be revisited, if appropriate, once the Treasury’s business rates review concludes. 

“The attention needs to shift towards developing new sources of finance for councils and different ways of incentivising growth. 

“Business rates account for around a quarter of all council spending power. Money raised is used to pay for vital local services, such as caring for older and disabled people, protecting children, fixing potholes and collecting bins.

“Councils want to see a reformed business rates system that commands confidence. Any reform must therefore recognise the importance of this income stream for funding key local services.”

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