Budget 2020: LGA responds to business rates review launch

"Urgent clarity is needed on how the Government’s fundamental review of business rates will impact on reforms to allow local government to keep more of business rates income collected locally from next year."


Calculator and finance

Responding to the launch of the Government’s fundamental review of business rates as part of Budget 2020, Cllr Richard Watts, Chair of the Local Government Association’s Resources Board, said:

“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.

“Any reform must therefore recognise the importance of this income stream for funding key local services.

“Councils want to see a reformed business rates system which commands confidence. It does need to be modernised and improved, for example to ensure that sectors such as online businesses make a fair contribution. The risk of appeals on councils need to be reduced and tougher powers are also needed for them to tackle business rates avoidance.

“Urgent clarity is also needed on how the Government’s fundamental review of business rates will impact on reforms to allow local government to keep more of business rates income collected locally from next year.

“We urge the Government to work closely with the LGA and councils so local government forms a central part of this review. The impact on how local services are sustainably paid for must be one of its central considerations.”

Notes

Councils do not set business rates - they simply collect the tax. They have little control over how much a business pays as the bills, as well as most discounts and reliefs, are set and paid for by central government.

Collectively, councils currently keep half of the business rates collected in England, and this is shared to help councils that are less able to generate business rates. The amount of business rates income kept by local government nationally is proposed to increase to 75 per cent from April 2021. This is happening at the same time as central government funding to councils is phased out. As a result, funding for local services will be even more intrinsically linked with business rates and a source of funding that councils have no control over.