Boston delivers funding warning to Government
Boston Borough Council has been among a group of invited local authorities presenting evidence in Westminster to a House of Commons Select Committee about the impact withdrawal of central Government funding could have.
The Government has proposed that councils should be funded mainly from council tax income, service charges and 100 per cent of their business rates by 2020, when revenue support grant funding would cease. Currently councils keep half of the business rates they collect, the rest going to Government, but receive an annual revenue support grant, which has been reducing because of austerity measures.
Andy Hall, Boston Borough Council's Business Rates Assurance Manager, told the Communities and Local Government Committee that areas such as rural Lincolnshire would be disadvantaged because the main industries of agriculture and horticulture are not rated.
Andy spoke to Select Committee Members about the implications and potential solutions:
- Rural areas such as Lincolnshire, even though they are feeding the nation, will be disadvantaged because the main industries of agriculture and horticulture are exempt from business rates and so the potential for growth in this principal income stream, however much those main industries flourish, is much more limited - a funding adjustment is needed to remedy this;
- Lincolnshire cannot cover the cost of the services it currently provides without additional funding from Government, even if 100% of its business rates is retained - on this basis, 100% business rates retention sounds more attractive that in reality it is;
- Much more detail about the proposals is needed before any confident views can be expressed on the sustainability of what is being put forward;
- Councils are not in a position to drive business rates growth to the degree that is implied by the proposals announced so far;
- Some areas will simply not be able to attract business rates growth if they do not have the infrastructure in place and so potentially there will be pockets of deprivation;
- A huge concern is that the growth in business rates income, that the council is identifying through enquiries to ensure that all businesses are correctly rated, is being eradicated by successful and significantly backdated appeals against the rating valuations previously worked out by the Valuation Office Agency, part of HMRC, and not the council. To illustrate this, the council collected £19 million last year in business rates; in the first 15 months of ensuring that all businesses are correctly rated, a £1.5 million increase had been identified, but more than this was lost in successful appeals;
- Incorrectly-rated premises, such as medical centres, have had as much as a 70% reduction in rateable value on appeal, backdated ten years - councils like Boston have had to fund those rate refunds and no one saw it coming - losses of this nature need to be funded centrally as councils have no control over them and do not contribute to them arising;
- A significant part of the current funding regime is arguably based on need, but business rates income bears no relation to a council's spending needs;
- There is no correlation between money from business rates growth and the services to be funded from that income;
- Businesses in Boston who pay rates in Boston will want to see that money spent in Boston and not split between the county councils and the borough councils;
- Boston borough has other special issues that merit specific consideration - for example, being low lying, land drainage is an expensive business with the council paying hefty levies, which it has no say in setting, to the Internal Drainage Boards (IDBs); in fact, 60% of its council tax income goes to the IDBs - there is a disconnect here with the future funding proposals which make no provision for this issue that is faced by only a small proportion of councils such as Boston;
- A clearer picture is required of the added responsibilities that devolution will bring and additional devolved responsibilities will need to be properly funded if they are to be sustainable locally;
- Councils need confidence that all these key issues will and can be addressed as the proposals are shaped and refined.
The inquiry is still ongoing and a consultation paper on the emerging proposals is now expected this Summer.