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Boston influences Government inquiry

Evidence from Boston Borough Council features heavily in a new Government report about future arrangements for business rates revenue.

The Communities and Local Government Committee document has been produced following an all-party select committee inquiry which invited the council to attend to advise MPs.

Andy Hall, the council's Business Rates Assurance Manager, gave evidence direct to the committee, delivering serious warnings about how the proposed changes could impact rural authorities.  Most of the issues that Andy raised during the inquiry feature in the published report, with many being attributed to Boston.

The 70-page report highlights significant issues to address before Government reduces Revenue Support Grant funding to councils and allows them to retain 100 per cent of business rates - changes proposed by 2020. Currently half of the business rates go to Government.

The report notes a lack of correlation between a council's business rates income and its spending need - a cornerstone of the evidence given to the select committee by Andy.

Furthermore, a key issue raised by Andy, about the significant cost of successful rating appeals, where refunds to ratepayers often far exceed authorities' growth in business rates revenue, is highlighted in the report along with suggestions that Andy made about how this could be remedied. The report concludes that "unless resolved, the appeals issue will pose a major challenge to 100 per cent retention, undermining the system before it has even had a chance to get going."

There is a stark warning that 100 per cent business rates retention may exacerbate the "winner takes all" approach to urban growth, in which a relatively small number of councils take the lion's share of economic development and its accompanying wealth.

The report calls on Government to specify how it will protect councils which rely on redistributed business rates and are worried that they will lose out under the new system.

Andy warned of the volatility of business rates compared with the predictability of the current Revenue Support Grant system and he also put forward alternative proposals as to how any growth in business rates might be shared out, saying: "...from Boston, our starting point is that 100 per cent should be retained by the district council. After all, the district council expenditure is much more likely to be closely linked, geographically, to the businesses that are contributing to that increased rate yield."  

These issues have been repeated in the committee's published report.

Regarding another key issue, the report says: "There was substantial evidence that the shares of business rate revenue retained by districts and county councils in two tier areas do not properly reflect the distribution of responsibilities between them. The Government and local authorities should explore together how the shares should be adjusted, including whether an approach based on an authority's needs would be fairer."

Andy's quoted evidence, that some areas will not be able to attract growth because they do not have the infrastructure in place, leading to pockets of deprivation, contributed to the report conclusion: "100 per cent retention must work in a way that ensures that areas with limited ability to generate growth in business rate revenue do not lose out."

CLG Committee chair, Clive Betts MP, said: "Our interim report has highlighted a host of issues regarding the reformed business rates system and we are calling on the Government to take these on board and work closely with local government to find the necessary solutions.  The issue of appeals is of significant concern to local authorities and it is essential that it is resolved before the Government pushes ahead with business rates changes. Similarly, the Government must address the alarm of councils, which are understandably worried that their spending needs and the funding of their local services will not be supported by their business rates revenue."

Cllr Aaron Spencer, Boston Borough Council's portfolio holder for finance, said: "From the council's perspective, it is reassuring to note that so much of the evidence presented by Boston has been taken on board by the select committee and will now feed into the Government's further consultation plans."