Agenda item

To make recommendations on any aspects which should be considered to be included in the formal response to the consultation and call for evidence papers

The Committee received a report providing details of the government consultation paper “Self-sufficient local government:100% Business Rates Retention” which sought views on the legal aspects of the proposed devolution of all the proceeds from local business rates to local authorities, as announced in the Autumn Budget 2015 and in the Queen’s Speech 2016.  In addition, the government had also launched a separate call for evidence on Needs and Redistribution to help re-set the existing distribution of funding through baselines and tariffs/top-ups.  The report set out the main issues in both the consultation paper and the call for evidence together with KCC’s initial assessment.

Mr John Simmonds, Deputy Leader and Cabinet Member for Finance and Procurement, introduced the report and emphasised the importance of the issues on a strategic level and also in terms of the detail as it would have an impact on the inherent fairness of any system ultimately put in place.

Andy Wood, Corporate Director of Finance and Procurement, spoke to the item.  He said that, if implemented well, the potential changes were an excellent opportunity for local government.  However, if implemented badly, they could be damaging to the financial health of the Council.  Therefore it was crucial that the responses to government were correct, well thought out and that they were taken on board by ministers.

Dave Shipton, Head of Financial Strategy, spoke to the item and further explained the difference between the in-principle consultation and the call for evidence and the legislative requirements related to the former.  He reminded Members that retaining, or having returned in grant form, business rates was not new but being able to retain the growth was, it was here that the potential risk lay as business tax was a volatile tax, and any reduction might have to be absorbed by a local authority choosing to retain 100% rates.

Mr Shipton said there was an estimated £12.5bn nationally which would equate to approximately £300 million for Kent and would be accompanied by new responsibilities for the Council.  Risks associated with new duties or alternative funding of existing responsibilities were set out in the report.

Mr Shipton made the following further comments:

      i.        That the government was proposing that any discretion to amend business rates by local authorities would only be to reduce them.  KCC’s response was likely to include a request that this be extended to include increases.

    ii.        That more authority should be devolved to local authorities to make decisions about exemptions from business rates.

   iii.        That governance issues would need to be resolved in two-tier areas so that it was clear who would make any decisions about the level of business rates.

The following comments were made, questions raised and responses received from officers:

      i.        That, although as officers had reported, there were opportunities to be had by retaining business rates there was also a high level of potential risk for the authority, and in particular Members raised concerns about the ability of the Council to continue to perform as expected should the country fall into a recession.

    ii.        That the matter of appeals and exemptions had the potential to have a drastic impact on the level of rates able to be collected by KCC.

   iii.        That once the Bill had been adopted by parliament, KCC would have no choice but to abide by the statutory duties within it, again reflecting the urgent need to influence the Bill at this early stage.  To this end local authorities were working together, supported by the LGA, to produce a robust and coherent response to government.

   iv.        Mr Smyth urged officers to ensure that the government was made aware that retention of business rates would not solve the problems of local government finance as any additional funding secured would not meet the growth in demand for services. 

    v.        The Leader said it was important that the response to the consultation helped to avoid the replacement of one complicated system of local government funding with another and that, alongside those considerations, it was crucial that the response to the Fair Funding  Review was also effective in securing a fair system of funding distribution.  Mr Carter would write to Kent’s MPs to ensure that they understood the critical points relating to these matters and could support the representations KCC would make.

   vi.        The Chairman said there was an opportunity at this time to influence government on these matters, not least because the new Prime Minister had begun her career in local government. 

It was RESOLVED that the approach to the consultation responses be endorsed.