Taking business rates “begging bowl” from councils ‘worth £10bn’

The £19bn of business rates collected by councils each year are currently redistributed by Whitehall which Eric Pickles, the communities secretary, said creates a “begging bowl” mentality among local authorities reports The Telegraph.

From next year, councils will be able to keep a share of the business rates, which are charged on most non-domestic premises.

The Government said this will create a “financial incentive” for local authorities to “support local firms and local jobs” by increasing “commercial floorspace”.

An analysis of the plan by the Department of Communities & Local Government published on Thursday said it would add an estimated £10.1bn to GDP over the next seven years.

However, councils have warned that the gap between prosperous and less well-off authorities will widen as a result of the policy, which is due to be implemented from next April.

The policy will see any growth in business rates shared evenly between local government and a central government pool which will provide grants and a ‘safety net’ for deprived areas. The Government said there will be protections for vulnerable or less prosperous areas including a hardship fund that could be used when a major factory closes, for example.

Councils that receive “disproportionate financial benefits” as a result of the policy will also be subject to a levy which will help fund the safety net.

Mr Pickles said: “The current flawed system of government handouts to local authorities encourages a begging bowl mentality, with each council vying to be more deprived than its neighbour. Our reforms will allow councils to stand tall, and reward them for supporting local jobs and local firms. All councils, including the least prosperous, have the opportunity to gain from this new system.

“Councils will have a strong incentive to go for growth, generating more money to support front line services, help pay off the deficit and still protect vulnerable communities.”