New rates deal?

Is it a financial sprat to catch a mackerel? B&NES and the other two local authorities prepared to sign up to the West of England deal are being offered participation in a pilot business rate scheme that could see them make – and  keep –  a bit of extra cash.

Bath & North East Somerset Council and two of its neighbouring authorities have been invited to take part in the Government’s 100% business rate retention pilot, starting 2017/18. This has the potential to provide additional resources over the next two financial years to help partially offset ongoing budget pressures. 

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The Guildhall in Bath.

The proposed pilot would see 100% of any future growth in business rates kept locally without deduction. Future growth may be generated by more businesses opening locally, for example.

This would be different from current arrangements where the Government takes a levy from any growth generated above an agreed baseline.

Crucially, the Government has proposed a “no detriment” provision for the 100% pilot to ensure that, if business rate income is lower than expected, those involved in the pilot would be no worse off than had they been operating the existing 50% rate-retention scheme.

The proposals are being considered in an Executive decision by the Council’s Cabinet Member for Finance & Efficiency. The proposals are also being considered by Bristol City Council and South Gloucestershire Council.

If the three local councils each approve the proposal, participation would then be contingent on the proposed West of England devolution deal receiving final approval by the Secretary of State later this year. Central government is only making this 100% pilot available to those areas which have a signed devolution deal.

The Cabinet Member for Finance and Efficiency, Charles Gerrish said: “In view of the financial challenges faced by councils nationwide, this pilot may be a valuable opportunity for Bath & North East Somerset Council to secure more local control and potential income for the immediate area and the wider region. The level of benefit depends on business rates growth and this opportunity is greater than applies outside devolution areas so could be a significant quick win for the area.”

It is expected that 100% business rate retention will be introduced nationally in 2020-21, and possibly as early as 2019-20.  At that point, the pilot would end and Bath & North East Somerset Council, along with the other two councils in the pilot, would join the full national scheme. 

The proposal for this pilot is not impacted by the national business rates revaluation announced last week.