Lead Authority: Chorley Borough Council

Proposal theme: Finance: Give Councils the power to retain a proportion of the revenue from business rates (Non Domestic rates, NNDR) to be spent on local priorities or to have the power to raise revenue through this mechanism by giving powers back to local authorities to set a local levy.

This proposal, supported by local residents on the Chorley Citizen’s Panel, asks the Government to give Councils the power to retain a proportion of the revenue from business rates (Non Domestic rates, NNDR) to be spent on local priorities or to have the power to raise revenue through this mechanism by giving powers back to local authorities to set a local levy.
Under the existing local government finance settlement arrangements Business Rates paid by businesses and other occupiers of non-domestic properties which contribute towards the cost of local authority services are currently pooled by central government (being collected in a central account held by Communities and Local Government) and then redistributed back to local authorities as part of the annual formula grant settlement. This money together with revenue from Council Tax payers and the Government Support Grant is used to pay for services provided by the Council.  

Presently Chorley Borough Council collects and pays over £20.7m of business rates and receives  £7.2m in grant back from the pool.  A change to allow the collecting local authorities to retain a proportion of NNDR or be enabled to have powers to raise revenue through the ability to set a local levy would give local Authorities the opportunity to directly invest more money in increasing sustainability.   Local authorities would be use this able to spend this extra.  According to Lyons transferring all business rates to local control would improve the balance of local government funding to 50:50 and would improve the current `gearing' ratio whereby a 1% increase in spending not covered by Government grant currently results in a 4% increase in council tax on average.    Any change to allow a proportion of NDR to be retained by local authorities would have a positive impact on this gearing ratio.
This would afford Local Authorities greater flexibility in addressing issues effecting local sustainability. For example increasing the level of discretion afforded would have enabled the Council could have implement its own business rate we could have implemented our a business rates relief programme to support local businesses in light of the current economic climate and preserve local jobs.

Local authorities would be able to retain and raise - a proportion of the revenue from business rates rather than just be given a proportion of the central government pool. This revenue could then be spent on priorities in the local area.

• What issues your proposal is addressing and how it will promote the sustainability of the local community

This proposal would enable the local authority would have the a proportion of the business rates, available to spend on local priorities which would incraese the sustainablity of local communities.  This money could then be to used directly fund local projects which coukld have a significant impact on local sustainability as more money to be allocated to the delivery of Sustainable Community Strategy priorities as required based on local needs.  This could include economic actions to support local business and provide local jobs.  The proportion of NNDR reatained could also be used to support projects and initiatives which support social sustainability, for example mainstreaming short term projects such as Chorley’s vulnerable households initiative.

Monies retained as a result fo the proposal could also be used to introduce a scheme of energy efficiency improvements to local housing which promote environmental sustainability and reduce fuel poverty, particularly amongst older residents.

This would also promote greater particaption in decisionmaking as it would be clear to local residents that enaging in local decisionmaking could have a greater impact in improving their local area.

• Who is affected by this proposal and how?

The proposal would have a positive effect on local residents, as it would enable the Council to protect local services that are considered most important by local residents. 

• Which public bodies might be affected?

This proposal would have a positive effect on the public bodies who make up the Local Strategic Partnership as more funding would be available to fund the delievery of actions which support locally identified priorities.  Funding could then be allocated to local partnership projects which support sustainability, such as Chorley’s ‘Families First’ vulnerable households family intervention project or projects such as ‘Girls Aloud’ which is a teenage pregnancy project involving peer educators which has been successful in reducing the borough’s teenage pregnancy rate.

• What are the main actions needed from Government?

The main action needed from government would be to change the process of the redistibution of Business Rates falls outside the scope of the activity of local authorities and requires action from the goverment.  The Department of Communities and Local Government is responsible for setting the overall government policy on local taxation in England.  Making any change to the Local Government Finance Settlement would require approval of require approval of the Local Government Finance Report by the House of Commons.  Such changes are also to require legislative changes in relation to any related Acts such as the annual Local Government Finance Settlement and changes to relevant legislation: Government Finance Act 1988; the Local Government Finance Act 1992 and the Local Government Act 2003.

• What do you expect this proposal to achieve?

The proposal also has the potential to remove a commissioning step in the local government funding arrangements.  Currently all of the business rates are collected by and sent to local authoriotes level of BR being pooled by central government and then resdistributed to local authorities, who then spend the reward grant on the provison of services and funding local priorities.   If a proportion of the BR was directly allocated to local authorities part of this redistribution process and the costs involved would be removed allowing more of the money generate through businesses rates to be directly spent on local priorities identified by local residents and in delivering the priorities laid out in local Sustainable Community Strategies.  This money could then be spent on projects and schemes which would promote the sustainability of local communities.  More money could also be made available to support.