The government’s u-turn on national insurance contributions will not scupper the £300m transitional business rates relief announced in last week’s budget, according to ministers.
Chancellor Philip Hammond announced earlier this week that it will not not pursue last week’s announcement to raise class 4 national insurance contributions for the self-employed.
But speaking in the Lords this week, Lord Young of Cookham, cabinet office spokesman in the Lords, dismissed fears that the move would reduce the amount available for business rates relief also announced in the Budget.
Liberal Democrat peer Lord Scriven challenged Lord Young, saying: “As the national insurance contribution changes were widely briefed by the government to pay for extra social care funding and business rates support, will the minister now give an absolute guarantee that local government budgets will not be raided to pay for the gap that has now been made by this u-turn?”
In response, Lord Young said: “The support that we announced for local government in the budget will go ahead and will not be affected by the announcement today.”
Separately, Hammond said in a letter to Treasury select committee chair Andrew Tyrie that he will announce how the money lost through the NICs u-turn would be made up in the Autumn budget.
Meanwhile, the DCLG has revealed its allocations to individual councils under the relief scheme, covering the next four years.
All authorities, barring the Isles of Scilly, will get a minimum of £100,000 for relief for 2017-18, with the amounts tapering off year-by-year.
London councils will get the most support — making up nine of the top 10 highest allocations, along with Birmingham.
Westminster City Council will get the largest share, with £19.9m over the four-year period.
Authorities will be free to decide how to allocate the cash, but will be required to only pay it to businesses facing a rise in their bill under revaluation.
The government said it had calculated the allocations by providing a proportion of the total increase in bills for properties with a rateable value of less than £200,000 facing rises of more than 12.5% on bills for this year.
Phil Seddon, head of finance at Rossendale Borough Council — which received the smallest share outside of the Scilly Isles — said: “Whatever money comes from central government, we will be passing it on. We are doing our own analysis of the impact.
“We only have about 2,500 business rate payers and a lot of small businesses are getting full relief. The biggest bills are to the supermarkets.”
Phil Vernon, head of rating at consulting firm PwC, described the relief scheme, while welcome, as “just a sticking plaster” over fundamental problems in the current rates system.
He said the new relief would create a fresh administrative burden for local authorities and ratepayers, and the “government will need to cut out red tape by making the relief process as painless as possible.”
He added: “A costly application process will add more frustration and confusion to the business rates system.”
However, communities secretary Sajid Javid said in a letter to Conservative MPs that the funding will allow local authorities to more than double the sums they spend on discretionary relief in 2017/18.