Massive appeals threaten business rates pilots
0...we could see the next revaluation wipe out the benefits of the pilot overnight if we don’t get the treatment of appeals right.
Councils piloting business rates retention schemes have warned that gains from business growth could be cancelled out by losses resulting from appeals following next year’s revaluation.
Speaking before the Communities and Local Government Select Committee, Richard Paver, treasurer of the Greater Manchester Combined Authority said an ongoing pilot trialling retention of growth, would generate around £5m.
But he warned about the impact of the next revaluation, which will begin on 1 April 2017 and will reassess the rateable value of all business properties.
Paver said: “The amount we are generating is small but a movement in the right direction. As time goes on you would hope that is going to grow but we could see the next revaluation wipe out the benefits of the pilot overnight if we don’t get the treatment of appeals right.”
Sharon Gregory, LGSS group accountant at Cambridgeshire County Council also told the committee: “For me one of the key areas is around the revaluation that is coming up. The appeals we are expecting to be generated from that revaluation could, potentially, significantly alter the baselines for the 100% retention scheme. That is a big concern for myself.”
And Edward Lister, the Mayor of London’s chief of staff, urged the government to sort out the problem of appeals.
He said: “We have about £120m in appeals which is locked up in provisions in our accounts, which will rise to £250m by this time next year. If it continues we will be having to set aside about £1bn for appeals by 2017.”
Losing a significant number of the outstanding appeals, said Lister, would mean capital projects have to be re-profiled, delayed or cancelled.
The forthcoming Enterprise Bill may speed up the rate at which appeals are decided, he said, but a lot of resources need to be targeted at central London to clear the appeals backlog.
He added: “The bit that is not working correctly is that the bulk of our appeals are in three London boroughs – Westminster, City of London and Camden. Indeed they are the bulk of the whole country.”
Gregory said that the Cambridgeshire and Peterborough retention pilot has been “quite slow to bring about”.
“We are struggling to agree a process on how to strip out the impact of appeals. That seems to be a bit of a stumbling block between ourselves and the DCLG.” she said.
Also appearing before the committee, Guy Ware, director for finance, performance and procurement at London Councils, said the current 50% business rates retention scheme, has not yet proved its worth in encouraging business growth.
He said: “In the first two years of operation there has been some huge variation and no net increase in the retained business rates.
“Partly this is due to appeals and partly the purely random effect of when baselines were drawn up. There were some very significant timing effects.
“For example if you are Newham, where the Westfield shopping centre opened after the line was drawn, you have done relatively well out of this.
“But there are other cases where major ratepayers came out of the list just after the system was introduced.
“Even though that might be because there might be long-term redevelopment and growth. In the meantime, the authorities suffer.”
Paver also suggested that investment in infrastructure following the full implementation of 100% business rates retention in 2020/21 should be ring fenced from any calculations for redistribution of rates income between richer and poorer authorities.
He said: “It is important to look at business rates in the longer term. We would be looking to benefit from direct investments by authorities and infrastructure therefore the benefits that flow from that should be retained locally and not passed back through a revenue sharing deal with government or a reset – almost in the same way enterprise zones work and you keep your benefits for 25 years.”
