Maximum business rates levy 50p in the pound

The Government has confirmed that the maximum levy on business rates will be 50p in the pound.

In guidance out yesterday following a consultation this summer, local government minister Brandon Lewis said that with a 50:50 central and local government share of future rates and a maximum 50p levy, at least 25p in each extra pound of business rates generated locally would be retained locally.

The safety net for unexpected drops in revenue is to be fixed at 7.5%, which was the highest level in the range consulted upon. Baseline funding levels will be up-rated by RPI when calculating eligibility for the safety net in order to maintain the guarantee in real terms.

Lewis said that the new system would “allow councils to stand tall” as opposed to the old, which encouraged “a begging bowl mentality with each council vying to be more deprived than its neighbour.”

Other main points in the policy document are:

• The limiting of funding held back for New Homes Bonus payments to £500m and £800m for 2013-14 and 2014-15, respectively.

• The application of floor damping at authority level instead of service tier level in 2013-14.

• Availability of further downward adjustment to the estimated business rates aggregate to provide for future appeals losses.

• Calculations are to be made on two years of historic data (2010/11-2011/12) instead of five years.

• Extension of the deadline for expressions of interest in pooling and simplification of the arrangements for designating and operating a pool.

• Confirmation of the proposals for sharing rates between billing authorities and major precepting authorities with 20% flowing to county councils, 2% to single-purpose fire and rescue authorities and 40% to the Greater London Authority.

• Confirmation that changes in cost of existing mandatory and discretionary reliefs between resets will be shared 50:50 between central and local government.