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Provisional local government settlement statement promises action on commercial property investment

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  • by Ian McDiarmid
  • in 151 News · Funding
  • — 13 Dec, 2018

The provisional local government settlement announced today said that the government would consider intervening in council borrowing to invest in commercial property, and that 15 councils would be able to run pilot schemes in 2019/20 for 75% business rate retention.

The secretary of state for housing, communities and local government, James Brokenshire, said of councils investing in property: “I share the concerns of CIPFA and others about the risks that these local authorities are exposing themselves and taxpayers to”.

He said his ministry in consultation with the Treasury would consider how best to intervene.

His statement follows CIPFA announcing in October that it would produce new guidance on borrowing to invest in commercial property.

One way for the government to act would be through the PWLB, which provides councils with cheap funding, including for their forays into commercial property.

Lending for commercial property could be made more expensive, or restrictions could be placed on it.

Brokenshire listed 15 councils, which will be able to run pilot schemes in 2019/20 for 75% business rate retention.

These included Northamptonshire which has been subject to two section 114 notices this year.

Devolved areas will be able to continue to retain the 100% of the uplift in rates in their areas under the existing pilot schemes.

In addition, Brokenshire confirmed the government will cover the cost of negative revenue support grant.

Cllr Peter John OBE, Chair of London Councils' response to 2019/20 Local Government Finance Settlementhttps://t.co/uSayvj6AsA pic.twitter.com/5iDDkbQ21Y

— London Councils (@londoncouncils) December 13, 2018

“I am pleased to announcethat we intend to directly eliminate the £152.9m negative RSG in 2019-20 using forgone business rates.”

Introducing the settlement Brokenshire said councils’ core spending power would rise from £45.1bn in 2018/19 to £46.4bn in 2019/20, a nominal rise of 2.8%, and one he said that represented an increase in real terms.

However,the figure includes the money already promised to local authorities in the Budget.

The leader of the council's response to today's local government finance settlement announcement. #localgov @LGANews pic.twitter.com/La0BHVu45e

— Rochdale Council (@RochdaleCouncil) December 13, 2018

Lord Porter,chairman of the LGA, said in response to the statement: “Next year will continue to be hugely challenging for all councils, who still face an overall funding gap of £3.2 billion in 2019/20. 

“It is therefore disappointing that the Government has not used the Settlement to provide further desperately-needed resources for councils next year”.

In the statement Brokenshire also said that councils would be handed £180m of surplus business rates to be distributed on the basis of need, and added that councils would have the ability to raise the police precept on council tax bills by £2 a month April 2019, from the £1 increase allowed now.

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