Government should ‘pick up’ £750m cost of NHS rate relief campaign

The Local Government Association has called on the government to pick up the potential £750m cost to councils if NHS trusts are successful in their demand for business rates relief.

As revealed by Room151, consultancy GVA Grimley has written on behalf of more than 100 trusts to local authorities claiming up to 80% charitable relief on rates payments, backdated for six years.

LGA chief executive Mark Lloyd last week wrote to Helen Edwards director general for localism in the Department for Communities and Local Government, calling for talks on the issue.

Lloyd’s letter, leaked to Room151, says that “…if the applications have merit, that DCLG [could] examine ways in which to pick up any rates retentions implications for this centrally. For example this could be through an adjustment to the 2013-14 business rates baseline.”

He also asked officials to extend the deadline for business rates pools for 2016-17 until councils have had time to consider the issue and received guidance from the DCLG. This deadline passed on 18 January, 28 days after the provisional local government spending settlement was announced.

However, it is understood that officials have already advised councils that there is no way of extending the deadline for business rates pools for 2016-17 as it is set out in statute.

Lloyd also raised worries that the trusts’ bids for rate relief could undermine cooperation between councils and health bodies over the provision of social care.

He said: “We are committed, as are all member councils, to the excellent joint working on the Better Care Fund and on integration across the country.

“We want to help member councils in continuing to strengthen relationships with health partners to improve joint working and to move towards our shared goal of integrated health and care.

“We would not like to see this jeopardised and will do all we can to help our member authorities as they seek to assess the implications of this latest issue.”

Lloyd also revealed that the LGA is seeking its own legal advice from a QC on the trusts’ claims, which he said “may reveal the flaws in the arguments submitted by GVA”.

Meanwhile, Room151 has also seen a copy of the letter originally submitted by GVA on behalf of its clients, which is based on legal advice from Queen’s Counsel Dan Kolinsky of Landmark Chambers.

It says that trusts are entitled to relief under section 43 of the Local Government Finance Act 1988 because their objectives, outlined in the National Health Service Act 2006, meet the definition of a charity.

The LGA’s letter is the first time a a figure has been put on the potential scale of the claims.

Lloyd said: “We understand that the implications of this are substantial and could be as much as £1.5bn and that billing authorities would have to make provisions to cover possible losses.

“In addition, under the rules of 50% business rates retention, local government would have to bear 50% of the loss within retained business rates, subject to any safety net provisions.”

The DCLG was unable to meet a request for comment in time for the publication of this article.