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The government has committed to rolling out 100% retention of business rates to all mayoral combined authorities “in the next Parliament”.
Delivering the Budget this afternoon, chancellor Jeremy Hunt said he had “agreed a new long-term commitment” with the Greater Manchester and West Midlands CAs to retain 100% of their business rates. He said this was something he hoped to “expand to other areas over time”.
Government had committed to devolve 100% of business rates to local government in 2015 but this was later reduced to 75% before being abandoned in 2021. The new policy appears to be focused on devolution to areas with mayoral combined authorities or county deals with directly elected leaders.
Under new “trailblazer” devolution deals unveiled this afternoon, councils in Greater Manchesrer and the West Midlands will get to retain 100% of their business rates for ten years. However, agreement has yet to be reached on the detail of this and the extent to which they would also carry the risk of any falls in business rates revenue.
The Greater Manchester deal says: “GMCA and its constituent local authorities and the government will need to work through further detail, including the right balance of risk and reward, ahead of the next Local Government Finance Settlement to enable this next phase of 100% rates retention to be implemented.
“The government recognises that GMCA and its constituent local authorities would only sign up to arrangements where the balance of reward outweighs the risks of being inside the scheme.”
Jonathan Carr-West, chief executive of the local government information unit, said the government’s commitment to expand business rates retention would be welcome.
“Three quarters of councils in our recent State of Local Government Finance report called for a 100% business rate retention and will be pleased to see the chancellor confirming his intention to introduce this,” he said.
However, Sir Stephen Houghton (Lab), chair of the Special Interest Group of Municipal Authorities, said “moves to further roll-out the discredited system of business rates retention will widen the growing gap between the poorest and wealthiest areas”.
Budget documents also said the government “remains committed to bringing forward wider proposals to improve the local government finance landscape in the next Parliament”. However, no further detail was offered.
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