Business Rates Localisation Announced

Councils in England will be allowed to keep the business rates they collect rather than paying them into Treasury coffers, under new government plans.

Deputy Prime Minister Nick Clegg will announce the plan in a speech to the Local Government Association (LGA).  He will seek to reassure deprived areas - with fewer businesses to generate money - that no authority will receive less than it does at present.

The LGA has already expressed its enthusiasm for the idea.

Business rates are charged on most non-domestic premises, including shops, offices, pubs, warehouses and factories.  They are calculated and collected by local authorities, and at present are put into a central pool before being redistributed to all councils in the form of a grant.

The grant is used to help fund local services like the police and fire brigade.

'Money talks'

Mr Clegg will tell the LGA conference in Birmingham that councils currently control less than half of their budgets, but with the localisation of business rates, that could rise to 80% or more.  He will also argue that with the power to spend money as they see fit, councils can better address local priorities and offer greater incentives to attract successful firms to their area.

Councils will also have the power to borrow against business rate income to fund local development.

Mr Clegg will say: "Every government preaches localism. This government will practice it. In terms of real decentralisation, money talks. We have to create the conditions for communities to invest in their own success.  That means putting our money where our mouth is to give you proper power over spending as well as more control over the tax you raise and keep so, for example, you can fight for businesses to come to your town."

Poorer areas, particularly in the north, fear that the localisation of business rates could leave them much worse off because they lack a large economic base.

'Economic boost'

But Mr Clegg will insist they need not worry, telling the LGA: "I guarantee any new system will be fair.  More deprived areas will not lose out. From the start, no authority will receive less funding when the new arrangements are introduced than they would have done previously.

In his speech to the LGA on Tuesday, the body's new chairman, Sir Merrick Cockell, said localising business rates would be "the biggest kick-start to our economies" that the government could give.  He said it would allow communities to benefit directly from their own economic activity and development.

The deputy PM will also unveil plans to roll out so-called community budgets across England after a successful pilot scheme.  The aim of the policy is to help councils manage families with multiple problems who require interventions from a number of different bodies, including the police, social services, doctors and courts.

The government argues that by giving councils one central budget for each of these families, waste can be eliminated and individuals can be cared for better.

Almost half of Lib Dems polled by the charity Shelter also feared the plans would lead to a rise in homelessness.

Work and Pensions Secretary Iain Duncan Smith said "scare stories" about rising homelessness were nonsense.

The government wants to cut the housing benefit bill and change a system it says is unfair.

The survey suggests that 68% of Conservative councillors and 80% of Lib Dems object to plans to limit rises in local housing allowance rates to the CPI (consumer prices index) measure of inflation from 2013 - rather than setting them in relation to local rent costs.

It also suggests that 49% of Lib Dems agree that housing benefit reductions made homelessness in their areas more likely, and over half opposed the scale of cuts to the benefit.

The leader of the Liberal Democrats on Richmond-upon-Thames council, Stephen Knight, said: "It's really, really pernicious, nasty stuff from this government and they're clearly Conservative-led policy changes, but in my view Liberal Democrat MPs and ministers have not done nearly enough to prevent these from coming through either."

David Skinner, a Conservative councillor in Coventry and a director of a housing association, said he supported action to cut the deficit and thought some changes to housing benefit were necessary.

But he said he was "somewhat overwhelmed" by the pace of change in housing benefit and other policy areas.

He added: "People in ordinary jobs living ordinary lives, I thought [they] would be confused by the sheer pace of change - and worried.

"So my comment, in effect, was although I'm a loyal member of the Conservative Party and I support the Conservative Party, I didn't think frankly that we were doing as good a job as we might have done on explaining why and in good time."

The government says the housing benefit bill has almost doubled in the past decade.

Mr Duncan Smith said: "The failure of the last Labour government to reform housing benefit has left us in the absurd situation where some benefit claimants can claim over £100,000 a year to live in large houses in expensive areas.

"This is unacceptable when hard working individuals and families are struggling either to find affordable private rents or pay their mortgages.

"Scare stories that housing benefit changes will force thousands of families from their homes are nonsense and are causing unnecessary distress.

"A small number of people may have to move and we are providing local authorities an additional £190 million over the next four years to smooth the transition.

"Instead of complaining, responsible councils should be working to effectively implement these policies, and recognise that we are trying to get people off benefits and into work, and drive the cost of the benefits bill to taxpayers down."

Benefits cap

Shelter's survey suggests that 67% of Liberal Democrat councillors believe reductions to housing benefit will lead to significant knock-on costs for councils - and that local authorities do not have sufficient resources to cope with extra pressure on public services.

But it says only one in five Conservatives oppose the scale of cuts to housing benefit.

The vast majority of Labour councillors opposed the government's plans.

ComRes surveyed 1,299 councillors across England, Scotland and Wales online, between 1 and 13 June 2011.

Shelter, which commissioned the work, has opposed the government's housing policies.

Another Lib Dem councillor, Chris Naylor, from Camden, said a survey by his council suggested the reforms would see the majority of landlords in the borough reducing their rents.

Simon Hughes, the deputy leader of the Liberal Democrats, will hold a meeting with Mr Duncan Smith on Wednesday to discuss a £26,000 overall cap on the benefits families can claim.

Mr Hughes, who is the MP for Bermondsey and Old Southwark in south London, has said the government should act to limit the impact of the cap on different-sized properties on Londoners.

BBC News Service 29/6/11