7th March 2018
Cranleigh Chamber of Commerce comment on 100% business rates retention
Local councils will be starved of their principal government grant from 2020. Already these block grants are decreasing year by year ready for ‘zero grant’ day, with a 37% reduction between 2010 and 2015.
Less grant means less council spending on all the services we have become accustomed to.
However, there is good news. The government used to take 100% of all the business rate income from each council. This changed to 50% in 2013 and by 2020, 100% of business rate income will go to councils.
Under the existing system, as a rule, the less deprived an area, the less government grant it is likely to receive. That is because richer areas can raise more funding via council tax and business rates.
This is not an exact link, but it is a useful rule of thumb.
For many decades, all governments used the grant to ensure as far as possible that local councils could provide an equal level of service across the whole country.
However, since 2010, on average, deprived areas have seen their grants cut more than less deprived areas.
If this is the plan, what does this mean for our Surrey councils? Well it is a bit of a mixed bag.
The Surrey district and borough councils have a larger number of businesses and, thus, business rates to collect than the northern councils. On the other hand, there are far more people, and indeed proportionately far more aged in the south who need council services.
So simply put, Surrey councils have a greater demand on whatever income comes in.
Also, Surrey councils are one of the few areas in the UK, London being another, that pays more into the Exchequer than gets out. Government uses this surplus to balance the budget elsewhere in England which is something our Surrey county councillors feel very sore about!
It gets further complicated.
Where there are two tier systems of local government (that means both districts and boroughs and a county council, unlike a Unitary authority like Berkshire which has no districts and boroughs) it is likely that the County Council will suffer more with the loss of government block grants because they do not collect business rates.
And yet they must deliver some of the most expensive services such as Education, Roads and Social Care.
The decision to remove the block grant will possibly be one of the most revolutionary since the 1973 reorganisation of council geographies. We have yet to see what the results will be.
What we can be sure of, is that there will be much, much less funding to go around.
We may well even see more Unitary Authorities springing up although this is hugely unpalatable to so many district and borough councillors who would be turkeys voting for Xmas. This is a route that Scotland has taken.