On 4 February 2008, Official Report, column 47WS, I laid before Parliament a written ministerial statement about payments under the Local Authority Business Growth Incentives scheme (LABGI) in the light of legal challenge. I am now in a position to announce the methodology the Government intend to use, to make additional payments to local authorities for years 1 and 2 of the scheme and to make payments for year 3 of the three-year scheme.
For years 1 and 2, the Government propose to make additional payments to eligible local authorities using all Valuation Office Agency change codes which record an increase in rateable value and which were not previously used in LABGI calculations. This will ensure that all codes that could contain elements of business growth are taken into account. As a result, we propose that additional payments totalling approximately £50.9 million should be made to authorities (approximately £13.5 million for year 1 and £37.3 million for year 2).
For year 3, the Government intend to replicate the revised methodology for years 1 and 2 of the scheme in year 3. As I indicated in my statement of 4 February, it is necessary at this stage to retain a portion of the year 3 funding as a contingency and I intend to retain £100 million.
A further announcement about the distribution of the remaining funding will be made in due course. This funding will be allocated to local authorities in full, in line with the policy purposes for which LABGI was designed. The exact methodology will be confirmed once any uncertainty associated with legal challenges has been resolved.
The Government, therefore, are able to allocate around £246 million to authorities at this stage for year 3 of the scheme. As in previous years, it will be necessary to apply a scaling factor to the calculated allocations in year 3 to ensure that the funding distributed does not exceed the amount available. Each authority’s allocation will be scaled back to 28 per cent.
Further details of the methodology used for calculating the latest payments for all three years of the scheme can be found in a technical note which is being published today on the Communities and Local Government website at: http://www.local.communities.gov.uk/finance/labgi/technote0708.pdf
Details of the proposed funding for each qualifying authority under the Government’s proposals can be found at: http://www.local.communities.gov.uk/finance/labgi/draftdtmn0708v2.pdf
Copies of these documents are available in the Libraries of both Houses.
Authorities will now have until 16 May 2008 to raise any queries or issues about the methodology. I intend to confirm and make payments to authorities as soon as possible after this period.