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Business Rates (Local Retention)

Volume 532: debated on Monday 5 September 2011

The Government have published proposals to allow local retention of business rates and are seeking views by 24 October. The plans give councils a strong financial incentive to drive economic growth, as well as providing protections for places in need of additional support. Subject to the outcome of the consultation, we intend to introduce business rates retention by April 2013.

There is significant concern in cities such as Liverpool that councils will lose money after the first year if they cannot adjust quickly enough to the changes. We have had reassurances from Ministers that councils will get that support in the first year, but will the Secretary of State guarantee that they will get that additional support in years 2, 3 and 4?

Had the provisions been in place over the past few years, Liverpool would have done particularly well out of the system. I am confident that the leadership of Liverpool will respond to this, because it puts Liverpool very much in the driving seat. My opinion is that Liverpool is an extremely good place to invest.

Following the riots, the viability of high streets is a priority. For my local shops, the priority is reform of business rates, which they see as too high and lacking any real connection with local services and local decision makers. Can the Minister hasten the day when business rates are not an issue for his Department?

I certainly hope so. We recognise the burden of rates on small businesses. That is why we are doubling small business rate relief until the end of September 2012. Approximately a third of a million business rate payers, including small shopkeepers, will pay no rates at all for this period, and through the Localism Bill we are giving authorities powers to grant business rates discounts as they see fit.

Businesses on Wirral are concerned that the retention of business rates might result in increased business rates. As the party of the small business, how are we going to protect those small engines of growth in these difficult times?

My hon. Friend makes a reasonable point, and I can assure her that part of the consultation makes it clear that local authorities will have the ability to bring business rates down, but not to put them up.

In my constituency, the local enterprise partnership is moving swiftly to create business growth across both Warwickshire and Coventry. Can the Secretary of State explain which mechanisms will allow LEPs to receive funding from business rates where they, working with the local authority or alone, have been responsible for economic growth in the area?

LEPs are a partnership between local authorities and business, and we will be encouraging, though we will not be prescribing, local authorities to pool the business rates. I know that a number of authorities around Greater Manchester, west Yorkshire and particularly London are actively considering pooling arrangements, which has the advantage that poorer areas can benefit from richer areas.

Barnsley council has estimated that, had the arrangements been in place last year, it would have seen a cut of more than £40 million last year. Does the Secretary of State think it is fair that poorer areas such as Barnsley may face pressures in delivering vital local public services, whereas wealthier areas may see their business rates receipts go through the roof?

If business rates go through the roof, they will be caught by the “disproportionate” rule and those sums will be taken away and distributed to poorer areas. This was designed to help councils such as Barnsley to retain local growth. The figures that I have seen—we received some figures from Barnsley during the recent settlement—did not appear to be entirely accurate. I am happy to work with the hon. Gentleman to get the best possible deal for Barnsley.

Ministers—[Interruption]—have already made savage front-loaded cuts to council budgets, and now they want to top-slice the proceeds of business rate growth which they promised to local councils. Localising business rate growth should give local authorities an incentive to grow their business base and to create jobs. Will the Minister explain just how central Government’s top-slicing of business rate growth can provide that proper incentive? Is it not just another hit on local government finance?

The hon. Lady was clearly missed by Members on her side of the House, and indeed by those on ours, judging by that welcome.

The only top-slicing that will take place is with regard to disproportionate gains, and I am pretty confident that Kensington and Chelsea and Westminster councils will see enormous increases in their rates. It is only right that we take that money away and see that it is distributed to other parts of the country, such as to Barnsley. I would have thought that she would support that.

What incentives will there be to encourage local authorities to introduce special low business rates for green energy schemes?

The Localism Bill gives local authorities the discretion to do that, and my hon. Friend makes a very sensible suggestion which I am very confident a number of local authorities will take up.