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Local Government Finance

Volume 548: debated on Tuesday 17 July 2012

I am today publishing a consultation and informing the House of a number of steps we have taken to support our localism agenda and the important financial reforms we are delivering through the Local Government Finance Bill.

Business rates retention

The business rates retention scheme will enable local authorities to retain a proportion of locally collected business rates to help fund the services they provide, therefore creating a direct link between business rates collected and local authority income, and reducing local authorities’ dependency on central Government grants. The technical consultation document, also published today, sets out proposals for the detailed workings of the new business rates retention scheme that is to be introduced from April 2013.

The scheme will give councils a strong financial incentive to promote local business growth while ensuring that all local authorities have adequate resources to provide services to local people. Analysis undertaken by the Department for Communities and Local Government shows that the projected economic benefits of the new business rate retention scheme could add an additional £10 billion to national gross domestic product over the next seven years. And councils who succeed in growing their local economy get a direct boost to their coffers. This is not simply about redistributing the proceeds of growth—if these reforms lead to every council working as hard as it possibly can to help businesses thrive, then they have the potential to increase growth overall, which is good news for communities in as much as any increase in business rates means more money to invest in local services.

This publication follows the 2011 consultation on the proposals for business rates retention and extensive discussions on the proposals with the local government sector, as well as the associated statements of intent published on 17 May this year. I have placed copies of the consultation document in the Library of the House. The consultation document, a supporting equality statement, a Plain English Guide to Business Rates Retention, a step by step guide and a revised pooling prospectus are also available on the Department for Communities and Local Government website and the Local Government Finance website at:

We look forward to receiving views on our proposals. The consultation period will close on 24 September 2012. We will then put forward our proposals for local government funding for 2013-14 in a draft local government finance settlement later this year.

Council Tax Information Letter

The Government also today issued a council tax information letter to local authorities to make them aware that, when considering applications from service personnel for second homes discount on their private properties, they do make payments on their UK or overseas service accommodation in lieu of council tax. This payment is paid to the billing authority where the service accommodation is located by the Ministry of Defence.

Council tax support

To support the planning of local council tax reduction schemes, and to provide clarity on our plans for secondary legislation, I have also published, on 16 July 2012, key draft regulations regarding the localisation of council tax support, as we said we would in the detailed statement of intent on regulations published in May.

Under the reforms set out in the Local Government Finance Bill 2012, local authorities will be required to make their own council tax support schemes by 31 January 2013. The draft regulations I published yesterday will ensure all local schemes contain any requirements prescribed by the Secretary of State, including provision of support for vulnerable pensioners, and also set out the requirements for a default scheme, which will come into effect if a local authority fails to make a scheme by the prescribed deadline.

The publication of these regulations in draft form is intended to give authorities and interested parties the opportunity to make any comments or ask questions on the process and the draft regulations, to ensure that the final versions will enable local authorities to implement the prescribed requirements or default scheme smoothly.

It is essential that local authorities press ahead now with developing their schemes. Schemes have to be agreed by the end of January 2013 and will apply from 1 April 2013. This means local authorities need to start consulting now to ensure they can give full consideration to the views local people express, and provisions in the Local Government Finance Bill make clear that the billing authority can consult prior to the Bill coming into force.

Parish and community cheques

Today we have published a consultation paper proposing the removal of an outdated rule that limits the ability of parish and community councils to use modern methods of payment. The rule requires all cheques and other orders for the payment of money to be signed by two members of the council. It applies to all parish councils in England and community councils in Wales, as well as some charter trustees in England. As the rule is contained in primary legislation the paper proposes that the reform should be implemented by a legislative reform order made under the Legislative and Regulatory Reform Act 2006. The paper sets out the robust yet flexible control framework that will take the place of the two signature rules; this framework has been developed by the local council sector. Subject to the outcome of the consultation, the Government propose to lay a draft order before Parliament in the autumn. A copy of the consultation paper has been placed in the Library of the House.