Prior to 2013/14, councils handed business rates they collected to the government and received a share back as part of overall government grant. In 2013/14, the government implemented reforms which allows councils to retain a proportion of the business rates they collect in exchange for a reduction in their grant funding.
For the last two years Camden, along with all London authorities and the GLA, have been participating in a pilot scheme to pool business rates income across the capital and retain an increased proportion of any business rate income growth, as the government sought to make moves towards greater local financial autonomy.
Camden welcomed the pilot pool approach as a step towards wider devolution. We have strongly supported the principle that Councils should retain more funding generated locally as part of our advocacy of wider devolution as a means of improving outcomes by moving decisions closer to the residents and businesses they effect. We argue that services that have a direct relationship to business should be transferred to councils including services that can help tackle key infrastructure challenges, including housing, transport and digital connectivity. In turn, we are creating a circular economy by encouraging greater participation of SMEs through our procurement processes.
The 2019 Spending Round announced that the implementation of a new model for Business Rates would be deferred again, to April 2021, creating more uncertainty around local authority finances in the medium term. While Local Authorities will continue to benefit from a share of business rates above an agreed baseline, the retention rate for London will reduce from 75% to 67% of income above the baseline with the GLA keeping 37% and councils keeping 30%.
If the Council operated outside of a business rates pool, it would be required to pay a 50% levy on the business rates income growth it retained. However, London Councils Leaders’ Committee have agreed in principle to support a pool for London under the 67% retention rates. The benefit of a London wide pool would be that collectively, London would pay a lower levy rate on growth than the individual authorities would if they operated outside of the pool.
The government previously stated its intention to hold a new Spending Review in 2019, covering the 3 year period 2020/21 to 2022/23. However, with the political turbulence around Brexit, the Government has only provided a one-year Spending Round covering the financial year 2020/21. This has given local authorities limited assurance in terms of their financial stability for the coming financial year, and there is no funding certainty beyond this point and no indication of when a fuller and longer term plan for public sector spending will be available.
The Review of Medium-term Financial Strategy report to Camden’s Cabinet in December 2019 set out an overview of the council’s financial position, including our plans to address the medium term funding deficit and an update on preparations towards setting the 2020/21 budget. See the supporting documents below and have your say on proposals.