Councils urged to use rates income to boost local business

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Councils are being urged to use income from business rates to support local firms and help create more jobs.

Communities Secretary James Brokenshire is inviting local authorities to apply for powers to retain the growth in their business rates, under new pilots schemes.

The pilots will see councils rewarded for supporting local firms and local jobs and ensure they benefit directly from the proceeds of economic growth.

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From April 2019, selected pilot areas will be able to retain 75% of the growth in income raised through business rates, incentivising councils to encourage growth in business and on the high street in their areas and allowing money to stay in communities and be spent on local priorities – including more funding to support frontline services.

This follows the previous wave of business rates retention pilots, launched in a wide range of areas across country in 2017 and 2018.

The government says the current 50% business rates retention scheme is yielding strong results and in 2018 to 2019 it is estimated that local authorities will keep around £2.4 billion in business rates growth.

Findings from the new round of pilots will help the government understand how local authorities can smoothly transition into the proposed system in 2020.

Brokenshire said: “I want to encourage councils to work together, with the aim of sharing their business rates income, so they can make better decisions that benefit their wider areas.

“Continuing the pilot programme for the second time allows us to look at how the system will work from 2020.”

Proposals will need to show how local authorities would ‘pool’ their business rates and work collaboratively to promote financial sustainability, growth or a combination of these.

Alongside the pilots, the government will continue to work with local authorities, the Local Government Association, and others on reform options that give local authorities more control over the money they raise and are sustainable in the long term.