Cost of business rate changes for local councils

The business rate changes announced in the 2016 budget are good news for small businesses, but less positive for councils. How will this loss of revenue affect the UK's local authorities?

Budget contents

In the latest budget, Chancellor George Osborne announced that £7 billion of business rate tax reliefs will occur over the next five years. In our previous blog post on the Autumn Statement, we reported that councils were to be allowed to keep the £26 billion generated annually by business rates. This was intended to compensate councils for the withdrawal of Whitehall grants. However, now it looks as if this measure will be less helpful than first thought.

The Treasury have stated that local authorities will be compensated for any lost income, but no details have been finalised. Director of the New Local Government Network, Simon Parker, stated: “George Osborne . . . knocked a huge hole in business rate income without spelling out how councils will be compensated.”

Potential impact

It’s estimated that 600,000 small businesses will pay no rates from 2017 as a result of these changes. This move has been welcomed by SMEs and the British Chambers of Commerce, but councils may be left to pay the bill. Chief Executive of the Local Government Information Unit think tank, Dr Jonathan Carr-West, stated: “This is a budget that will leave many in local government deeply anxious. Only two months ago, local government was offered the ‘certainty’ of a four-year funding settlement, but that certainty already looks illusory.”

Public services are likely to be affected as a result. Jan Tregelles, Chief Executive of learning disability charity Mencap, voiced concern that councils who are already struggling to fund social care will find themselves in an even more challenging position in the near future.

With uncertainty remaining over the four-year funding plans for local authorities, councils can prepare for the future by building up their cash reserves. Ethical Enforcement Agents such as Dukes Bailiffs can assist with this through the fair and timely collection of outstanding arrears. Speak to our Contact Centre Manager today to find out how we can help.