Transcript Business rate retention

Business rate retention
Daria Kuznetsova
New Local Government Network
Contents
1) Overview
2) Summary of Changes
– Local and national share
– Set aside
– Top-ups, Tariffs and Resets
– Levy and Safety Net
– Tax increment Finance
– Pooling
3) Applications to Greater Manchester
Cause for change
•
•
•
•
Economic health
Misalignment of costs and benefits
Uncertainty and lack of control
High property prices
Timeline
Jan 2012
Finance Bill
in committee
stage in
House of
Commons
Jan 2013
Further guidance
provided on:
• Levy options
•Local/National Share
•TIF
April 2013
Amendments
take effect
Jan 2014
Spending controls and the national
business rate baseline
Source: DCLG, Local Government Resource Review: Proposals for Business Rates Retention Technical paper 1: Establishing the baseline, August
2011
Tariffs, Top-ups and resets
• Establishing individual authority business rate baseline
• Establishing individual authority baseline funding levels
• Uprating top-ups and tariffs by RPI business rates
multiplier
• Resets
Top-up authority
Tariff authority
Tariff
Business
Rate
Baseline
Baseline
Funding
Top-up
Business
rate
baseline
Baseline
Funding
Tariffs and Top-ups
Tariffs and Top-ups
Greater Manchester Authorities
Bolton
Bury
Ratio of
business
Forecast
rates
contribution to
contributed to
the business
Formula formula/grant Predicted Toprates pool (£ m) grant (£ m)
received
up or Tariff
82.6
128
0.6:1
Top-up
48.7
67.8
0.7: 1
Top-up
Manchester
Oldham
287
55
354.3
122.4
0.8:1
0.4:1
Top-up
Top-up
Rochdale
Salford
Stockport
58.9
77.5
88.6
115.5
135.6
86.8
0.5:1
0.6:1
1:1
Top-up
Top-up
Tariff
Tameside
Trafford
Wigan
54
146.3
73.5
106.7
70.6
135
0.5:1
2.1:1
0.5:1
Top-up
Tariff
Top-up
Data Source: House of Commons Library (2012) Local Government Finance Bill 2010-12 RESEARCH PAPER 12
Levy
• A levy will be put in place against disproportionate benefit
• Any two authorities achieving the same levels of growth in
their business rates will see the same percent increase in
their income
Levy
Individual
authority
1:1 Levy
1:2 Levy
1:0.5 Levy
Baseline business rate
Year 1
rate (pence rate (pence rate (pence
funding
baseline (Tariff)/top-up in the
in the
in the
(£m)
(£m)
(£m)
pound)
pound)
pound)
Authority A
100
550
(450)
82
64
91
Authority B
100
220
(120)
55
9
77
Authority C
100
120
(20)
17
No levy
58
Authority D
100
90
10
No levy
No levy
44
Authority E
100
50
50
No levy
No levy
No levy
Authority F
100
10
90
No levy
No levy
No levy
Safety net
• Levy used to fund
safety net to protect
local authorities
from volatility
• Safety net will be
used when a local
authority sees its
income drop by
more than a set
percentage level
below its baseline
funding level
Distribution of year-on-year percentage change in
NNDR Contribution to the Pool
Source Source: DCLG, Local Government Resource Review: Proposals for Business Rates Retention Technical paper 6: Volatility, August 2011
Example of a tariff authority
£170m
£150m
2013/14
*Assuming a national share of 4 %
2014/15
Local Share
Retained
£104 m
Tariff
Local Share
Tariff
£100m
Business rate income
2012/13 Formula
Grant
Business rate income
Tariff
(£40 m)
Levy
Business rate income
National
Share*
(£6 m)
£140m
National
Share
(£6.8 m)
£40m
2015/16
Retained
£123.2m
£40m
Example of a top-up authority
£155 m
£145 m
Local Share
Retained
£100.8 m
Local Share
Retained
£110.4 m
£40 m
Top up
National Share*
(£4.2)
Top-up
Top-up
(£40 m)
Business rate
income
2012/13 Formula grant
£140 m
National
Share*
(£4.6)
£40 m
£100 m
2013/14
*Assuming a national share of 4 %
2014/15
2015/16
Tax Increment Financing
Option 1
Option 2
 Local authorities
borrowing against future
business rate income
(under existing
prudential borrowing
rules)
Associated with
substantial uncertainty
Schemes in which
business rates growth
would not be subject to
the levy or reset for a
period of time
E. g. Enterprise zones
Subject to government
approval
Pooling
• Local authorities can pool business rates if they
meet the following criteria:
– all local authorities to be included in the prospective
pool agree with the proposal
– there is a formal pooling agreement setting out how
the pool will operate
– pooling proposals have been signed off by the Chief
Executive and the s.151 officer of each local authority
– pooling proposals meet any legislative requirements
that may be in place
Pooling
• Tariffs and Top-ups aggregated
• Implications for levy
• Implications for safety net
Benefits of pooling
• Spreading risk associated with business rate
volatility
Business rate yield, Greater Manchester Billing Authorities, 2005/06 2009/10
135
130
125
120
115
110
105
100
2005/06
2006/07
2007/08
2008/09
2009/10
Bolton
Bury
Manchester
Oldham
Rochdale
Salford
Stockport
Tameside
Trafford
Wigan
Data Source: House of Commons Library (2012) Local Government Finance Bill 2010-12 RESEARCH PAPER 12
Benefits of pooling
• Strategic infrastructure investments
– Business rate growth
across GM would
account to approx. £10
m - £15 m in 2013/14
(exact figure dependent on
central/local share calculations)
1
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Retained Income
1322.7 1355.194 1384.953 1429.413 1507.668 1607.287
• Governance structures for pooling in place in Greater
Manchester
• Collaboration between local authorities instead of zero sum
competition
Graph obtained using the interactive calculator in technical paper 5 with RPI forecasts from Oxford Economics and growth
forecasts using historical business rate growth rates
Recommendations for Use of Pooling
Revenue
• Skills Investment Fund
– Allowing LEP to commission training places to
correct skills market failures
• GM wide TIF for capital investments
– Reliability of pooled revenue reduces riskiness of
TIF
• GM Recyclable Investment Fund
– Similar to investment fund plans underway in
other areas
Questions ?
[email protected]