FSB: Local government finance review must not be a revenue raising exercise for councils
The Federation of Small Businesses (FSB) has welcomed the Government’s review looking at the way local authorities in England are financed, but warns that the new powers must not be used to raise revenue at the expense of business. It is also imperative that the funding local councils receive from central government is safeguarded so that all parts of the country can benefit from the new system.
The FSB is supportive of moves to create a system which incentivises councils to prioritise business growth, through being able to keep more of the business rates from firms in the region. If approached correctly this system would help to create better and stronger relationships between councils and local businesses, particularly if local authorities recognise that they will only succeed in stimulating growth with the help of businesses.
However, any changes must encourage councils to stimulate growth in a way which is sustainable; making small business growth the bedrock of the local economy, not just as a way to quickly raise revenues.
John Walker, National Chairman, Federation of Small Businesses, said:
“Many businesses think that the rates they pay go straight to their local authority when in fact they go into a central pot and are then redistributed. While this consultation aims to make the process fairer and more transparent – in that a local authority will be able to keep more of the rates it collects – it must not be allowed to be used as a revenue raising exercise for councils at the expense of business. It is therefore imperative that business rates continue to be set centrally.
“Central government must also ensure that different types of relief – such as Small Business Rate Relief – remain fully funded, so that there is still a strong incentive to promote them locally. Councils that increase the number of small businesses in their area and improve the take up of relief must not end up worse off as a result.”
Notes to Editors
The FSB is the UK's leading business organisation with more than 200,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk
Property valuations are set by the Valuation Office Agency (VOA) and the multiplier (which then determines how much a business pays) is set by central government, as are the majority of the reliefs available to businesses. The local authority’s bills businesses in their region based on the amount determined above and collect the money. Unlike council tax that money is not retained locally, but is instead paid to the Government to go into a central pool and then redistributed to all authorities as part of a Formula Grant, which all councils receive to fund their activities. The Formula Grant a council receives is broadly based on a council’s relative need and resources and not the amount of business rates that the local economy in their area generates.
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