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Retained business rates must be invested for growth

Posted on 4 January 2018

The biggest business-representation organisation in the region is urging local authorities across Derbyshire to invest for growth when the county joins a pilot scheme that will see it retain 100% of business rates.

Changes to the way business rates are collected and redistributed will eventually mean that all rates-collecting local authorities will retain the money they collect.

At the moment they retain 50%, sending the other half to central Government to distribute. By the 2020/21 financial year the retained element is expected to rise to 75%.

But Sajid Javid, the Secretary of State for Communities and Local Government, announced just before Christmas that the county of Derbyshire would be one of ten local authority areas to take part in a pilot project where they will have 100% retention of collected business rate from April, the start of the 2018/19 financial year.

It is expected to put an additional £21m in the county’s coffers, of which 70% will be shared between the eight authorities that joined the bid. The remaining 30% of the extra revenue will be ring-fenced for economic growth, managed by a board including representatives of all the Derbyshire-based participating authorities.

The county council has welcomed its involvement in the pilot, quoting Council Leader Councillor Barry Lewis as saying: “This is fantastic news for the county as a whole and will benefit a wide variety of important projects that will make a huge difference to communities and our local economy.”

Scott KnowlesScott Knowles, Chief Executive at the Chamber, which represents over 4,100 businesses across the East Midlands, said: “While we welcome the news that the county will retain 100% of the business rates it collects, we are concerned that this move does nothing to mend the ‘broken’ business rates system.

“The current system is a tax businesses have to pay, based on the perceived rental value of their premises and installed plant, before they have earned even a single penny. It takes no account of ability to pay. It also fails to recognise the growth of the digital sector, where highly profitable businesses use a fraction of the space that more traditional industries need, or online retailing which has no need of premises on the High Street, for example.

“We would welcome news that local councils could use the fund to introduce flexible rates rebates or to reduce business rates to encourage new businesses to an area but, in the interim, we look forward to working with local authorities to identify appropriate ways to stimulate and support long-term economic growth.”

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