Business rates: MP Meg Hillier and Hackney Council warn government ‘not to compromise’

Concerns: Meg Hillier at a business rates rally earlier this year. Photograph: Hackney Council

Hackney MP Meg Hillier joined the council in expressing concerns over the government’s plan to fully devolve business rates income by 2020, following a report by the public spending watchdog.

The National Audit Office warned the scheme, which will see councils retain 100 per cent of the proceeds raised by the tax in their area, has “clear risks”.

The report raised questions about the ability of the Department for Communities and Local Government (DCLG) to deliver the policy by 2020, and said pressure to implement it within the timescale may result in it not being fully tested.

Hackney MP Meg Hillier, who chairs the Public Accounts Committee, echoed those fears: “There are real concerns over whether government can deliver a reliable scheme on time, and how this will affect funding for cash-strapped local authorities which have to balance support for local businesses with collecting the money needed to run public services.

Devolving business rates income means local authorities can reinvest the money locally.

But the NAO said not enough research has been done to prove that the current system, which sees councils retain 50 per cent of the tax, succeeds in promoting local growth.

NAO chief Amyas Morse said: “DCLG faces a significant challenge in implementing 100 per cent local retention of business rates by 2019-20.

“It has benefited from the experience of delivering the 50 per cent local retention scheme and is using this experience effectively.

“The key question is whether there is enough money in the system to let services be delivered on the right scale and for self-sufficiency to be seen to succeed.”

A spokesperson for Hackney Council said: “We welcomed the government’s announcement in the budget last year that business rates would be devolved to councils, however it is not yet clear how this will work in practice because the proposals have not yet been finalised.

“The NAO’s report highlights the problems and issues of introducing a very complicated change to local government finance in such a short timescale.

“Along with the NAO, we urge the government to ensure that the design of the new system is not compromised by the pressure to deliver to a tight timetable.”

A government spokesman said the NAO report recognised the “great progress” being made with the retention scheme, adding: “Local government has campaigned for over a decade for this, so working closely with them, we’re designing a system that helps promote economic growth.

“Alongside these reforms, we’ve given over £200 billion to local authorities through the historic four-year funding settlement. This gives them the certainty they need to plan ahead with confidence.”