Transport and skills are the key areas councils would like more control over, through chancellor George Osborne’s business rates retention plans, according to an influential group of MPs.
Under the plans to allow local government to retain 100% of business rates from 1 April 2020, councils will have to take on extra responsibilities to ensure the policy is fiscally neutral, as full business rate retention would provide billions in extra cash.
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Local transport issues are 'top concern' for manufacturers
An interim report on the reforms from the cross-party Communities and Local Government Select Committee suggests taking on more responsibility for transport and skills was ‘most popular’ among local government.
The Local Government Association (LGA) is quoted stating it would ‘empower local areas to close skills gaps, boost employment and improve public transport’, while the manufacturers’ association EEF said local transport was a ‘top issue’.
Sources at the LGA said councils would like to see greater control in a range of areas.
Issues such as consistency and flexibility in funding for local highways and transport services, more control of bus services – which is in part being delivered by the Bus Services Bill – control of train stations and moving traffic enforcement powers could be among the asks.
The MPs also highlighted major concerns over plans to allow Local Enterprise Partnerships (LEPs) to approve or block an ‘infrastructure premium’ or levy as it was previously called, in combined authority areas with a mayor.
While the new infrastructure levy will be capped, with the limit likely to be set at 2p on the rate, it is only business representatives on the LEPs that can approve or block the proposed rise by a majority vote.
MPs found that LEPs were ‘near-universally thought to be ill-suited to the role being envisaged for them’ with a range of problems including that some LEP areas were too large or overlapping, under-resourced, and had no clear method of being held to account.
Other problems highlighted by the committee’s investigations include a lack of engagement with the community and a lack of representation across the business community.
Essex CC said LEPs had ‘insufficient political mandate’ to take such decisions, an issue first raised by council directors to Transport Network.
The Committee called for:
- a review into whether Local Enterprise Partnerships should play such a key role in deciding whether to raise the infrastructure premium, following concerns that some are not representative of all business
- consideration of whether, by making the infrastructure premium available only to those areas with a directly-elected mayor, it is placing areas without such a post at a disadvantage, in conflict with the aims of the new scheme.
The report also raised the prospect of a showdown between county councils and district councils over the current split of business rates, which sees the districts keep 80% of the retained business rate, while county councils get 20%.
Counties said that the current apportionment did not reflect their responsibilities for providing demand-led services or services that are linked to economic growth, such as transport and gave them little incentive to promote growth.
However district councils disagreed, with Andy Hall of Boston Borough Council one even stating their share should go up to 100%. MPs said there needed to be a conversation between government and the sector to explore how shares could be adjusted, including whether a needs-based approach would be fairer.
A spokesman for the District Councils' Network revealed talks between the two parties were already underway 'to try and find the best result for the local government family as a whole'.
This is a major issue given that MPs highlighted serious concerns over how business rates retention would impact authorities with less revenue. The committee noted ‘the lack of correlation between business rate revenue and local need’.
LGSS - a shared service jointly owned by Cambridgeshire County Council, Milton Keynes Council and Northamptonshire County Council – also suggested that properties on the central list for business rates should revert to local authority control.
The central list is made up of large network style properties such as utilities or railway stations.
LGSS gave the example of rail stations, which authorities had often funded and developed resulting in better buildings and increased passenger numbers but from which they gained no direct benefit as the property was on the central list and so business rate revenue was retained by central government.
Elsewhere it was also suggested that ministers should consider removing plant and machinery from business rates to help incentivise growth.
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