IFS study casts doubt over backing for 100% business rate retention


Senior councillors and directors have expressed scepticism that 100% business rates retention will bring benefits, according to analysis from the respected Institute for Fiscal Studies (IFS).

The analysis, based on two earlier surveys by The MJ/LGiU and PwC, found that most respondents were unable to identify any benefits from the current 50% business rate retention scheme (BRSS).

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After The MJ/LGiU survey found almost half thought their councils would lose out from a 100% scheme and only 23% saw any benefits, the IFS study said: ‘Such pessimism is somewhat surprising in light of the relatively strong political support for the 100% BRRS from the local government sector.’

The PwC survey found strong backing for a national system of redistributing the benefits of local growth.

Two-thirds of respondents preferred a redistributive system rather than areas retaining the entire proceeds of local revenue growth.

In conclusion, the IFS said its findings suggested ‘significant doubts within large numbers of councils about the impacts of extending the BRRS and imply it may be difficult to design a scheme that can meet the expectations of local decision-makers, whose preferences for incentives versus redistribution differ systematically around the country’.

Pete Moore, president of the Society of County Treasurers, said: ‘Business rates retention is just one potential funding mechanism for local government and holds many risks as well as some opportunities.’

This story first appeared on themj.co.uk.


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