Agenda item

Report and presentation on the proposed changes to Business Rates

The Panel received a report of the Head of Strategic Finance which followed on from a previous report to Budget Panel on 25 October 2011.  Additional documents were circulated to the Panel after the publication of the agenda.  These included a document from the Economic Development and Infrastructure Planner regarding the potential for Business Rate growth in Watford and one about the projection for New Homes Bonus from the Interim Housing Strategy Manager.  The Head of Strategic Finance apologised that the additional information had not been provided earlier, however, the situation was changing on a daily basis.

The Chair introduced Neil Benn from CIPFA and invited him to give his presentation.

Mr Benn explained the current Business Rates collection procedures and the new scheme from April 2013.  He provided a comparison of Watford Business Rates under the old scheme and the new scheme.  He added that levies would be imposed on authorities who gained Business Rates and safety nets for those who collected less.  He also provided an example of the calculation for 2013-14.  The figures included in the example were guesstimates.

Following a question from Councillor Watkin, the Portfolio Holder for Finance and Shared Services, Mr Benn confirmed that the targets were set for 10 years.  The option on how the target would be calculated still needed to be confirmed.  It was possible this could change if there were a change of government. 

Mr Benn advised that there were many aspects of the scheme that still needed to be finalised.  The proposed levy for gainers in the scheme was 89%.  A proportion of the levy would then be distributed to authorities who had made losses.

Mr Benn then explained about 'pooling'.  This would allow local authorities to 'pool' their resources.  He informed Members about the advantages, disadvantages and main risks of this method.  He added that if authorities wanted to form a 'pool' they had to inform the Department for Communities and Local Government by the end of July 2012.  If the County Council was involved the levy was reduced to 73% rather than 89%.

Mr Benn set out the timetable for the introduction of the scheme culminating with it being introduced from April 2013.

Members were concerned that once the target was set there was no incentive to increase the amount of business rates collected.  Councils might prefer to have flats developed rather than businesses and thereby gaining additional New Homes Bonus.

There was also concern that there might be tension finding like-minded authorities to join forces and pool resources.  It was felt that there were very few authorities in Hertfordshire who were similar to Watford.  Some Members felt that 'pooling' should not be ruled out completely and that further work needed to take place to enable different options to be investigated.  It was agreed that there was insufficient time to make a decision before the deadline in July.

Following various Members' questions, Mr Benn explained that the July deadline had been set to enable central government time to work out the targets and grants for 2013/14.  If authorities decided not to enter into a 'pool' by July it was possible to establish one at a later date for the following year.

With regard to the incentives, Mr Benn advised that the Government wanted no more than 1% increase in Business Rates per year and therefore the levy had been introduced. 

The Economic Development and Infrastructure Planner explained the document he had produced setting out the potential for Business Rate Growth.  In relation to 'pooling' a concern would be that not all authorities were pro-growth.  Authorities interested in 'pooling' needed to be like-minded and have a common ground.  He noted that Members had referred to Stevenage and Dacorum.  The businesses within Dacorum were different to those in Watford.  With regard to Stevenage, the town was located further north and land values were different.

The Head of Strategic Finance then informed Members of the discussion which had taken place at the Herts Leaders' meeting on 11 June.  He advised that the Mayor had not been present as she was attending a different meeting.  He stated that the Leaders had agreed not to make an application to 'pool' resources by the July deadline and that it would be reviewed further after December when more information would be available.

The Chair concluded from the Panel's discussion that Members felt that the suggestion should not be ruled out completely but that it was important to wait for further information.  This appeared to be the same view as the Herts Leaders' group.

The Chair thanked Neil Benn for his presentation and responding to the Panel's questions.

The Head of Strategic Finance noted that the New Homes Bonus had not been discussed.  He advised that this would be revisited at the next meeting as part of the Medium Term Financial Strategy.

RESOLVED –

1.      that the Panel's comments be noted and that 'pooling' should not be ruled out completely.

2.      that further information be presented to Budget Panel when it is known.