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The Devil in the Detail: Designing the right incentives for local economic growth, a new white paper issued this week by NLGN, presents a timely response to the recent government consultation on business rates reform. While acknowledging the Government must strike a careful balance between equity and efficiency, the report strongly recommends ensuring the system is geared towards a pure focus on business growth, avoiding recreating the complexities of the current grant settlement process.
The report was launched following the coalition’s planned introduction of a package of decentralist policies to designed rebalance local-decision making in favour of economic development. The Local Government Resource Review will allow local authorities to retain increases in business rates generated in their area. This represents a fundamental change in the way local government in England is financed. The report makes recommendations to ensure this business rates retention model achieves goals and reinforces a council’s ability to secure economic growth.
The report is guided by two principles.
- Firstly, if the government is going to move to a system designed to incentivise business growth, then the system must be geared towards this goal. A change in the system should not become a complex replication of the current grant settlement.
- Secondly, whilst we believe that a system of redistribution and equalisation is essential, we argue that it must operate outside the business rates retention scheme. We call specifically for a capital fund to be accessible by areas of lower business rates growth.