New powers give councils more control over local finances

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

New details of measures that help councils boost local growth and that give them more control over their finances have been published by Local…

New details of measures that help councils boost local growth and that give them more control over their finances have been published by Local Government Minister Bob Neill.

The Government’s new business rate retention scheme enables councils to retain a proportion of locally collected business rates which they can use to help fund services to their communities. A consultation was launched today setting out proposals of how the retention scheme could work.

A plain English guide explaining business rate retention was also published so people can easily see how the scheme will work and what benefits it can bring.

The local growth scheme is part of the Local Government Finance Bill currently before Parliament and has huge potential to boost local growth and councils’ coffers and could add an additional £10 billion to the national Gross Domestic Product over the next seven years.

The Bill seeks to create a new incentive for local government across England to support growth by directly linking a council’s financial revenue to the decisions they take to back local firms and local jobs. Councils will be able to keep 50 per cent of their business rates, providing a strong incentive to go for growth.

The Bill also puts councils in charge of providing council tax support so it can be administered in a way that best meets local needs and supports local people. These changes go hand in hand with the wider economic reforms and will ensure the new system is a fairer one, where taxpayers can be more confident that work pays and the benefits bill is controlled.

Draft regulations were also published to help Local Authorities set up localised council tax support schemes, which must be in place by the end of January 2013. This gives councils the time and opportunity to design and implement those new local schemes in time.

Bob Neill said:

We’re determined to give councils more financial control and the Local Government Finance Bill gives them a new incentive system that ensures they have the best opportunity to boost local growth, which could potentially add £10 billion to the wider economy.

Spending on council tax benefit has more than doubled since 1997. The Bill will also put council tax support in local hands so it can better meet local needs. Councils now have all the information they need to start putting in place their own local schemes well ahead of the new year deadline.

The business rate retention scheme consultation can be found at: and will close on 24 September.

The Government has already published key details of the rate retention framework:

The new system will be fair and equitable for all areas with protections for vulnerable or less prosperous areas. Business rate growth would be shared evenly between central and local government. The ‘local share’ would be retained in full by councils and would be set at 50 per cent for the seven year period. The full ‘central share’ will always be returned in grants to local government.

In addition councils would get to keep 100 per cent business rates from new renewable energy projects. These would not count against the local-central shares.

A centrally run safety net fund would provide support should a council’s income drop below a set baseline, protecting areas which suffer a downturn.