Councils across England are forecasting a record-breaking £23.5 billion income from business rates next year despite many small businesses paying no rates at all.
Local Government Minister Marcus Jones said the increase – some £400 million – was down to rise in the number of new business across the country.
In future councils that lead the way in driving growth will be rewarded by a change in the rules which will allow them to keep 100% of business rates income.
These changes will be in place by 2020 – but had they been up and running next year councils would have kept all £23.5 billion instead of the £11.75 billion they will under existing rules.
Local Government Minister Marcus Jones said:
As part of our long-term economic plan British business is on a roll.
Councils already plan on handing out discounts of £3.2 billion which supports charitable work, fills vacant shops and encourages entrepreneurs but we want to further incentivise councils to do even more.
That’s why by 2020 councils will have greater financial autonomy and be handed the power to cut rates as much as they like to boost enterprise in their local areas. And those that do give business a helping hand will reap the rewards - keeping 100% of the additional growth they generate
The historic local government finance settlement paved the way for councils to have greater financial freedom from Whitehall.
Business rate retention has already given councils a financial boost and, since 2013, local authorities have kept 50% of the business rates income they generate. This has resulted in 90% of authorities expecting to see additional business rates income from 2015.
On top of this the government has also introduced more than £1 billion support for business rates bills in 2015 to 2016 and have confirmed the doubling of Small Business Rate Relief will continue into 2016 to 2017.
Latest figures show there are 900,000 more businesses now than in 2010. Already 400,000 small businesses pay no rates at all and councils are also spending less on reliefs for vacant premises as entrepreneurs’ spring up and fill empty shop fronts.
In total 600,000 small businesses receive some form of discount and in 2016 to 2017 local authorities plan to grant £3.2 billion reliefs to help local businesses and charities thrive.
But as part of wider reforms to give councils greater financial autonomy, local government will throw off the shackles of bureaucracy and keep 100% of local taxes by 2020.
The new reforms will also include plans to abolish the uniform business rate, giving local authorities the power to cut business rates as much as they like to stimulate growth in their area and attract new businesses.
And for those areas that choose to have city-wide elected mayors, there will be even greater flexibilities - including the power to increase rates for spending on local infrastructure projects, as long as they win the support of local businesses.