Money for Services
Big topics this week have been the continued pressure on the government for better funding for adult care, prior to the budget next week. Our group has worked early and effectively on the Housing White paper just published now for consultation. Thanks to many of you who raised important points at our well-timed and well-attended information and development session on housing, through the think tanks or through our group Executive members. Independent group colleagues on the LGA Executive and I promoted your key points in separate meetings and conversations with senior officers and with ministers. The white paper now out for consultation contains many of the things we sought and some of the worst proposals have been successfully excluded. Now the paper is out for consultation, there is more to do. Following two days of inclusive, high level discussion with members, a new LGA response is being compiled. If you would like to add further points, the document is on line.
We saw two political rumpuses this week, included the defeat of the government on a Brexit amendment in the House of Lords with the help of cross bench peers and the Surrey “sweetheart” deal.
Cross-bencher lords were part of the vote to give a sense of security to current European residents. Indeed, three of our LGA board members left the board meeting to take part in the vote, not all on the same side! The Surrey “sweetheart” deal allegedly obtained by Surrey has reverberated round Tory Council leaders. The LGA is fighting hard to bring forward funding that was ear-marked for the Better Care Fund in future years. We are also calling for it to be decoupled from the delayed transfers of care, in recognition that adult care is much wider. Indeed, more than 40% of the budget is spent on adults aged between 18-64, with 35% being spent on people with learning disabilities alone. We met the minister again this week and hope to make some progress in the budget.
As you know, we are due to have the other 50pc of business rates in Councils by April 2018. The LGA is working hard on it. (Ref below) If large business rate payers and hospitals are taken out as they are requesting, it clearly makes the pot for local government a lot smaller. Of the £13bn, the LGA has argued that £5.8bn is needed to plug the gap already faced by Councils and the remaining amount is needed as an incentive to support business growth.
Business Rate revaluations in England and Wales
Some businesses will see significant changes in their bills from April 1st. Revaluations are normally every five years, but the one for 1st April 2015 was postponed, now coming into force on the 1st April 2017. Where an authority loses out because of the revaluation, an adjustment will be made to the authority’s tariff or top-up level. In Wales, the Wales-wide pooling system means that the additional revenue will be redistributed on a needs basis.
The rateable value is normally the annual rental value of a business premise, in good condition on the open market on 1st April 2015. Businesses with a rateable value of under £12,000, get 100pc rate relief. Those above £15,000 pay full business rates, tapering in between. Each separate premise, even a parking space now must be treated separately. The business rate is the valuation x “multiplier”, around 46-50p.
Some properties like pubs and hotels are assessed on their “fair maintainable trade” related to their turnover. Some unique buildings are assessed on the cost of construction from scratch, paying a decapitation rate reduced in 2017 to between 2.1% in Wales to 4.4%/yr, lower for health, education and defence and slightly lower in Wales.
Solar panels under 50kW will be receiving business rate bills for the first time, and larger solar arrays will be getting bigger bills.
Effect of revaluations
The revaluations estimate around a 10% increase in England and 2% increase in Wales. However, the law requires that revaluation does not alter the national size of the pot, so the multiplier is used to bring the total back into line. However, in areas where the rental values have bigger increases in the five years up to April 2015, there may be substantial increases in their business rates. Transitional relief is offered that will dampen increases. However in England only, it is funded by damping reductions. Thus businesses in poorer areas may well find they are paying more than they should in order to subsidise businesses in richer areas such as London and the South-east.
It was different on the previous revaluation, when the government simply compensated local authorities, so that a cap of 15-25% increase could be applied.
The proposals suggest caps on the increase of 5% in year one for small businesses, rising to 15% by 2022. (See table ref below) If the relief is not enough, Councils could be asked to decide how to apply the £3.6bn transitional funds over 5 years.
We have seen that revaluations lead to many time-consuming appeals, particularly where rates bills are largest and it is more worthwhile a business delaying payment. The LGA has pressed for a slicker appeals system and changes are now in place for England, though we are still waiting for the final regulations. The existing rates bill must now be paid during the appeal and there is a charge of £150 for small businesses.
A Welsh Appeal goes to the Valuation Office Agency and then to the Valuation Tribunal for Wales. So how will it work in England? “Check” is the first step is simply responding on line to the estimate and expecting a ruling back in 3 months. Within four months the business can then “Challenge” providing evidence for a new proposed figure. The Valuation Office then issues a formal letter and the business has four months to “Appeal”. The Valuation Tribunal can only order a change if it is outside a range of “professional judgment”. That would mean a business could remain paying up to 20% over the odds even after appeal.
The greater the gap in wealth across each country, the greater the variation in winners and losers. There is considerable press interest in live examples of the impact of revaluation changes on small businesses and jobs. Please let us know if you have some striking examples in your area, to help make the best case we can for our councils and our residents.
Marianne Overton MBE