Lancashire could be £7.1m richer under a Government pilot scheme to keep a greater share of business rates wealth within the county.
Currently 50 per cent of the fees levied on spaces used by local businesses is kept within regional authorities and services while the remaining is sent back to central administration.
But now, Preston City Council (PCC) has joined a county-wide pool - the 75 per cent Business Rates Retention Pilot Pool - which will allow Lancashire to hold back an extra 25 per cent of the growth from the tax on businesses to invest into projects here.
Preston City Council coun Martyn Rawlinson said: “This year it looks like we are in a growth position.
“At the moment we get 50 per cent of the whole growth. If we go into this pool we will get an extra 25 per cent of the growth back.
“It’s a bit of a gamble to go into the pool but it’s a calculated risk.
“The benefit could amount to several hundred thousand pounds for Preston.
“It’s difficult to say at this point what it will be spent on but there’s every chance that some of the money will be spent on economic growth in Preston.
“That’s the whole point of the pool - to try and get more money from the government pot to try and spent more money in Lancashire, it’s worth the risk.”
Lancashire County Council, 14 district councils and the unitary authorities in Blackpool and Blackburn with Darwen have jointly bid for a pilot scheme to retain 75 percent of the revenue generated by the tax.
Asked what the money will be spent on, Coun Rawlinson said: “It will be spent on projects.
“Each district is going to want projects that will benefit them.
“The government wants us to work together on the economy.
“It will benefit the whole county overall.”
Lancashire County Council leader Geoff Driver added: “This bid, if successful, could see [more money] become available from the Government to be spent on priority issues in the county.”
Modelling shows that if a 75 per cent Business Rates Retention scheme is brought into play in Lancashire, based on 2018/19 figures, there was in the region of £10.8m of predicted growth that could be retained by the region for an investment fund or to promote financial sustainability. However without Lancaster City Council in the pool - the only council in the region not to sign up to the new arrangements - the extra growth forecast reduces to just under £7.1m.
Bosses at the authority say that because of the power stations within its area there is a potential for high-value appeals on business rates and loss of income from unplanned outages.
Laying out its reasoning behind joining the pool, council documents state: “While the 2018/19 Business Rate estimates reflected a negative growth position for Preston, the latest information as at August 2018 suggests this position has moved above baseline position.
“Additional business rates for 2019/20 are projected which is estimated to take the council into a growth position which will mean it is financially beneficial to join the 75 per cent Business Rates Retention Pilot pool.”
However there is also a risk involved in joining the pilot. In joining the pool PCC would be giving up its right to its individual safety net protection from central government.
The document continues: “If the council is below the baseline funding level there will be no individual 92.5 per cent safety net.
“This means that if business rates income falls below baseline by approximately £450K, if outside the pool the council would receive a safety net of approximately £50K.
“However if in the pool this cost will fall upon the council’s revenue budget.”
In order to ease the risks involved with joining the pool members are putting some safety measures in place.
The first five per cent of any additional growth will be used to create a new reserve to mitigate against any extra loss which may come out of being a pilot member. Additionally, if funds are remaining this will be used to further compensate individual councils facing a loss.
Preston City Council is joining the pool for the year of 2019/20, as of next year’s financial year which starts in April.