What Lancashire's business rates deal means for the county - and why one council declined to sign up

Lancaster City Council has said the power stations in its area were the reason it chose not to take part in a Lancashire-wide scheme which could see the county keep more of the money it collects in business rates.

By The Newsroom
Friday, 5th October 2018, 7:07 pm
Updated Friday, 5th October 2018, 7:13 pm
Lancaster Town Hall (photo courtesy of Dan Tierney)
Lancaster Town Hall (photo courtesy of Dan Tierney)

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. Currently, Lancashire’s local authorities keep half of the business rates they collect, while the government redistributes the remainder across the country.

WATCH & READ >>> County leader says local government finance has been "allowed to get into a bit of a mess"But Lancaster last week became the only council in the region not to sign up to the new arrangements, which will come into force in April 2019.

The scheme requires all of the county’s authority’s to pool their rates – but Lancaster says that being home to the Heysham nuclear power stations meant that it was at risk of losing out.

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“The reason Lancaster is not in the pilot is because of our particular circumstances in terms of our business rate income risk,” Cllr Anne Whitehead, cabinet member for finance, explained.

“This specifically relates to the power stations [in the area] and the potential for high-value appeals and loss of income from unplanned outages. In simple terms, under the proposed pooling arrangement, the majority of any significant income losses – should they occur – would be borne in the main by Lancaster, which would not be financially viable.”

The government has removed a so-called “no detriment” clause for next year’s pilot, ending a guarantee that councils would be no worse off than under their previous arrangements.

Lancashire has instead designed its own scheme, which allocates 5 percent of the pooled money to cover potential losses from successful appeals by businesses for rate rebates.

Lancaster’s decision means it will instead still be covered by the government’s previous guarantee – but will continue to retain only half of the rates collected in its area. The 75 percent scheme is expected to be rolled out across the country in 2020 following next year’s pilot scheme.

It is expected that the Lancashire pilot would result in an extra £10.8m being kept by councils in the county. Ribble Valley Council leader, Ken Hind, whose district co-ordinated the bid, described it as “a triumph of co-operation”.

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. The county council and our partner local authorities, who have all worked together in a spirit of co-operation over this bid, are hopeful that it will be successful.”

If the scheme is given the go-ahead by government, the money will be divided into three pots – £540,000 to cover potential appeals and losses, £2.5m for sustainability and growth projects and the remaining £7.8m split across the county’s councils.

The districts would share 56 percent of the third tranche, with the county council receiving 17.5 percent, the standalone councils in Blackpool and Blackburn getting 25 percent and the Lancashire Fire and Rescue Service in line for 1.5 percent.