The likely impact of rates localisation on future local authority funding is finally beginning to sink in as town halls across the country consider the raw financial impact of self determination.

Having initially rubbed their hands with glee at the thought of wresting control of funding from central government, many are now running scared. And well they might. 

The government is pressing ahead with a form of rates localisation which removes the predictability of today’s system of centralised, equalised funding. In its place, a system of localised business rates will allow successful local authorities to maintain local control over an as yet undefined portion of the increase in rates revenues collected from successful, growing, local businesses.

Concerns that proposals are overly complex

Local authority representatives and the London council’s body, which represents London’s 33 local authorities, have expressed concerns that the government’s localisation proposals are overly complex and probably unworkable in their current form.

In his inimitable style, Eric Pickles, Secretary of State for Local Government recently dismissed opponents of the proposals as “grumblers”. This is hardly the tone expected from a Minister overseeing such a major change in the way businesses will be taxed and councils funded. UK plc’s anti-localisation stance has been made clear for some time.

Now, as the likelihood of regional funding disparity looms, many local authorities are openly expressing doubt.

UK businesses face unpredictability

At the sharp end, UK businesses must wait and wonder. It appears inevitable that the localisation policy’s inherent lack of regional parity will translate into intolerable unpredictability for business. Before local authorities yield to the temptation to bridge any funding gap by increasing local business taxes, as they surely will, it is important that the government has already specified exactly how it intends to protect businesses from such cynical moves.

There continues to be a nagging concern for business ratepayers, owners and developers that any potential rate liability will not be transparent and could be complicated by the different political ambitions of neighbouring boroughs.