Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 45
45
Accepted in Part
Design business rates system to incentivise councils to encourage local economic growth.
Recommendation
The business rates system, or any alternative tax system for business property, must be designed to incentivise councils to encourage growth in their areas. We are concerned that any full, cliff-edge reset of business rates will reduce this incentive by withdrawing the benefits of growth. (Conclusion, Paragraph 169)
Government Response Summary
The government acknowledges concerns about cliff-edges, stating it will design transitional arrangements for the 2026 reset and will not reset the system again during the current multi-year settlement. It defers the timing and design of the next reset to a later period, allowing for consideration of phased resets.
Government Response
Accepted in Part
HM Government
Accepted in Part
The Government acknowledges concerns around potential ‘cliff edges’ around resets. For the reset in 2026, to minimise the risk of these cliff edges, the Government intends to consider the impact of the reset within the design of transitional arrangements. We have invited views in the consultation on a package of transitional arrangements that enable local authorities to plan for these changes. To provide certainty to the sector and continue to reward local authorities for business rate growth, the Government proposes that, following the reset in 2026–27, the Business Rates Retention System will not be reset again within the remaining years of multi-year Settlement. Government will confirm the timing and design of the next reset by the end of the next multi-year Settlement period. Whilst we understand the interest in the sector around the details of the next reset being proposed as soon as possible, taking further time will allow reset periods and the design of future resets – including the potential delivery of a phased reset - to be considered alongside the delivery of the first Reset, wider improvements to the Business Rate Retention System and the Government’s commitment to transforming Business Rates.