Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 47
47
Deferred
Implement a phased business rates reset to prevent cliff-edges for local authorities.
Recommendation
Pending a fuller reform of the business rates system, business rates resets must avoid cliff-edges for local authorities by means of a phased reset, by which growth is reset to a fixed prior period, say seven years before the date of the reset. This would eliminate hard resets, allow authorities to benefit from accumulated growth for a known length of time, encourage investment, and reduce funding uncertainty. (Recommendation, Paragraph 171)
Government Response Summary
The government acknowledges concerns about cliff-edges and will consider transitional arrangements for the 2026 reset, but defers a decision on a phased reset mechanism, stating it will confirm the timing and design of the next reset by the end of the next multi-year settlement period.
Government Response
Deferred
HM Government
Deferred
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.