Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 9
9
Accepted
Paragraph: 62
Business rates system is outdated, complex, misaligned, disproportionately impacting deprived local authorities.
Conclusion
The business rates system is overly complex, outdated and in urgent need of reform. The baselines used in the business rates retention scheme are over 10 years out of date and their continued use is causing a significant misalignment between the level of funding distributed to local authorities and those authorities’ spending needs. There is a disproportionately negative impact on those authorities in the most deprived parts of the country. The Government committed to a Fair Funding Review for local government in 2016 but is still to deliver on this commitment and it is not clear to us that it will do so.
Government Response Summary
The government states it completed a review in 2021 and passed the Non-Domestic Rating Act 2023. It will not reset the business rates retention system before 2025-26, but agrees to consider further improvements in the next Parliament.
Paragraph Reference:
62
Government Response
Accepted
HM Government
Accepted
12. Following a manifesto commitment, the Government completed a review of the business rates system in 2021. Parliament subsequently passed the Non-Domestic Rating Act 2023 to give effect to the review’s conclusions, including measures to improve the responsiveness of the tax to changes in economic conditions. 13. Following calls from the sector for stability in this Parliament, the reset of the business rates retention system will not happen before 2025-26. The Government agrees to consider further improvements in the area and remains committed to improving the local government finance landscape in the next Parliament.