Members considered a report providing an update on the introduction of the Business Rates Retention Scheme due to be implemented from 2013/14.

The Portfolio Holder for Finance and Value for Money introduced the report and highlighted that from next year, Business Rates Retention would be the Council’s largest funding stream from Central Government replacing the current Formula Grant.  This would represent one of the most significant changes made to local authority funding in recent years.  The exact details of the funding methodology were still being finalised and it was unlikely that provisional funding figures for the first two years would be received until December.

The Group Manager, Financial Services, explained that currently all businesses paid business rates to their local authority, this was then passed onto Government who redistributed it back to local authorities via a formula.  Members heard that the system did not encourage local authorities to increase new business. 

The new scheme aimed to reward local authorities for business growth but only to a certain degree.

The change to Business Rates Retention would affect this Council in two stages.

• Initial funding levels
• Future funding levels that will be affected by business growth or reduction.

Stage One - Initial funding levels

The initial settlement would be based on a 5 year average Business Rate (07/08-11/12) amount but there would then be adjustments to ensure that the change did not have any real effect on the level of funding distributed to each authority.

This “baseline” figure for SDC and all billing authorities would be less than the actual amount of Business Rates collected, therefore a ‘tariff’ would be applied to remove the excess Business Rates.  Non billing authorities would receive a ‘top up’ from this amount.

Stage Two – future funding levels

Local authorities would keep 50% of the additional Business Rates they generated (split SDC 40%, others 10%).  However, the scheme would include a ‘levy’ on authorities who had significant growth which would be used as the ‘safety net’ for local authorities who had reduced Business Rates.

As a result of this, it was very difficult to accurately predict the level of funding that the Council would receive from this new scheme.

The Deputy Chief Executive and Director of Corporate Resources explained that the situation in Sevenoaks was made worse as a result of changes that were taking place within the District.  These changes would mean that the Council would be starting with a baseline figure that would diminish, creating a gap that would need additional funding. 

Members agreed that there were a number of authorities in the same position as SDC and that the situation would have to be kept under review.

Resolved: that the report be noted.