Monday, 19 December 2011 12:28

Government to review rural formula

Written by  Ruralcity Media
Government to review rural formula

THE government is to review the formula that helps decide how much money local authorities receive to provide rural services.

The pledge is contained in the government's response to a consultation on proposals enabling councils to keep a share of business rates they collect rather than paying them to Whitehall.

Published on Monday (19 December), the response will be seen as a boost for rural local authorities who have long campaigned for a fairer funding deal from central government.

The full document can be downloaded here.

It says the government will consider limited technical adjustments to the relative need formulae used to determine funding for rural services and concessionary travel.

Councils would be freed to generate greater levels of income, encouraged to support local firms and jobs and be well placed to reap the rewards of success, said Mr Pickles.

Ministers were committed to letting councils benefit from business rates growth in their areas and borrow against future rate income, he added.

They saw this as the means to putting all parts of the country on a surer path to economic growth.

Last year, some £19 billion in business rates collected by councils was recovered by government and redistributed back out through a complex grant.

Ministers believe the new business rates system will be more transparent and will increase the amount of revenue local authorities generate from business rates.

To establish baseline funding levels, existing datasets will be updated and limited technical adjustments considered to the relative need formulae for the cost of rural services.

But the government is not proposing to change the way that business rates bills are calculated, the way that properties are valued or the way business rates levels are set.

Mr Pickles said: "We need to restore the country to strong sustainable growth and local government has a key part to play in this.

"For too long councils have been hamstrung and discouraged by a system that failed to encourage and reward economic success.

Growth in business rates meant more money to invest in local services, said Mr Pickles.

"Our reforms are fair and sustainable. They will deliver long term certainty and protection for those areas in need of additional support."

Councils with business rates in excess of a set baseline would pay a tariff to the government while those below would receive an individually assessed top up from government.

This would ensure that all councils would start from a level playing field, said Mr Pickles. How far they then progressed beyond that would be entirely down to them.

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