This article poses some interesting challenges to the purpose of the Business Rate Pilot which netted the participants a total of £873m extra funding- a not insubstantial sum.
There are a number of major themes that need to be explored in context of this pilot.
Firstly it seemed to be an exercise in both self selection and a demonstration that potentially warring factions could cut a deal. There is no evidence that I have seen which suggests the pilot rewarded specific councils that are growth boosting exemplars or penalised those with a sluggish approach. It seems to be a reward for writing a nice submission and agreeing to cut the cake nicely without fighting.
Secondly, the pilot has no correlation whatsoever with local authority need either in general or within pilot areas. This matters because spending on demand led services has nothing to do with business rates growth potential.
Thirdly there is a much broader question about business rates as a system to support local government finance. Business rates growth will always cluster around cities for the very simple reason that its about buildings and buildings from which businesses operate tend to cluster in cities to facilitate interconnectedness. Business rates is also a 20th century tax trying to address 21st century problems. Internet companies don't pay business rates in the same way as a supermarket and therefore are not contributing to local services in the same way.
In a 100% retention world, businesses are paying for up to 70% of all local services - is it fair that Aldi are paying a sizeable contribution to local services and Amazon aren't.
None of this should detract from the excellent work that councils both in the pilot and outside of it, to encourage business growth, albeit one whereby most of the businesses they encourage are subsequently burdened by this clunky and regressive tax. Wouldn't it be better for local authority services to be funded based on demand and need and for businesses to be encouraged with tax breaks and as they grow be required to plough profits back into the local community? Just a thought.
Areas involved in 100% business rates retention pilots could collectively gain an extra £873m funding in 2018–19 although some councils could have been better off had that money been redistributed nationally instead, research by the Institute for Fiscal Studies has found. The biggest beneficiaries are set to be London boroughs, including the Greater London Authority, which will collectively benefit by an extra £431m, followed by those involved in the Berkshire pool (£53m). The single area that stands to gain the least, according to IFS analysis, is Bury MBC (£1.5m) but that forms part of the Greater Manchester pilot which is set to collectively gain an extra £51.6m.