Brent Council leader: 'Business rates change could leave us with a £150m blackhole'
PUBLISHED: 06:45 08 October 2015
The government's surprise announcement that local authorities can keep business rates could 'crucify' vital services and lead to council tax rises in Brent, it has been claimed.
On Monday, Chancellor George Osborne announced the plans to let councils keep local business taxes but Cllr Muhammed Butt, leader of Brent Council, has issued a warning to residents that the new scheme could result in the creation of a £150million “black hole,” leading to more cuts in the borough.
He said: “People are making the assumption that we’ll have more control over our business rates and power will be devolved to us but actually they’re just abdicating responsibility for councils like ours.
“We are going to be crucified in Brent if we lose a £50m top-up from the government. It goes into funding everything, all the services. It all boils down to the detail. We need to know where that money’s coming from and at the moment we have no idea.
“If the funding goes then we’re looking at a £150m black hole over the next four years if you add it to the cuts we’ve already made.”
Brent Council currently keeps £38m per year of local businesses rates after giving 50 per cent to the government and receives £50m back in top-up funds in the form of a grant aimed at the poorest local authorities.
Under the new rules, Brent will be able to keep all of its business rate income but faces having its lifeline top-up grant cut by 2020.
The council will not be able to increase business rates, meaning savings will have to be made from a greater council tax burden or cuts to services.
Cllr Butt explained: “I have always been honest about the fact that there’s a discussion every year about council tax. It’s capped at the moment but it could be a risk factor we’d have to consider.”
Adding that the plans could widen the gap between wealthy local authority areas and poorer ones reliant on subsidies, he said: “Brent generates £100m per annum from mostly small and medium sized business, whereas Westminster collects £1.8 billion. It’s absolutely horrendous. We will never be able to compete. We need to know where our money is coming from so we can plan for budgets.”
Mr Osborne assured councils that funds would be fairly redistributed to support the poorest local authorities, but the Treasury department has yet to confirm details of the plans.
John Longworth, director general of the British Chambers of Commerce, said: “It is highly questionable for the Chancellor to announce major changes to business rates without consulting broadly with the business communities that pay them.
“The detail of the Chancellor’s plan is critically important. Businesses will want assurances that greater local control over business rates does not translate to them becoming a milch cow for local government.”