The North of Tyne area is one of 15 across England selected for a pilot scheme to see how greater retention of rates could encourage local growth, announced as part of the draft local government finance settlement for 2019-20.
Currently, local authorities retain 50 per cent of business-rates growth, but as part of the trial, participating councils will keep 75 per cent, following calls for them to have greater control over money raised locally.
The pilots will run from April 2019 to April 2020 with findings informing the Government’s plans to permanently increase business-rates retention across England.
Communities Secretary James Brokenshire said: “We are taking action to build a fairer, more self-sufficient and resilient future for local government.
“I’m pleased to announce a new series of 75 per cent business-rates retention pilots across England, including in North of Tyne, to help run local services.
“These pilots lay the foundation of our ambition to roll out 75 per cent business rates retention across the country from 2020, so every council will have greater financial freedom to invest where they have the greatest need.”
Addressing Parliament earlier today, Mr Brokenshire said that the draft settlement confirms that councils’ core spending power ‘is forecast to increase from Â£45.1billion this year to Â£46.4billion in 2019-20, a cash-increase of 2.8 per cent and a real-terms increase in resources available to local authorities’.
He added: “This is a complex issue and we’re working with local authorities – to ensure we get this right.
“And we’ve taken this approach across the board – listening carefully to what councils of all shapes and sizes, across the country, are telling us and responding.
“As a result, I can confirm that I will increase the Rural Services Delivery Grant by Â£16million in 2019-20 to maintain this at last year’s level. This recognises extra costs of providing services in those communities.”
Later in the debate, Northumberland MP Anne-Marie Trevelyan asked for confirmation that this meant the county was going to benefit.
The Conservative MP for the Berwick constituency asked: “Could the Secretary of State confirm that my constituents in Northumberland will benefit from the increases in the Rural Services Delivery Grant, which is a most welcome recognition of the rurality challenges our public services have to solve across my vast and very sparsely populated constituency?”
Mr Brokenshire replied that the Government does ‘acknowledge some of the real pressures within rural areas and some of the additional costs that come through from that’.
He highlighted that as well as the rural services grant, that Northumberland is also benefiting from the business-rates retention pilot, ‘which I’m sure will be of assistance too’.
Addressing the provisional settlement, Lord Porter, chairman of the Local Government Association (LGA), said: “The recent Budget showed the Government is listening to the LGA’s call for desperately-needed investment in our under-pressure local services, such as roads and social care.
“We are also pleased that the Government has decided not to increase the New Homes Bonus threshold further next year which makes up a considerable part of funding for some councils, particularly shire district authorities, and provided some extra funding for rural authorities.
“Next year will continue to be hugely challenging for all councils, who still face an overall funding gap of Â£3.2billion in 2019/20. It is therefore disappointing that the Government has not used the settlement to provide further desperately-needed resources for councils next year.”
He added: “It is vital that the Government uses the final settlement next month to provide the further resources needed to protect our local services in 2019-20 before ensuring next year’s Spending Review delivers a truly sustainable funding settlement for local government.”