EAST Hampshire District Council (EHDC) has given a “cautious welcome” to George Osborne’s plans for a “devolution revolution” in local government.
The announcement, made at last week’s Conservative Party Conference, promised to let councils retain millions of pounds in business rates instead of handing them over to central government.
Chancellor of the Exchequer Mr Osborne described the plans as “the biggest transfer of power to our local government in living memory”.
He said the changes will fix “the current broken system” of financing councils.
“We are going to allow local government to keep the rates they collect from business,” said Mr Osborne. “That’s right, all £26bn of business rates will be kept by councils instead of being sent up to Whitehall.”
This would mean that “money raised locally will be spent locally” with every council able to cut business taxes to attract more trade to an area.
Last month, district leader Ferris Cowper announced that the council had decided to support the Hampshire and Isle of Wight devolution bid.
He said that while EHDC remains supportive of the scheme, the exact benefits to residents and businesses within the district were still “unclear”.
This week, Mr Cowper commented on the possible benefits of Mr Osborne’s reforms.
“The headline proposal that local councils can retain 100 per cent of business rates has to be set in the context of a 100 per cent sacrifice of all central government grants,” he said. “If true, in the case of EHDC, there could be a small surplus but the gains match the losses almost pound for pound.
“However, the national press reported that the ‘tariff’, which is a further payment to the government on top of the 50 per cent widely reported, will stay in place. If correct, then EHDC and all district and borough councils in Hampshire will be out of pocket by a very large sum and of course we would reject that proposal.”
The chancellor also announced that business rates could not be increased by local councils unless they chose to have an elected mayor.
“Local businesses will be pleased to note that the full council of EHDC was completely opposed to having an elected mayor for Hampshire and the Isle of Wight,” added Mr Cowper. “However, as the value of retained business rates closely matches the loss of grants and may even leave councils worse off, the chancellor’s observation that local councils would be able to cut rates where appropriate would have a very limited effect at best.”
In a statemen,t EHDC explained that to be part of this “devolution revolution”, local councils are required to agree to an “acceleration” of the planned housing delivery programme and, in the case of Hampshire and the Isle of Wight, an additional housing programme of 500 dwellings per year spread across the whole of the county. At this stage, EHDC said it visualises “no material change” in its existing forecast.
The reforms will see local government retaining all revenue from business rates for the first time in decades as, since 1990, rates have been set uniformly by Whitehall.
This is currently collected locally but then transferred to central government to be distributed back to local areas in the form of grants.
Since 2013, councils have been able to retain 50 per cent of the proceeds of rates so that, according to the Conservatives, when local areas take steps to boost business growth in their community, they “see the benefit”.
But the Treasury said the latest reforms go much further, moving to 100 per cent retention of the full stock of business rates by 2020.
The promised benefits include “more infrastructure”, “a boost for business and employment” and more “localised management and integration of aspects of healthcare”.
However, EHDC said it already has all of these programmes under way in the flagship regeneration town of Whitehill and Bordon and its hope is that the promised revolution will enable it to “extend those benefits” to the rest of the East Hampshire community.
Mr Cowper concluded: “The devolution revolution is definitely not a cash bonanza for the council but there are suggestions that there could be benefits when the details are fleshed out. Until then we remain in the bidding process with cautious optimism.”