City could miss out on PS27m due to new business rates rules.
COVENTRY looks set to lose out on PS27million under new business rates rules set to come in under the West Midlands Combined Authority.
Plans for the WMCA - commonly referred to as 'Greater Birmingham' - include the region keeping all business rates collected in the area rather than the 50 per cent local councils currently retain with the rest going to central government.
Councils then see their income topped up by needs assessed grants from Westminster.
A report to Coventry council's scrutiny committee suggests annual business rates retained by the city will increase from PS67million to PS137million when the rules come into force in 2020. But the forecast also indicates that the predicted withdrawal of government support grants will result in a total shortfall of PS27million from today's income.
The figures in the report are set to be discussed by the scrutiny panel on September 7 and will be used by the council and the WMCA to lobby the government to help address the probable shortfall.
One method of increasing revenues could be to get the government to change the rules around student accommodation which currently mean large scale operators currently pay no business rates or council tax.
What is the current situation? Coventry receives a total of PS296million. Roughly PS132million in council tax, PS67million in business rates and PS97million from central government.
What is the forecast outcome of the changes? By 2020 the council predicts a drop in income from this area of PS27million.
Council tax income would remain at PS132million while business rates revenue would rocket to PS137million.
But PS97million of government funding is likely to evaporate meaning a PS27million hole in the council coffers.
Could the new system benefit Coventry? If the government grants are retained on top of the new business rates income - there would be an increase of PS44million in revenue, but the report makes clear this is not the likely outcome with government grants likely to disappear.
Under the WMCA business rates are set to be collected across the West Midlands and distributed regionally under the new system, meaning money collected in Birmingham could actually be spent in Coventry - or vice-versa.
How this will all play out is still to be agreed, although Coventry appears to advocate a 'needs-based' allocation system.
How could the shortfall be met? The council report looks at student accommodation in the city and the affect that has on the city's income.
It highlights that even large privately-operated private student accommodation buildings do not pay business rates and instead fall under council tax rules.
Student-occupied buildings also do not pay council tax and, according to the report, these exemptions equate to approximately 3,800 properties in the city, reducing the level of council tax revenue by around PS3.2million.
This seems to indicate that one solution the WMCA could push for to bolster the city's coffers would be to make large-scale student accommodation providers liable for business rates or council tax.
Do the universities pay business rates? Yes - although the council report shows that the city's two universities also receive an 80 per cent discount on their business rates bills due to their charitable statuses.
That means their bill of about PS6.7million amounts to roughly PS1.4million after the reduction.
But the report suggests that Coventry is not disproportionately affected by this business rates reduction with charitable discounts knocking 9.6 per cent of business rates nationally compared to an 8.8 per cent reduction of business rates income in Coventry.
What do the council say about the changes? Labour Coun Jim O'Boyle, Coventry council's cabinet member for business, said the government was trying to dress up a bad deal as a good one.
He said: "I'm not sure how we're going to make up the shortfall. The government have been warned about this time and time again.
"We need to continue to lobby government locally and through the local authority."
He added: "They know damn well we're getting a worse deal. It's a disgraceful piece of chicanery designed to undermine local authorities. It's completely and utterly political."
What do the council say about targeting student accommodation? Coun O'Boyle said: "I will be interested to see what scrutiny board recommend. I'm happy to look at anything along those lines."
He added: "But we also need to ensure there is a mixed economy - particularly in the city centre. I'm having several exciting conversations with potential partners in areas other than student accommodation.
"But, looking at the news about Jaguar Land Rover, that has to be the answer. What's important is to generate jobs, the economy and wealth in and around the city. That, by definition, will bring more interest and growth to the economy."
Should business rates be increased? A West Midlands mayor is likely to have the power to increase business rates, but Coun O'Boyle said such a move would need careful consideration. He said: "The last thing businesses would want is to effectively be taxed twice. The overall purpose of the combined authority is to attract inward investment. If taxation undermines that, what would be the point?"
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|Publication:||Coventry Evening Telegraph (England)|
|Date:||Sep 7, 2016|
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