Cllr Steve Count is Leader of Cambridgeshire County Council

Cambridgeshire and Peterborough are important drivers to the UK economy and one of the fastest growing areas in the country. While growth is good in terms of jobs and economic success the careful management of this is vital as it brings tremendous pressures on services, infrastructure and budgets.

We thought it fair that local communities who face the challenges of this growth should also benefit from it, rather than the Business Rates generated by it going all to Treasury. Indeed we are also in the best position to say locally where this money should be spent to manage growth and support our existing communities.

That is why we were pleased, following discussions with Treasury, the Cambridgeshire Local Authorities and Peterborough were offered the opportunity to run an innovative business rate pilot scheme in the 2015 Budget. This represented a move forward in terms of devolution for the area, although we were disappointed that this did not go further. It is encouraging us to push for even greater freedoms, which will enable us to support our economy and deliver better outcomes for local people.

The pilot represented an important step in the devolution journey for Cambridgeshire and Peterborough, following our large-scale Greater Cambridge City Deal and our longer term ambition for greater fiscal freedoms and further devolution from Westminster. In our discussions we were able to convince Government that the combined growth potential of the City economies of Greater Cambridge and Peterborough, and the wider Cambridgeshire area, would yield major national benefits if they were supported enough locally.

The aim of the pilot scheme is to incentivise activity to support economic growth through increased local retention of business rates. It allows the authorities involved to retain 100 per cent of “additional growth” in business rates in their area and stands alone from the existing business rates scheme. “Additional growth” is measured against existing business rate forecasts. The pilot will be reviewed after three years with a view to potentially rolling this out nationally. While an extremely welcome development, the scheme does fall short of 100% retention of all business rates which the area wanted. Any additional retention is only on growth over that already forecast and therefore marginal and does not include the 50% of existing rates collected by Local Authorities but diverted to central government.

While we can’t know for sure what parameters the Government would set for a 100 per cent system, which is one of our requests in our devolution offer, if we assume a simple doubling-up of the current system with a resultant cut in Government’s Revenue Support Grant, then a growing business rates environment would ensure the additional rate income would exceed the loss in Government grant.

According to our rough modelling over the three years of the pilot 100 per cent retention could generate just under £14 Million shared amongst all of the authorities more than the arrangements for the current pilot, yielding a total of approximately £406 Million rather than the projected £392 million.

Of course, such a scheme would not be without risks. Our Local Authorities would be more reliant on the volatility of the business rates system and would not receive additional income should additional growth in the area not occur. However, we are ready and willing to take on this level of responsibility that devolution entails. There should not be a need for areas to pay in locally-raised funds only to receive the same amount back from Central Government. 100 per cent retention would address this anomaly.

This should, however, only be a first step. This Government have demonstrated that they are serious about offering real devolution to local areas that can demonstrate they are able to deliver better local outcomes but further progress needs to be made.

For growth areas like Cambridgeshire and Peterborough this should include further fiscal devolution (including local taxation, fiscal instruments and incentives, devolution of national budgets and longer-term funding). This is so that we can invest in the infrastructure and skills of local people to support growth and provide the services to ensure our residents have the best possible quality of life. We are making this case strongly to Government for our area and hope other localities will also be able to benefit from further devolution in the coming months.

Leave a Reply

You must be logged in to post a comment.