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Budget 2016: rates retention alone not enough to successfully fund devolution, says expert


Allowing local authorities in England to retain all business rates collected in their areas will not on its own be enough to fund the chancellor's 'devolution revolution', an expert has said.

Nick Ogden of Pinsent Masons, the law firm behind Out-Law.com, said that devolved areas would have to work together to develop "commercially focused funding frameworks" linking local areas in order to successfully attract investment. The need for such frameworks was now even more acute given changes to business rates relief announced as part of the 2016 Budget, which the chancellor has claimed will reduce or abolish business rates for "half of all British properties".

"Attracting investment is critical," said Ogden, who is an infrastructure expert at Pinsent Masons.

"At this point, local authorities don't have the mechanisms or control to foster investment effectively. Relinquishment of fiscal powers will be a game changer and could prompt a new, commercial approach to local authority fundraising. Government must go further and create a framework which allows councils to group together to launch region-wide funds which present a compelling and diverse investment opportunity with the lure of significant return on investment," he said.

The chancellor used his 2016 Budget speech to announce ongoing negotiations on new 'City Deals' for Edinburgh and Swansea, as well as "major further advances in the devolution of power within England". A new East Anglia combined authority, West of England mayoral authority and the Greater Lincolnshire region are all to elect mayors with powers devolved from central government, following the lead of the cities of the north of England which are due to do the same next year, according to the speech.

The Greater London Authority will be able to fully retain all business rates collected locally from April 2017, three years ahead of schedule; while the Greater Manchester Combined Authority is to be given new criminal justice powers which will enable it to "offer seamless interventions for offenders as they transition between prisons and the community, and to join up public services to tackle the causes of crime and prevent reoffending", according to the Budget document.

Local authorities in England have been able to keep 50% of the business rates that they generate to reinvest in their own communities since 2013. This is due to increase to 100% by 2020, to correspond with the devolution of more powers to vary business rates and reliefs to local areas.

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