THE LEADER of the county council lobbied MPs yesterday (Monday) for clarity over a reform that could increase Essex’s tax receipts by £300m.

Councillor David Finch was invited to give evidence to the CLG Select Committee where he probed plans to let all local councils keep 75 per cent of business rates from 2020/21.

When central Government funding to local authorities ceases, this could move to 100 per cent retention.

In Essex, £625 million of rates are currently collected and £304 million is spent locally, with the rest going back to the Treasury.

“Keeping business rates would give us the financial stability we need to realise our strategic ambitions for Essex and drive prosperity for all,” said Cllr Finch.

“But there are still too many unanswered questions to enable us to plan effectively for our future.

“We have not built 100 per cent retention into our financial projections because we don’t have enough information, such as how much we could get, how the money will be distributed and what responsibilities will be devolved to us from Whitehall.”

When central government grant funding comes to an end in 2020/21, the Council estimates it will have a funding gap of £94 million.

Cllr Finch added: “We simply don’t have enough money and we need the Government to trust and empower us by letting us keep 100 per cent of our business rates, with no strings attached.”

If the council, along with Southend Borough Council, district, borough and city councils, had been chosen to become a 100 per cent retention pilot area, local councils would have received £38 million of extra funding, including £8 million for Essex County Council.

Cllr Finch said: “The loss of this funding is significant. It could have provided 550,000 care hours or fixed 16,000 defects on our highways network.

“It is unclear if the 75 per cent scheme even helps. The additional 25 per cent comes with a series of commitments, such as business rates being used to fund items like public health, which is currently funded by a separate grant.

“So we will lose the specific grant but maintain the requirement to deliver the service. The majority of funding under the 75 per cent scheme is therefore merely a transfer of funding streams, it does not provide any additional money.

“We need greater clarity as a matter of urgency so we can plan safely for the future.

“It must be recognised that local government services cannot be switched off overnight, so the sooner we have clarity on this issue, the better.”

While 100 per cent council tax retention is popular in comparatively rich counties, such as Essex, it is likely to pinch the purse strings of poorer authorities which previously received part of the pooled tax via grants. 

A 2016 Parlimentary Paper outlining the potential problems with the plan reads: "Under 100 per cent retention, divergence in business rate revenue between authorities could be substantial.

"Mechanisms to reduce this divergence, such as top ups and tariffs, the safety net or similar measures, will be even more necessary and significant and be needed to ensure the delivery of key public services."