Council finance departments up and down the country have been forced to take a fresh look at their financial plans for the coming year after the government issued a correction to the top-ups and tariffs used for business rates.
The changes are expected to impact financial settlement outcomes for many councils first published in December.
Chief financial officers were emailed Thursday by the Ministry of Housing, Communities and Local Government (MHCLG) to say that new data on rateable values published by the Valuation Office Agency on the same day had prompted a recalculation of top-ups and tariffs.
The VOA’s own website said an “improved methodology” to identify rateable properties has now been used after data was published in October. The VOA later conceded in a statement that there had been a fault in the original data collection.
Finance directors told Room151 they were assessing the effect on their budgets, though it was unclear as yet what the impact might be on individual councils.
Lord Porter, chairman of the Local Government Association Chairman, said the VOA’s “error” had added to the financial challenge facing council budgets for 2018-19 and called on the Treasury to use its share of business rates to ensure local authorities receive no less than they had planned for after the initial settlement published in December.
“Of course, none of this changes the fact that councils face a £5.8bn funding gap by 2020 and the government needs to use the final settlement to provide new funding for all councils over the next few years so they can protect vital local services from further cutbacks.”
Andrew Burns, president of CIPFA, said: “Late notification will always cause difficulties for financial planning.”
Cllr Claire Kober, chair of London Councils, called for the VOA’s work to be restructured.
“We welcome the clarification of these statistics, but are concerned about the lateness of the revision, given how close councils are to setting their budgets,” she said. “The distribution of millions of pounds of public money depends on correct information from the VOA: the importance of this will only increase as the sector moves to 75% business rates retention from 2020-21.
“This error strengthens the case for the VOA’s work to be devolved to a local level to provide greater local accountability over its performance, give businesses greater certainty and confidence about their business rates bills and add more stability to funding for local services.”
The email from MHCLG, said: “I am writing to alert you to the fact that, as a consequence of the revised data published by the VOA today, we will be amending the tariffs and top-ups published in the provisional Local Government Finance Settlement. The amended tariffs and top-ups will be included as part of the final settlement.
“I appreciate that this will be unwelcome news, but we feel that we have little option but to calculate the revisions to tariffs and top-ups on the basis of correct data.”
The VOA was expected to publish a new “calculator” for top-ups and tariffs on Thursday.
A Valuation Office Agency spokesperson said: “A fault in the process used to extract data from our systems has resulted in an error in our NDR statistics, published in October 2017.
“The stats publication issued today corrects that. There is no question around the accuracy of our other statistics, all of which are produced in line with Official Statistics protocols.”
*Updated with comment from London Councils on 19 Jan, 2018.
