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Local Government Finance Act 2012 2012-13
(This Bill is from a previous session)
Bill is now an Act
Type of Bill:
The Bill was introduced to Parliament on 19 December 2011. Its major provisions will apply to England only, with some of its technical changes extending to Wales. It brings forward proposals considered as part of the Local Government Resource Review, and its measures are due to be implemented by April 2013.
It aims to encourage regional transport, housing and regeneration development by granting local authorities greater power over tax revenue and project funding.
The Bill allows for:
- local authorities to retain the majority of the business rates they collect, granting them greater power to decide where the money should be spent
- the introduction of tax increment financing (TIF), under which local authorities can borrow money to invest in a local project against the business rates revenue the investment will return in the future
- a new financial deal for the eight 'core cities', providing each with a consolidated capital pot to direct as it sees fit, and granting them the power to offer business rate discounts
- local authorities to replace council tax benefit with their own local schemes, designed to reflect local priorities and reduce costs
- further, small changes to improve the council tax system, including the removal of special tax breaks for empty homes and second homes
As part of the government's localism agenda, it is hoped that the Bill will provide financial incentives for local authorities to champion growth in their area. Announcing the Bill, Nick Clegg stressed that the new rules will pass greater responsibilities on to local authorities, saying:
"Our cities will need to shoulder some of the risks. Where big projects are involved, for example, we will not do all the underwriting. We will expect you to work together. And we will need to see results."
The return of business rates to local authorities was pledged in the Lib Dem manifesto at the 2010 election, but none of the Bill's other specific measures were debated at that time.
The Labour Party "supports a simplification that would give councils the power to encourage and benefit from growth in their area", but criticised the government's specific plans. Hilary Benn said that the threshold above which local authorities are planned to retain business rates is too high, and that the proposed changes to council tax benefit are unfair, and "will hit the people in work on low incomes the hardest".
The Bill was well received by stakeholders, particularly its provision for business rates to be retained by local authorities. The British Chambers of Commerce welcomed the Bill, which it said would urge local authorities to "think business first". The Chartered Institute of Public Finance and Accountancy was equally enthused, saying
"This is a positive step in the right direction. Hopefully, the long-term destination will be a truly local business rate, which is set by councils."
Having campaigned for the introduction of tax increment funding, the British Property Federation also welcomed the Bill.
The Local Government Finance Bill was the subject of a carry-over motion on 10 January 2012, which was approved in a deferred division on 11 January.