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<p>The Government’s aim is to increase local government’s retention of business rates
from 50 per cent to 75 per cent. To ensure the increase in business rates retention
is fiscally neutral, some existing grants (including the Rural Services Delivery Grant)
will be devolved to local authorities so that these responsibilities are funded through
retained business rates. We recognise that some redistribution of business rates between
authorities will continue to be necessary to ensure that no council loses out if it
is unable to collect enough business rates locally to meet its needs. We are therefore
undertaking a review of local authorities’ relative needs and resources to determine
the basis on which redistribution will take place in the new system.</p><p>The review
of relative needs and resources will set fresh baseline funding levels for councils
in England, and we are working closely with local government representatives and others
to examine all of the available evidence for the costs faced by authorities, including
how geographical features such as rurality and density affect the cost of delivering
services across the country, and how to account for these in a robust manner. In December
2018 we published a consultation paper that set out a proposed ‘Area Cost Adjustment’
methodology to account for these factors. This included consideration of how levels
of 'accessibility' and 'remoteness' - the impact of journey times on labour and procurement
costs - might account for the additional costs associated with sparsity, isolation
or market size. For example, local authorities with longer journey times from service
points to households may have to pay their staff (e.g. on domiciliary care visits)
for more hours in order to deliver an equivalent level of service.</p><p>In developing
this innovative new approach, we have worked closely with both local government and
other government departments, including the Department for Transport and DEFRA as
champions for rural proofing. Our most recent consultation closed on 21 February and
we are considering the many representations made in response, before taking further
decisions on the shape of the review.</p>
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