HARTLEPOOL Borough Council could be as much as £20m a year worse off if the Government decides to hand control of business rates back to local authorities.
This year Hartlepool finance chiefs collected £24.6m in business rates for the national pool but received £45m in return from the Treasury, which redistributes the cash to areas on the basis of population and levels of deprivation.
But the Government is reviewing legislation which could see councils keep the rates that they collect and potentially decide what rate to charge businesses.
If the system does change, then the council would be worse off as it receives more than it collects and civic leaders say it would be “grossly unfair”.
This year the council would be £20.4m worse off but the figures fluctuate each year.
The idea behind the move is to hand councils more power and control over their finances but some areas, especially those in the south, can collect more business rates than others.
In Hartlepool, the amount collected in business rates on behalf of the national pool is £24.6m for the current financial year and finance chiefs are forecasting £27.4m for 2011-12.
This year, the council has received £45m from the national pool and next year it is expected to be £40m.
The council’s finances are already being squeezed due to Government cuts to public spending, and the local authority is faced with slashing £20m from its budget over the next four years with the loss of jobs and services.
Councillor Robbie Payne, the council’s cabinet member for finance, said: “We are aware that the coalition Government is carrying out a review of business rates and we await the outcome with interest.
“We would expect to be consulted on any proposed changes to the system, and if these are to Hartlepool’s detriment from a financial perspective we will be making the strongest possible representation.
“The Government’s recent spending review has taken the most money away from deprived communities, in Hartlepool these grant cuts are more than twice the national average and total around £19m over the next two years.
“It would be grossly unfair if we were penalised any further.”
A Communities and Local Government spokesman said: “As we announced in October’s Local Growth White Paper, The Government is considering options to enable councils to retain locally-raised business rates.
“Such reforms have the potential to make councils less dependent on the whims of Whitehall funding and will give new incentives for councils to help local firms and back local job creation.
“Deprived areas will continue to receive additional central support.”
Business rates are normally paid by the owner-occupier or leaseholder of a non-domestic property. The bills are worked out by multiplying the rateable value by the multiplier or ‘poundage’ which the Government sets from April 1 every year for the whole of England.
This year, the multiplier is set at 41.4 pence and the small business multiplier is set at 40.7 pence. The rateable value is set by the Valuation Office Agency and that figure represents the yearly rent that the property could have been let for on the open market.