Councillors have slammed a decision which will see Hartlepool lose out on millions of pounds in taxes paid by the power station.
An appeal by power station bosses to the government agency which sets business tax rates has resulted in its level of tax being almost halved.
The timing was a bolt out of the blue and the magnitude of it was completely unexpected. It was significantly worse than we were anticipating.Chris Little, Hartlepool Borough Council
It means the town will lose out on £3million in business tax this financial year and around £2million for all future years the station continues to operate.
The council is now seeking a meeting with the government to ask for more help but the rate decision by the Valuation Office Agency cannot be appealed.
The local authority says the current system for business taxes exposes councils like Hartlepool to too much financial risk when such a big chunk comes from one source.
Council finance chiefs said they have been caught out by the size of the cut, which sees the power station’s tax bill slashed from £33.6million to £17.5million.
Chief finance officer Chris Little said: “It was significantly worse than we were anticipating. The timing was a bolt out of the blue and the magnitude of it was completely unexpected.”
He said it was equal to a further six per cent cut in the authority’s annual government grant. Under the Business Rates Retention System, which came into effect in April 2013, councils collect and keep 49 per cent of their business rates with 50 per cent paid to the Government and which goes into council’s annual government settlements. The new rate for Hartlepool Power Station will see the council get £3.889million less in tax.
A government ‘safety net’ grant of £875,000 triggered by the reduction sees that come down to just over £3m illionfor this financial year.
Since receiving news of the reduction at the beginning of May, council finance officers have had to work quickly to work out how to manage the loss.
The use of one-off reserves and an increase in council taxes from new housing and more business rates from Hartlepool Enterprise Zone brings the shortfall down to £1.98million for this year and just over £2million next year. The power station’s rates have also been backdated to 2010 but Mr Little said the impact of that was still not known.
He added: “We are going to make an application to the Local Government Minister to say can they look at the funding system to provide a fairer settlement for Hartlepool that recognises the power station issue should be dealt with by tax payers nationally not just local taxpayers in Hartlepool.”
Councillors on the Finance and Policy Committee said they were unhappy that the system meant Hartlepool taxpayers would be left to foot the bill.
Coun Chris Simmons said of the reduction: “Having a power station in Hartlepool has been both a blessing and a curse. It provides employment in the area and has done for many years, but it is a curse because the uncertainty of income from it gets greater as we proceed down the line to its decommissioning.”
Coun Marjorie James added: “The public purse in Hartlepool just seems to be getting clobbered.
“For an authority like Hartlepool to be left to fund these huge bills there has to have been something wrong in the calculation.”
Coun Paul Thompson the council needed to attract more businesses into the town so it was not as reliant on the power station, due to be decommissioned in 2024.