Transitional Rate Relief (England) 20 th May 2004 Nick James

Revaluation & Retail Currently £4bn approx liability (England) Retail rents have risen 23% on average Retail warehouses higher at 33% Some massive local variations E.g.- Tottenham Court Road = 110% - Romford = 50% Revaluation will increase liability by over £400m

Transitional Relief Introduced in 1990, 1995 & 2000 “phases in” large increases in rates liability Protects against “significant and unpredictable increases” Restricts the amount a bill can rise Has balanced this by restricting the amount a bill can fall

For 2005/6 – 2009/10 ODPM is modelling options for a transitional scheme Due to announce provisional scheme and multiplier by end of June – now extended to mid-July Due to confirm final scheme and multiplier in October BRC has seen elements of the four models being considered in April

Local Government Act Scheme MUST unwind within life of list -Scheme MUST be self-financing -Can be subsidised by Government in short term if Treasury willing For 2005/6 – 2009/10

What do we want? BRC calls for a scheme of transitional rate relief that: 1.Phases in increases over at least a four-year period 2.Sets specific and manageable upwards caps for each year of the scheme 3.Is funded through downwards phasing with some Treasury support We view a scheme broadly in line with that implemented in England in 2000 as the most practical model.

Options Compared: 2000/1–2004/ Yr 112.5% Yr 215.0% Yr 317.5% Yr 417.5% Yr 517.5% Real terms for “large” properties – over £18k in London, £12k elsewhere Upward Caps Yr 12.5% Yr 22.5% Yr 35.0% Yr 47.5% Yr 515.0% Downward Caps

Options Compared: 2005/6-2009/ ABCD Yr 112.5% 15.0%12.5% Yr 215.0%17.5% 25.0%20.0% Yr 317.5%25.0%20.0%smooth Yr 417.5%NONE25.0%NONEsmooth Yr 517.5%NONE Real terms for “large” properties – over £21.5k in London, £14.5k elsewhere Upward Caps

Options Compared: 2005/6-2009/10 Funding models for Option ‘A’ (3 year scheme) YearDownward Cap (large properties) Supplement Rate (supplement inside caps) Revenue neutrality: In-year 3 years5 years %3.7%1.7%0.9% %1.4%1.7%0.9% %*0.3%1.7%0.9% % %

Funding Mechanisms Downward caps: our favoured option and in keeping with the 2000 scheme. It is understood and practical. Supplement inclusive caps: we are keen to avoid these due to the penalties felt by all ratepayers and the complexity of such a radically different system. Supplement exclusive caps: this option, where additions are made on top of caps, undermines the whole purpose of upwards phasing.

Treasury Support? “In-year” revenue neutral schemes require no Treasury subsidy and need strict downward caps or large supplements “Across-year” revenue neutral schemes require Treasury subsidy and can spread impact of funding mechanism more equitably Treasury/ODPM costed options so far of between £400m - £600m

BRC Response Caps need to be more “manageable” in early years and rise gradually Four years for unwind a must Downward caps most practical and preferable to supplements Treasury support could allow for larger downward caps, spread more evenly

BRC Activity Members of Rating WG & BRC have: Researched, written & submitted report on proposals Met with: Ruth Kelly (Financial Secretary, HMT) Caroline Spellman (Shadow Local Government Minister) Officials at Treasury, ODPM & DTI Others such as SBS/VOA/CBI Will be meeting with Nick Raynsford

Last word…. “I can reassure you by saying that no decisions have yet been made and all options are still on the table. We continue to analyse the options in greater detail.” Nic Suggit ODPM