The Chamberlain News

City centre retailers win £18m rates rebate over Midland Metro line ‘disruption’

Shops in Birmingham city centre have been awarded £18.6 million in business rates rebates after complaining that work on the Midland Metro tram extension was hitting trade and keeping customers away.

Retail outlets appealed successfully for a one-off cut in rates bills following months of disruption as tram tracks were laid along Bull Street, Corporation Street and New Street.

The award is bad news for Birmingham city council which will lose £9.3 million – half of the total rebate given to the businesses.

Under a national retention scheme the council retains half of all business rates collected and from 2020 will keep a hundred per cent as government grant to local authorities is phased out.

The overall budgeted level of business rates for the council in 2015-16 is £404.4 million, excluding income generated in the Enterprise Zone, of which the council’s retained share is £198.4 million.

Details of the impact the metro extension from Snow Hill to New Street is having on the civic finances are set out in a report to the council cabinet:

Information from the valuation office has revealed a number of significant rateable value reductions in Birmingham city centre as a result of the Midland Metro extension works.

These reductions have been backdated to the start of these works resulting in a large in-year deficit forecast of which the Council’s share is £9.311 million.

Work on the tram extension is still not complete with the new line not yet running as far as New Street Station, but the cabinet report makes it clear that the metro rebates are a short term problem:

It is anticipated that the rateable value reductions relating to the Midland Metro extension are of a temporary nature and therefore as the work is virtually complete, it is expected that it should not impact further on 2016-17’s business rates income.

The council will also lose a further £4 million in income following other successful appeals by businesses against the size of their bills. In total, the local authority will receive £13.2 million less in 2015-16 from business rates than expected.

There may be an even bigger financial headache around the corner.

A recent application by NHS Trusts across the country for mandatory business rates relief on charitable grounds is described in the cabinet report as a significant risk. The report warns:

If granted this would potentially have a major impact on the business rates income for the council. Legal advice is currently being sought on this matter. Due to the lack of information at present, as yet this has not been factored into business rates income forecasts.

Difficulties over business rates are part of a mixed financial picture for the council.

Total savings required for 2015-16 as the authority grapples with cuts in government grant and spiralling costs of social services are £110 million.

The latest projections indicate an underspend of £0.436 million in the base budget at the end of the year. However, just under £10 million of savings remain unachieved, giving combined pressures and savings risks of £9.087 million at year end – a reduction of £3.4 million since November.

Children’s social care is on course to underspend by £1.827m, against a £0.511 million overspend projection in November. Slippage in planned staff recruitment and reductions in the use of agency staff as well as a reduction in the cost of internal foster care payments have contributed to the underspend.