Agenda item

To consider the impact on school budgets of the Council’s decision to end discretionary rate relief. Appendix B refers.

The Forum considered a report outlining changes to school business rates from the 1 April 2013.

The Forum noted that the Council was changing its policy on awarding discretionary rate relief from 1^st April 2013.

The current position was as follows:

The following categories of school receive 80% mandatory relief by means of their charitable status:

·         Voluntary Aided

·         Voluntary Controlled

·         Foundation

·         Academy

Traditionally, Havering Council had awarded discretionary rate relief at 20% to all of the above categories with the exception of Foundation.

This had been achieved at no cost to the Council.  The mandatory relief was reclaimable from central government as was 25% of the discretionary relief.  The other 75% was charged to a budget that was top sliced from the DSG.  This released additional funds back into the overall DSG for the benefit of schools.

From April 2013 the way that Councils receive their funding from central Government would change to a system that includes an element of business rates retention. This meant that any rate relief would have a direct impact on business rate yield to the Council.  It would be shared as follows:

·         Central Government 50%

·         The Council 30%

·         Greater London Authority 20%

For every school that had mandatory relief or discretionary relief the Council would have a reduction of 30% of the value of the business rate retention element of its annual funding.

Councils had no influence on mandatory relief but did have on discretionary relief. The Council was therefore being asked to approve a policy that would cease the awarding of discretionary relief to certain groups including educational establishments from 1^st April 2013.

There would be no financial impact on individual schools or academies of this change because the funding formula allocated funding at an amount equivalent to the rates charge.

Those schools and academies that had previously received an NNDR allocation of zero in their budgets would, from April 2013 receive a budget that was 20% of the value of the rates charge.  This would apply to the following schools:

Whereas in previous years it would have been possible to reclaim 25% of this cost (£98k) from central Government and charge 75% (£293k) to a central budget top sliced from the DSG, from April 2013 the full amount would need to be allocated to schools and academies.

The DSG would continue to benefit from the cost of additional mandatory rate relief from academy conversions but the Council overall would lose through the revised Council funding arrangements.