For months, Salford City Mayor Ian Stewart has been bragging in public how Salford now has a growth rate `equivalent to China'. Indeed, Council finance officers estimated that such growth would increase business rates income by £3million in 2015/16.
Instead, Salford City Council is set to declare a deficit of £7.143million in its business rates collection for this financial year - which it is putting down to "increasing use of business rates avoidance tactics".
Businesses are appealing their rates bill in droves, to the point where, this year, the Council estimated that the cost of such appeals would be £3.5million. In the event, the cost of appeals was £12.05million, a `variance' of £8.55million. After other finance factors were taken into account, it leaves a final deficit of £7.143million.
Salford Council now gets to keep 49% of business rates in the city, totalling £124.174million, with 1% going to Greater Manchester Fire and Rescue Authority and the other 50% to the Government. The Council's 49% share of the deficit is £3.5million, which finance officers state "would increase the savings requirement in 2016/17" – in other words, it will be made up by cutting spending on community services.
A report going to the Executive Lead Member for Finance next week underlines the problem..."It can be seen that the increase in the estimated cost of appeals is the major factor in producing a deficit position at 31st March 2016".
The Government announced restrictions on the back dating of appeals last year but the report adds, "In reality the restriction has resulted in an unprecedented increase in the level of appeals with £254m being the value of those currently outstanding. The majority of these are still eligible for back dating. Based on historical data this could ultimately reduce our business rates yield by £18m and require a £12m contribution to the current provision in 2015/16."
The report reveals that, while businesses in Salford have grown, "the financial impact of this growth is being negated by the likely cost of outstanding appeals."