Councils to retain business rates from shale oil and gas

The Department of Communities and Local Government has published the results of its consultation “Business Rates Retention and Shale Oil and Gas“. The consultation concerned a proposal to allow local authorities to retain business rates income from Shale Oil and Gas (fracking) in their area. The Government has decided to allow local authorities to retain 100% of new business rates income generated from these schemes where they are developed. The income will be split, broadly, on a 60:40 basis outside Greater London, with County Councils retaining 60% of the income and District Councils 40%, and on an 80:20 basis in Greater London, with the London Boroughs retaining 80% and the Greater London Authority 20%.

Whilst the principles behind this announcement are entirely consistent with the Coalition’s localism agenda and the business rates retention scheme already introduced under the Local Government Finance Act 2012, the announcement will no doubt attract criticism as one that will encourage local authorities to allow fracking proposals in their areas. The increasing pressure on local authority budgets will enhance the importance of income from business rates retention. The question is will the financial rewards be sufficient to encourage local authorities to grant permissions for deeply unpopular developments such as fracking?