The headline issue during Derby City Council’s annual budget setting process is the percentage increase in the Council Tax. A subject that caused much emotion this year.

Of the £350m Council funding in 2025/26, the split is:

• £131m – Council Tax
• £49m – Retained Business rates

The balance of £170m comes from central Government Grants.

Derby City Council’s budget meeting agreed to reduce the proposed Council Tax rise for 2025/26 from 4.99% to 3.99%.

Derby City Council’s 5.5 hour Budget meeting delivers nothing for the City

This resulted in a reported funding shortfall of just £1.27m; the Labour Group suggested that there would be severe consequences to vulnerable people. There was no mention of the wider context.

There are just over 8500 business locations in Derby with a total rateable value of £244m. This year, the rateable value is multiplied by 0.546 to calculate the rates due. This would suggest that the total tax due should be around £133m; in fact it’s £90m. Where is the other £43m?

(Of the Business rates collected , only 50% is retained by the Council, the other 50% goes to Central Governement)

There are an array of business/charitable/educational discounts that reduce the tax payable; after excluding organisations that attract reduced rates the total rateable value is £182m, across 3460 business locations. The vast majority pay business rates at around 50-55% of the rateable value.

However, there are 587 business locations with £10.8m rateable value which pay 0% business rates ( NB – not charities etc). This is a missing contribution to the Council of over £3m and largely relates to empty properties.

There is a limited short term exemption from business rates for industrial premises up to 6 months

Around 50% of this missing contribution is attributable to 2 buildings just a few yards apart on Derby Commercial Park:

The OXW326 building with a rateable value of £2.37m and the recently vacated JD Sports building at £3.49m. Just these 2 buildings should be paying rates of £4.5m of which 50% would be retained by Derby City Council to pay for essential services.

Also on this site is GXO Logistics which has a rateable value of £3.22m which should be paying business rates of £1.76m , but is actually paying half of that at £0.85m

Comment

The Council’s £350m budget is discussed in such a way that implies that it is precise. Achieving a 99% accuracy would mean an “error” of £3m. Many heated debates on Council finances are well below this threshold, and at a level of precision which is barely achievable or controllable.

The business rates multiplier increased by 6.6% last year with a further 1.6% this year. Companies and organisations will drop in and out of the list throughout the year. Hello Fresh opened up in Derby in 2022 and is now the 3rd largest business rates payer. JD Sports moved to Derby, and then dropped out resulting in significant shifts in the tax revenue.

The bad tempered budget debate, that was over-excited about £1.27m, demonstrated that Councillors, in particular, don’t understand and recognise that there are many more variables that they should be challenging than the Council tax rate. There is never any discussion about the impact of independent corporate decisions on Council finances. What is the Council doing to maximise the Business rates tax take? To ensure that empty properties become operational? To ensure that all discounts are legitimate?

This is all part of the funding source that pays for local services which would address the dire consequences that the Labour administration was suggesting would arise solely due a 1% change in the Council Tax rate.

Post Script

The business rates tax take is heavily skewed to the Top 15 organisations in Derby that contribute around £12m ( 25% of the total business rates)

• Rolls-Royce
• Royal Derby Hospital
• Hello Fresh
• Severn Trent Water
• Alloga
• ASDA
• GXO Logistics
• Sainsbury’s
• Alsthom
• Morrison’s
• Tesco
• Costco
• B&Q
• Derby County
• Oregon Timber Frame

Any one of these could make a business decision to exit Derby and disrupt the Council’s finely balanced finances