Making funding fair

This month, the LGA has responded to the Government’s consultations on its review of local authority relative needs and resources (commonly known as ‘the fair funding review’) and its business rates retention reform.

The LGA has been clear that the current system of funding distribution is opaque, overly complex and out of date. It has been working closely with the Ministry of Housing, Communities and Local Government on its review to try to ensure it is objective and transparent and that there is extensive engagement with local government.

The distributional consequences of the review mean that it is important to supply a robust evidence base behind the decisions made. In its consultation response, the LGA said councils will want to know that all the factors suggested that affect their need to spend have been tested as part of the work. If some of these factors have been excluded or ruled out after analysis, there should be an explanation as to why that is the case.

The LGA also said a lack of clarity on formulas for adult social care, children and young people’s services, public health, fire and rescue services, concessionary fares and home-to-school transport at this stage will be a concern for councils.

Fundamentally, the LGA is clear that the outcome of the review will not be sustainable unless it is delivered with sufficient additional funding because councils are facing an overall funding gap of £8 billion by 2025.
It argues that the review should be taking place in a revenue-neutral manner; the Government must give sufficient additional resource as part of the 2019 Spending Review.

Meanwhile, the Government has also been consulting on options for the reform of elements of the business rates retention system in England from 2020/21 onwards.

The LGA has responded on a range of issues from partial or phased resets, the safety net, tier splits, valuations and pooling, and again raised the need for the Government to introduce measures to tackle business rates avoidance. This includes willingness to explore phased resets (where growth is always kept for a certain number of years) and exploring an alternative way of administering the system and dealing with appeals.

It remains concerned about the lack of clarity over funding for local authorities. With further business rates retention, the results of the Spending Review and the outcome of the review of relative needs and resources all being implemented from April 2020, local authorities have no reliable basis on which to plan their budgets appropriately. At the moment it is unclear how much funding there will be from April 2020, how it will be distributed, and the means of delivery.

As a result, local authorities will have to make assumptions about future funding and, in some cases, this will result in unnecessary cutbacks to services that could be avoided with more certainty. This is unacceptable, especially at a time when councils will have dealt with a £15 billion reduction to their annual core government grant over this decade.

For more information or to read the consultation responses in full, please visit www.local.gov.uk/topics/finance-and-business-rates

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