Secretary of State for Communities and Local Government Sajid Javid has announced a shake-up in the next year’s funding for local authorities in England. With changes including fresh powers to set council tax and a U-turn on controversial business-rate plans, budgets may need adjusting to be ready for reforms.
As part of the provisional local government finance settlement 2018-19, Javid promised authorities the ability to raise council tax by 1%. He also announced a £12 council tax flexibility for police services, which he predicted would raise an additional £139m over the next twelve months.
The other major shift relates to business rates. Following concerns that many local authorities would end up with ‘negative Revenue Support Grant (RSG)’, plans for them to retain 100% of business rates by 2020 have been shelved. Instead, this will be reduced to 75%, with existing grants incorporated into an “updated and more responsive distribution methodology” and a consultation on trials will follow in spring.
The majority of media coverage has focused on the potential cost to council-tax payers. The Taxpayers’ Alliance said it ‘beggared belief’ that rates could be increased at close to double the CPI's inflation indices – a response that will concern authorities keen to raise revenues to protect front-line services after years of cuts.
The Local Government Association (LGA), meanwhile, argued that changes may not go far enough for some parties. Lord Porter, Chairman of the LGA, stated, “With no other national tax subject to referenda, the council tax referendum limit needs to be abolished... with residents able to democratically hold their council to account through the ballot box.”
Balancing these fresh powers and the force of public opinion could well be the biggest challenge for council leaders in the coming year. And with question marks still hanging over other policy initiatives such as the New Homes Bonus and Fair Funding Review, it will be critical that they take advantage of any new fundraising opportunities afforded them.
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