Potential Implications ofCurrent Resource Review Cllr Steve Houghton Leader Barnsley MBC
Current System Service provision based on needs and ability to pay Taxpayers in similar circumstances should pay the same across the country for the same level of service.and It is based on relative needs of communities and differing ability to raise Council Tax of individual Authorities. Aim has always been to achieve ‘fairness’ NNDR pooled – because it has no real relationship to service needs
Proposed System Service provision based upon retention of Local Business Rates with some ‘equalisation’ No account of communities ability to pay No account of future needs
Full Localisation - Deprived Hit Hardest £m 400 Surrey 300 Hertfordshire HampshireSurplus or (Deficit) on NNDR Larger Surplus 200 Oxfordshire 100 0 0 20 40 60 80 100 120 140 -100 Lower Deprivation BradfordLiverpool Birmingham -200 Index of Multiple Deprivation 2007 - Analysis excludes outliers of Westminster and City of London
Government’s potential approach toreduce the impact? A system of ‘tariffs’ and ‘top-ups’; with a baseline / ‘equalisation’ frozen at 2012/13 funding. Major issue of locking in existing disparities i.e. damping No effective mechanism for updating needs Authorities who generate NNDR greater than Formula Grant will pay a ‘tariff’ Authorities who generate less NNDR than Formula Grant will receive a ‘top-up’ May at first appear to deliver some ‘equalisation’
Fairness / Equalisation Issues Modelling shows the gap between rich and poor areas would widen. Equalisation only at the start Even if business rates and council taxes across England grow at the same annual percentage rate* some authorities funding would grow much faster than others; Authorities with highest One year % Authorities with lowest One year % funding growth cash growth funding growth cash growthCity of London 34.9 Northumberland 5.3Westminster 22.7 Bury 5.3Hillingdon 10.1 Isle of Wight 5.3Tower Hamlets 9.8 Waltham Forest 5.3Camden 9.4 Wirral 5.3 In reality likely to be much wider * Assumed NNDR(RPI +2.5%); CT (2.5%)
Equal Growth + Initial ‘Equalisation’=Growing Disparities Average Four Year Percentage Increase in Total Funding Available (including council tax) 30 29.6 Percentage Increase in Funding 29 28 27 26 25 24.6 24.0 24.2 24.2 23.7 23.7 23.8 24 23.3 23.1 23 22.8 22 NE NW SW SIGOMA WM EM YH EE SE OLB ILBExcludes outliers of Westminster and City of London Region Modelling over a four year period, applying same growth in business rate and council tax to all authorities
Fairness / Equalisation Issues Authorities with high taxbases (NNDR and CT) compared to their needs are likely to benefit Weaker economies will increasingly suffer Cannot deliver Government promise of protecting more vulnerable in our society No relationship to ongoing needs Will give successful economies ability to reduce or remove council tax – poorer continue to pay Likely to be more complex than current system Survival of the Fittest!
Incentives for Growth? Fundamental issue of ability to influence growth Some growth just happens because of where it is Rewards go to already successful places (LABGI?) Focus on physical growth- e.g. would exclude internet based business No ‘kick start’ support for economic growth in more deprived areas Deprived areas will see reducing resources – reduced ability to support the local economy Treasury view – Local Government has little impact on economic growth
Impact on Localism Localism should be about having funding levels to meet local needs and deciding the best way to spend it This model will provide different levels of Council Tax irrespective of ability to raise by individual authorities different levels of service irrespective of needs Local rate setting ? Strongareas ability just to ‘relocate’ business away from weak Business may want more say – accountability issues Is this localism or simply redistribution of resources
Future Growth in NNDR Expected to exceed current spending plans – will this solve the problems? Will Treasury take resources Will we just get new responsibilities Given there is no prospect of RSG to supplement NNDR going forward, this is still likely to be a zero sum game Winners – strong economies, prosperous places Losers – weak economies, most deprived
Achievability? Current indications no firm proposals to consult on in July? Recognition that significant issues to overcome Danger of rushing through to meet deadlines Need consideration of alternative models to incentives without impacts on services Should be a delay to deliver a sustainable model to achieve buy in to maintain fairness If these can’t be achieved Maintain status quo Look at other options
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