Local authorities should seek to become financially self-sufficient, partly through the retention of business rates “in totality”, according to the chair of an independent commission on local government finance.
In an interview with LGC to mark the publication of its interim report, ‘Public money, local choice’, commission chair Darra Singh said some councils could be self-sufficient by 2018.
“We envisage business rate retention in [its] totality,” he said.
The report, commissioned by the LGA and the Chartered Institute of Public Finance & Accountancy, indicated that by 2018-19 there was “scope for local government to become self-sufficient if it retains all its business rates”.
It said that by 2018-19, “council tax and business rate revenue will overtake local government’s projected funding”.
In a self-sufficient system, the report found, “equalisation” between councils could operate on a “top up” basis.
It said: “There is less disparity in wealth between the different parts of the country than is often assumed. On the 2018-19 projections, self-sufficiency would require 247 councils to ‘top up’ 106 councils. Most of this could be managed through transfers between councils in the same area.”
Asked about this proposal, Mr Singh said: “While equalisation [of funding between affluent and deprived areas] is important, if we’re devolving greater responsibility down to local areas, should those areas also not take on responsibility for equalisation within that group of authorities, however they are defined?
“This is not going to be without difficult dialogue about priorities and where investment should go, but actually we think there’s merit in the argument that that’s best done at a lower level than a national level.”
Mr Singh also said initial consultation showed there was a strong argument for “local revaluation on additional bands” of council tax.
He said New York, which conducted regular revaluations, was an example of how it could work.
“The time perhaps has passed for the one-size-fits-all system of local government funding,” Mr Singh said. A new model should recognise some areas were willing and able to “take on greater responsibility and therefore accountability to shape their local destinies”.
Mr Singh wrote in his foreword to the report that previous reviews of local government finance had “foundered”.
Asked why he thought they had failed, he said: “The reason I think we’re more positive this time is the context in which we’re working has never been more challenging… It seems to me it’s in all of our interests, particularly in this context, to look seriously at how we can create a sustainable model of local government funding.”
Communities secretary Eric Pickles said in a statement that he “completely disagreed” with the report’s proposals on council tax.
“Revaluation and higher council tax bands would means soaring tax bills for hard-working people, as the 2005 council tax revaluation in Wales showed,” he said. “Instead, this government is working to keep council tax down – our council tax freeze has cut bills by 11% in real terms since 2010, and further funding for a council tax freeze is available to councils next year too.”