Submissions on Local Government Finance, January-February 2025

In the first two months of this year, TRL Insight made submissions to both of the following:

  • An inquiry “The Funding and Sustainability of Local Government Finance” by the Housing, Communities and Local Government (HCLG) Committee of the House of Commons;
  • The Government consultation “Local authority funding reform: objectives and principles”.

TRL Insight’s submissions can be read by clicking on the titles below.

TRL Insight evidence to HCLG Select Committee inquiry “The Funding and Sustainability of Local Government Finance” (27 January)

This evidence covers issues such as:

  • The limited base of taxation for local government, with the Government controlling many key parameters and frequently “tinkering” with the system;
  • Grant funding – local government’s over-reliance on it, the way it has fragmented over recent years and the current Government’s proposed consolidation of grants;
  • Problems with the Business Rate Retention (BRR) system: its outdated needs assessment (topped up by grants), and its complexity and inconsistency, in particular in the way it treats equalisation for ability to raise council tax and business rates differently;
  • Problems caused by this lack of financial autonomy: constraining local authorities’ ability to put together a financing package that is suited to their local circumstances, and causing difficulties for budgeting for the long-term and investing in service transformation;
  • How devolution and the Prudential System are welcome and can be most helpfully expanded;
  • The need to replace the use of capital receipts for revenue purposes with a much more flexible capitalisation regime for unavoidable and otherwise unaffordable costs and for upfront investment in service transformation;
  • The importance of MHCLG being involved in policies led by other departments which affect local authorities.

Prior to writing this submission, I gave a preview of the subjects to be covered in it, in my LinkedIn article Thoughts on HCLG Committee inquiry on “The Funding and Sustainability of Local Government Finance”, which was published on 24 January.

 

TRL Insight response to the Government consultation “Local authority funding reform: objectives and principles” (12 February)

This response covers issues such as:

  • Equalising for council tax and business rates at same stage of BRR calculation
  • A fresh round of Tax Increment Financing schemes, where growth would be excluded from this equalisation
  • Avoiding use of taxbase projections, as this bakes in an assumed minimum level of taxbase growth – and modelling the use of historic/lagged taxbase data
  • Taking advantage of the greater retention of council tax from these measures to refocus New Homes Bonus – providing a top-up for retained council tax from lower band properties and, if necessary, supporting affordable housing
  • Modelling the options of partial and rolling resets of business rate growth and rolling resets of the needs assessment
  • Urging the Government to start to look into broadening the local government tax base now, and how new taxes may be equalised for (so that this could be implemented not in the 2026 reset, but in the one after) – then use this in preference to New Burdens grant funding in future
  • Not being over-zealous in simplifying the need assessment
  • Improving the assessment of differences in unit cost of providing services, for example greater spend on fuel and vehicle maintenance where rounds are longer
  • Suggested improvements to the Community Infrastructure Levy – clarity about its purpose,, removing the legal restriction from borrowing against it and consulting on greater local flexibility
  • Increasing the financial autonomy of local government, including over sales, fees and charges policies
  • Ditching the patronising language of “rewarding” councils for growth

Prior to writing this submission, I previewed many of these points for the benefit of other respondents in a LinkedIn article, Local authority funding reform consultation – some points to consider, which was published on 10 February.