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Potential Implications of
Current 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
                                                                                                                                                 Hampshire
Surplus or (Deficit) on NNDR




                                                 Larger Surplus
                                200
                                                                                                                                              Oxfordshire


                                100



                                0

                                        0             20              40             60               80                100       120            140


                               -100                                                                          Lower Deprivation
                                                 Bradford
Liverpool
                                                     Birmingham
                               -200
                                                                                   Index of Multiple Deprivation 2007


                               - Analysis excludes outliers of Westminster and City of London
Government’s potential approach to
reduce 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 growth

City of London                   34.9       Northumberland                 5.3
Westminster                      22.7       Bury                           5.3
Hillingdon                       10.1       Isle of Wight                  5.3
Tower Hamlets                     9.8       Waltham Forest                 5.3
Camden                            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       ILB

Excludes 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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W18 lg resource review - cllr houghton

  • 1. Potential Implications of Current Resource Review Cllr Steve Houghton Leader Barnsley MBC
  • 2. 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
  • 3. 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
  • 4. Full Localisation - Deprived Hit Hardest £m 400 Surrey 300 Hertfordshire Hampshire Surplus or (Deficit) on NNDR Larger Surplus 200 Oxfordshire 100 0 0 20 40 60 80 100 120 140 -100 Lower Deprivation Bradford Liverpool Birmingham -200 Index of Multiple Deprivation 2007 - Analysis excludes outliers of Westminster and City of London
  • 5. Government’s potential approach to reduce 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’
  • 6. 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 growth City of London 34.9 Northumberland 5.3 Westminster 22.7 Bury 5.3 Hillingdon 10.1 Isle of Wight 5.3 Tower Hamlets 9.8 Waltham Forest 5.3 Camden 9.4 Wirral 5.3  In reality likely to be much wider * Assumed NNDR(RPI +2.5%); CT (2.5%)
  • 7. 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 ILB Excludes 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
  • 8. 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!
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. 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