Local authorities receive funding from a range of sources, including Government grants, council tax, fees and charges. The majority of this income is derived from council tax and business rates. Central government has a significant degree of control over these two revenue streams, and sets the policy framework in which both operate. In 2013–14, the government introduced the BRRS (Business Rates Retention Scheme), allowing local authorities to retain 50% of real-terms changes in business rates revenues. This is a pledge to continue to provide local government greater control over the money they raise.
In December 2017, the government piloted 100% Business Rates Retention in a number of areas of England. Following this, in September 2018, the executive launched another set of pilots, to test 75% Business Rates Retention until 2019-20. Following the pilots, in December 2018 the government started a round of consultations on Business Rates Return reform. The feedback, currently under analysis, is expected to sit alongside a larger reform of local finances due in 2020.
In February 2018, the government extended the Capital Receipts Flexibility programme to 2020. This gives local authorities the freedom to use money they have gained from the sale of their assets.
The government’s finance settlement for 2018 to 2019 projects an increase in available local government resources from £44.3 billion in 2017-18 to £45.6 billion in 2019-20.
With steps such as the BRRS trials, consultations for general reform, and the Capital Receipts Flexibility extension, we can see a continuation of policies to increase the financial autonomy of local government. So, we consider this policy ‘done’. We’ll keep tracking financial arrangements for local authorities until the government’s term has ended, and update our verdict if necessary.
Want to know more?
- What is Local Government? – Local.gov.uk
- Business Rates Retention – Local.gov.uk
- 100% Business Rate Retention Pilots: What Can be Learnt and at What Cost? – Institute for Fiscal Studies
- Financial sustainability of local authorities 2018 – National Audit Office
- Local authority governance – National Audit Office
- Local Government Finance and the 2019 Spending Review inquiry – Housing, Communities and Local Government Committee – Parliament.uk