Council funding review considers tax changes

23 Jan 03
Local taxes came a step closer this week as Nick Raynsford launched a 'wide-ranging' review of how Whitehall funds town halls.

24 January 2003

The local government minister unveiled the terms of reference for the long-awaited review, which will consider whether authorities' budgets rely too heavily on grants from the centre. At the moment, councils receive about 75% of their funding in this way.

Raynsford pledged that the review group, which meets for the first time in April, would consider a 'range of short and long-term options' for increasing the proportion of funds raised locally.

The panel, likely to have between 15 and 20 members, will include local government representatives, academics, policy and finance experts, and business and union leaders. The review is expected to last for a year.

Raynsford said the results would shape future policy for years to come. 'The findings of this group will, along with other work, inform policy for the next ten years and contribute to our long-term strategy of extending local freedoms and raising the quality of service.'

Local Government Association chair Sir Jeremy Beecham said the review should herald a 'fair, accountable and transparent' funding regime for authorities. 'This review must fully examine how to achieve this and end the current situation whereby an extra 1% of spending by a council can lead to a 4% increase in council tax.'

Dennis Reed, director of the Local Government Information Unit, urged ministers to prove that their intentions were sincere. 'This review must be a spur to considered reform and not a device for putting it off further. The increase in local authority powers must be introduced for the correct reasons and not just to suit the passing political needs of central government,' he said.

But Dan Corry, executive director of the New Local Government Network, said he was optimistic the review would yield improvements.

'It would be unwise politics to set up a body like this if the intention is to deliver no, or only marginal, change,' he said. 'There is a reasonable chance it'll lead to something meaningful. Ministers are not idiots, they know they are setting up expectations.'

Meanwhile, Raynsford this week announced 23 pilot areas selected to trial New York-style Business Improvement Districts to revive their town centres. The areas, including Kingston-upon-Hull and Keswick in Cumbria, will be able to ballot local businesses once the provisions for Bids, contained in the Local Government Act, have been passed.

Under the plans, businesses would agree to pay higher rates to the local authority in return for agreed enhanced services.


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