Council funding faces detailed scrutiny

23 Oct 03
Town hall leaders are increasingly confident that radical reform of the funding system is on the way, after ministers agreed to detailed research into the implications of potentially far-reaching changes.

24 October 2003

Town hall leaders are increasingly confident that radical reform of the funding system is on the way, after ministers agreed to detailed research into the implications of potentially far-reaching changes.

Local government minister Nick Raynsford has given the green light for officials to study the likely impact of several possible reforms, following a meeting of the Balance of Funding review group on October 21.

These include controversial measures such as the introduction of a local income tax, returning the business rates to local control, and a complete reform of council tax to tackle its regressive nature.

The move is being taken as a signal that the review, which is due to report its findings next summer, will produce an overhaul of the current system, in which 75% of funding comes from Whitehall.

Local Government Association chair Sir Jeremy Beecham, who has led the campaign to win greater revenue-raising powers for councils, told Public Finance that the case for change had been convincingly made. 'There is now a general acceptance that we can't stay where we are and the system has to change,' he said.

Beecham said council leaders now wanted to explore a 'basket' of measures to test their efficacy. This would include fundamental reforms and less radical changes, such as a local tourism tax.

'We'd like to take this approach so that we can investigate which ones are the serious runners. First, you have to show that a measure is practical: it has to pass that test first before you can get into discussions about principle,' he added.

The review, first announced last year and chaired by Raynsford, got under way in April. It was launched in response to widespread concern that the present balance of funding undermines councils' autonomy and hampers their attempts to improve local services.

But Raynsford, speaking after the meeting of the 22-strong panel this week, was careful not to raise expectations of the final outcome.

'It is clear that there are no easy answers. But we thought it was now right to look at some of the most frequently suggested options in more detail,' he said.

The research commissioned

by the local government minister will be considered by the panel when it next meets in January.

See feature, page 28

Education Secretary Charles Clarke has revealed that more than a third of students could have their

top-up university fees paid for them. 'It is conceivable that from 2006, lower income students will not pay any fees to go to university,' he said.

Next year's referendums for elected regional assemblies will be carried out entirely by postal ballot, the Office of the Deputy Prime Minister has declared. 'It is clear that all-postal ballots can significantly increase levels of participation,' said local government minister Nick Raynsford.

The East of England Development Agency has launched a contest to find a landmark to rival Cornwall's Eden Project or Tyneside's Angel of the North. The region, which has a GDP of £79bn a year and is centred on Norwich, will spend £250,000 on feasibility studies.

New housing schemes for key workers

Public sector workers put off by soaring house prices in London and the Southeast are being offered new incentives to find homes.

The government's starter home initiative is due to come to an end in April, having helped about 9,000 key workers buy their first property – 1,000 below the target.

Measures worth £603m announced by Deputy Prime Minister John Prescott on October 21 will aim to help employees to upgrade to larger family-sized properties.

Workers are to be eligible for loans of at least 25% of the house price, up to a limit of £50,000. Renting is also being encouraged, at sub-market prices, along with shared ownership schemes.

The government is committed to spend at least £1bn on key worker housing over the next three years. The definition of key worker may also be extended. The Office of the Deputy Prime Minister says it has listened carefully to what workers and employers want.

Prescott, who praised the way regional housing boards had balanced competing demands in drawing up their new regional strategies, also announced that the housing 'pot' will now be worth a total of £5bn over two years. Transitional support for RSLs is being increased by £75m, he added.


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