Commercial activities ‘could ease council budgets’

25 Mar 15

Around £100 could be shaved off council tax bills by 2020 as local government becomes more innovative and entrepreneurial, the Localis think-tank has predicted.

Its predication follows a survey of 150 senior local government members and officers who projected that earnings from entrepreneurial activities would rise from 6% of council budgets – equivalent to approximately £10bn in 2012/13 – to 18% by 2020 – around £27bn. This means local authorities would generate an additional £2bn each year, equivalent to £100 off each 2019/20 council tax bill.

‘Councils have borne the brunt of austerity, but they have responded with striking innovation to minimise the impact of cuts on their residents,’ said Localis chief executive Alex Thomson. ‘In particular, our research shows councils becoming ever more commercially savvy, bringing in money to support vital local services.’

More than 9 in 10 of respondents said their council shared a service with another council and used assets such as land in an entrepreneurial manner.

Over 6 in 10 said they operated joint ventures with a neighbouring council, while 57% were working with the private sector and 54% with the voluntary sector.

More than a third (38%) of councils said they had invested money in private sector enterprises and a further 58% of the respondents indicated that their council currently operates a trading company. Localis said that, if extrapolated across the country, 205 authorities would be using these trading powers.

Without entrepreneurial activities, 8 in 10 survey respondents say they would have to cut services and raise taxes.

Localis said that, with no let up in austerity, councils needed to increase their entrepreneurial agenda and start becoming more business-like.

Local authorities should be given ‘Earn Back’ powers to stimulate local investment, similar to the Greater Manchester’s devolution deal, it added.

The government should also use departmental underspends to fund a three-year corporation tax holiday for new council-owned trading companies to assist them in their start up, Localis recommended.

CIPFA chief executive Rob Whiteman commented: ‘This report successfully outlines how local government can secure its finances and boost local growth prospects by developing entrepreneurial approaches.

‘Many councils are already doing an excellent job in exploring these commercial spheres to mitigate against the pressures, but this report recognises that more needs to be done.’

  • Judith Ugwumadu

    Judith Ugwumadu joined Public Finance International and Public Finance online as a reporter after stints at Financial Adviser, Global Security Finance and The Sunday Express. Currently, she writes about public finance, public services and economics.

    Follow her on @JudithUgwumadu_

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