Council devolution proposals sought as part of business rates review

18 Apr 16

The government has called on local authorities to submit proposals for service responsibilities to be devolved to councils as part of business rates localisation from 2020.

The Business Rates Retention Officer Steering Group, which is being co-chaired by the Local Government Association and the Department for Communities and Local Government, published a series of papers following its first meeting on Tuesday 12 April.

The devolution of responsibilities policy paper set out the options that the government is considering in order to ensure that the full devolution of all £26bn of business rates from 2020 is cost neutral. It confirmed that ministers are considering that public health funding and administration of

Housing Benefit for pensioners be among the areas devolved, totalling over £3.2bn.

“The functions and responsibilities devolved to local government as part of the reforms will set the shape and form of local government for the future,” the report stated.

“This reform presents an opportunity to enhance authorities’ role in promoting growth and service provision. The aim should be to produce a package of devolved responsibilities that fit well with the local government system in England.”

Key to the discussion is the question of how much money will be available once pre-existing commitments are taken into account, with half of the total yield already used to fund local government. Early work is underway to establish a starting position, and an analysis will have to identify the cost of any new functions and the future pressures they could create for local government, alongside existing pressures within the system.

Devolution will also be intended to build on the strengths of local government, support the drive for economic growth and improved outcomes for service users or local people.

According to the report, a number of local authorities have expressed an interest in the devolution of skills, employment and wider transport funding, to give local government the flexibility to respond to local needs and drive local growth.

It called for views on these areas for devolution, as well as other possible options.

“Wider evidence and views provided to the LGA and DCLG are welcome and will be used to consider all of the options,” it added.

The report also confirmed that some authorities have called for elements of the new finance system – including redistribution of business rates to form the baseline from 2020, the management of volatility and the safety net – to be managed at a regional, sub-regional or combined authority level.

Such an approach will be considered, the paper stated. Carolyn Williamson, director of corporate resources at Hampshire County Council, has told Public Finance that the 15 councils of the Hampshire and Isle of Wight partnership wanted to take such local control.

The papers also revealed that in designing the 100% rates retention scheme, consideration will be given to whether tiers of local government that do not receive funding from the current 50% devolved share, such as combined authorities, should be funded through rates.

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