Transcript Localising Support for Council Tax

Local Government
Resource Review
Simon Ridley, 16 September 2011
Coalition Agreement
“We will promote the radical devolution of power
and greater financial autonomy to local
government and community groups. This will
include a review of local government finance.”
“We will provide incentives for local
authorities to deliver sustainable development,
including for new homes and businesses.”
The context
LOCAL GROWTH
• Central to economic
strategy.
• Wide ranging programme
of reform to encourage
closer partnership with
private sector and support
for economic growth in
localities.
DEFICIT REDUCTION
• Government’s top priority.
• Taxpayers were paying almost
£120 million a day (£43 billion a
year) in debt interest - more than
council tax, stamp duty and
inheritance tax combined last
year
LOCALISATION
• Coalition principles of
increasing freedom and
sharing responsibility by
localising power and funding.
• De-ringfencing of funding,
abolition of top-down targets
and inspection regime
WELFARE REFORM
• Reforming the welfare
system - to make it fairer,
more affordable and better
able to tackle poverty,
worklessness and welfare
dependency
Key announcements
SPENDING REVIEW 2010
• Support for council tax localised from 2013-14
• Spending reduced by 10% from the same date (Around £500m p.a.
across GB). Funding to be switched from AME to a DEL grant.
• Reform should protect the most vulnerable – and support
improved work incentives to be delivered through Universal
Credit.
LOCAL GROWTH WHITE PAPER 2010
“Local business rate retention will be considered within this review,
which we intend to launch in January after a period of consultation on
the proposals in this document. This is a
significant opportunity to consider a range of options to provide
genuine incentives for local economic growth through the business
rates regime, and to equip local authorities with the tools to support
that role.”
Government's proposals –
Council Tax
Give local authorities a greater stake in the economic future of their local
area, and supporting the Government’s growth agenda.
Opportunity to reform and simplify the system of support for working age
claimants.
Reinforce local control over council tax - consistent with a drive for greater
local financial accountability.
Give local authorities a significant degree of control over how 10 per cent
reduction in expenditure is achieved.
Contribute to the Government’s programme of deficit reduction.
Give local authorities a financial stake in the provision of support for
council tax - creating stronger incentives for councils to get people
back into work.
Government's proposals –
Council Tax
• Support will take form of discounts within the council tax system
• Government will set broad parameters in which local schemes to be
designed, including:
• the framework for support for eligible pensioners
• the importance of supporting incentives to work
• New Government grant to local authorities (at the moment council tax
benefit spend is just under £5 billion across Great Britain).
• Local authorities free to collaborate to reduce costs and develop
schemes that support shared priorities
• Data sharing will reduce administrative costs and complexity.
• Mechanisms to manage financial pressures through the council tax
system
Protecting Vulnerable Groups
• Reform taking place within a wider programme of welfare reform to
help move people back into work.
• But some groups will be protected- in particular pensioners - who would
struggle to pay council tax without support, and whom the Government
does not expect to work to increase their income.
• Government proposing to control system of support for pensioners - by
prescribing, for example, criteria, thresholds, award.
• Also seeking views on other group who should be protected – bearing in
mind financial implications
Supporting work incentives
• Reform is taking place in context of wider welfare reform and introduction of
Universal Credit - intended to make work pay.
• Local authorities already have strong interest in increasing employment.
• Government is inviting views on proposed national guidelines, guidance
and model schemes so that localised support for council tax and Universal
Credit work effectively together
• In addition to protect the positive work incentives and distributional impacts of
universal credit some changes to the universal credit design may be required
Key principles for incentivising people to work:
• People should get more overall income in work than out of work.
• People should generally get more overall income from working more
and earning more.
• People should be confident that support will be provided whether they
are in or out of work that it will be timely and correct, and that claiming
will not be a complicated and frustrating experience
Government's proposals –
Business Rates
To build into the local government finance system an incentive for local
authorities to promote local growth over the long term
To reduce local authorities’ dependency upon central government, by
producing as many self-sufficient authorities as possible
To maintain a degree of redistribution of resources to ensure authorities
with lower taxbases are able to deliver services in their areas
Protection for businesses and, specifically, no increases in locally-imposed
taxation without the agreement of local businesses
Components of scheme design
1: Setting
the
baseline
2: ‘Tariff’ and
‘Top-up’
Essential to give authorities on
a stable and fair starting point
THE STARTING POSITION…
Essential to
get optimal
balance
between
rewarding
growth and
supporting
services
3: Growth
Incentive
4: Levy
5:
Revaluation
adjustments
…FUTURE YEARS
7. Pooling
6: Resetting the
system
The growth incentive
By fixing the baseline, and ‘top-up’ or ‘tariff’ for each authority, the proposed scheme
provides a positive business growth incentive that will reward local action to support
economic growth. The scheme:
 Is a key aspect of wider Government reforms to encourage local growth
 Should lead to increased local consideration of local businesses and the maintenance and
support of the local business tax base
 Should reward local growth transparently.
However, to get the right balance between rewarding growth and ensuring a
sustainable funding system:
We propose charging a levy on disproportionate growth in high business rate base
authorities.
We propose a power will remain to re-set the tariff / top-up of each authority and/or the
levy periodically to take account of changing circumstances over time.
Pooling across local authorities
The approach to business rate retention will allow local authorities to come
together voluntarily to form a single pool. A pool could be able to decide
how to distribute revenues among its members.
Benefits
Enabling groups of authorities to deliver increases in
growth by taking advantage of economic efficiencies
and working across the natural economic geography
of the area.
Helping local authorities manage volatility by
sharing fluctuations in business rate revenues across
a wider area.
Key issues
Organisation and governance
The role of the pool in deciding the distribution of
resources, including those from local growth
whether incentives are needed to form pools to
encourage their formation
TIF and Enterprise Zones
TIF
proposals
Enterprise
zones
Option 1: Authorities would be free to borrow against retained
business rates revenue, including future growth. Authorities
would need to take account of levy arrangements but would be
able to plan borrowing, and any infrastructure projects.
Option 2: Additional business rates arising from a TIF project
would be retained for a defined period, and during that period,
would not be subject to levy payments, and would be
disregarded in any re-assessment of top ups and tariffs. This
second option would require government approval to maintain
resources available for rebalancing at any reset.
All business rates growth within the zone to be retained for 25
years to support the LEP priorities. To deliver this, the business
rates uplift from within an EZ will be disregarded from any levy
calculations, and will not be taken into account in any
reassessment of top ups and tariffs. This will ensure that all
growth is retained locally for the benefit of the LEP.
The road to implementation
2011
Oct
Nov
2012
Dec
Consultation
closes
Jan
Feb
Mar
Apr
May
Jun
Primary and secondary
legislation
Jul
2013
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Parameters of
rates system
Local authorities
designing and consulting
on local schemes
Local authority budget
setting
Local authorities
implementing local schemes
Schemes
go live
Apr
Getting your views heard
• We have been and are still holding 16 consultation events round the country –
covering specific aspects of the scheme. Key issues so far have included:
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Timetable for implementation (for delivery group primarily)
Protecting pensioners / vulnerable people
How work incentives can be supported
Impacts on council tax
Managing funding pressures
• We are setting up governance groups – with representatives from key
organisations – including IRRV, SDCT, SMT, SCT, SUT, London Councils, CIPFA
and the LG Group. These groups can represent your views – and provide real
practitioner input into developing proposals
• The public consultation is open until 14 October – let us know your views:
http://www.communities.gov.uk/publications/localgovernment/localisingcounciltax
consult
• Please respond to: [email protected]
• Further consultation planned on draft secondary legislation next year
Getting your views heard
Any questions? Please get in touch:
[email protected]
Katy Willison – 0303 444 1762
Jessie Hamshar – 0303 444 1761
Consultation paper, technical papers and the interactive calculator are
available at:
http://www.communities.gov.uk/localgovernment/localgovernmentfinance/lgr
esourcereview/
Responses to be sent to:
[email protected] by 24 October 2011
Local Government
Resource Review
Simon Ridley, 16 September 2011