Delays to introducing 100% business rates retention mean government must take urgent steps in the forthcoming local government settlement to stop councils facing financial breaking point, according to the Local Government Association (LGA).
Plans for 100% rates retention to be up and running by the end of the decade were dashed after the Local Government Finance Bill was scrapped in the wake of the June general election.
But councils still face cuts to central government grants which were slated to dovetail with the planned rates retention regime.
LGA senior vice chair Nick Forbes said: “Councils knew they would struggle to cope with the pace of government funding cuts over the next few years. It was hoped that local government as a whole keeping all of its business rates income by 2020 would ease that pressure.
“With those plans now in doubt, councils are faced with the double jeopardy of not only the money they have to pay for local services running out fast, but also huge uncertainty about future funding after 2020.”
The LGA said councils will see central government funding cut by another £2.7bn between 2018/19 and 2019/20 — a 54 % reduction. Almost half of all councils — 168 districts, counties, unitaries and London boroughs — will no longer receive a penny of this government funding by 2019/20.
The LGA has called on government to use the settlement, expected next week, to reduce the pace of reductions of core grant funding for the next two years.
In addition, it called on the department for local government to clarify its plans on rates retention.
Geoff Winterbottom, principal research officer at the Special Interest Group of Municipal Authorities(SIGOMA), told Room151 that councils are facing problems preparing medium term forecasts due to the uncertainty on future funding arrangements after 2020.
“We are still waiting for the consultation on fair funding which was due to carry on despite the dropping of the bill. We have been assured it is imminent and we need it soon,” he said.
According to Winterbottom, any move by the government to continue transitional funding which was agreed for the first two years of the current four year settlement, would be unfair.
“The purpose of the transition funding was to recognise that the change in the funding regime was dropped late in the day and some could claim they were caught out by it. They can’t claim that now, two years later,” he said.
The LGA also called on government to abolish council tax referendum limits.
In a statement, it said: “It should be local authorities and their residents to decide how local services are paid for. No other national tax is subject to referenda.”
