Resource review risks costly two tier system

The Government’s Local Government Resource Review consultation paper asked the question:

“Do you agree that the current system of business rate reliefs should be maintained?”

Taken at face value this implies that the current mechanism, whereby central government funds local government for discretionary and mandatory relief granted to charities and not-for-profit organisations, should continue.

However, the detail of the consultation question makes it clear that the Government is only considering continuing to provide funding for current reliefs that are funded, via adjustments to tariffs and top ups. There is no guarantee that the Government will continue to offer local authorities support for mandatory and discretionary reliefs granted after the new scheme has begun.

This runs the risk of two potential scenarios:

• A two-tier system of reliefs being granted by local authorities – those granted prior to local retention of growth in business rates and those granted after. The ones granted after could potentially be subject to a much lower level of relief.

• A post implementation approach to the granting of discretionary relief which is much reduced compared to the current system as local authorities will be unable to afford to continue funding these reliefs. In order to ensure consistency, this could see organisations that currently receive discretionary relief having it removed.

With the current financial climate that Councils find themselves in, there are already some authorities who feel they cannot afford to continue to grant discretionary relief. If central government no longer funds mandatory or discretionary relief related to charities and/or not-for-profit organisations then local government will be even less able to afford this in the future.

The potential impact on charitable and not-for-profit organisations under the current proposals for the new scheme is significant. Local authorities might urge the Government to reconsider its proposals and agree to continue with the current approach of fully funding mandatory relief and part funding discretionary relief. This will ensure that invaluable third sector organisations continue to receive the levels of support that they currently rely upon.

One of the Government’s headline aspirations on coming to power was the development of the Big Society and the use of charities and the third sector to help deliver public services. If the Government no longer funds mandatory and discretionary relief for these organisations then the development of the Big Society risks being drastically reduced.

In addition, if all schools that convert to Academy status are awarded at least mandatory relief, then this could also be a significant drain on local authority resources, removing even more funding from crucial front line services.

Greater Birmingham and Solihull LEP Finance Officers

Contact: Paul Johnson, Director of Resources, Solihull Council (pjohnson@solihull.gov.uk)

These, and other challenges facing local public services will be the focus of discussions at the SOLACE Summit in Coventry on 16-18th October. More information and details of how to book are available here.

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