• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • Slough welcomes commitment that Office for Local Government ‘will not be a burden’

    June 30, 2022

  • Homes England agrees strategic partnership with two authorities

    June 29, 2022

  • Soaring inflation and pay pressures to add £3.6bn to council budgets

    June 28, 2022

  • Underfunded social care reforms could ‘exacerbate workforce pressures’

    June 27, 2022

  • Nottingham City Council leader labels proposed intervention as ‘disappointing’

    June 27, 2022

  • Government preparing to intervene in Nottingham City Council

    June 23, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Richard Harbord: The difficulties of fiscal neutrality

0
  • by Richard Harbord
  • in Blogs · Richard Harbord
  • — 13 Jun, 2016
Richard Harbord

Richard Harbord

As Local Authorities finalise their accounts it is no surprise they turn their minds to the next financial year. For many authorities this will fail to bring any joy, or relief, from the burden of austerity.

And when the the past year’s figures are eventually published it will be fascinating to see whether the majority managed to end the year within their original budgets.

———————————————————————-
8th Local Authority Treasurers Investment Forum
———————————————————————-

I suspect there may be fewer for 2015-16 and I also suspect that non-earmarked reserves will not have risen.

But, of course, they now turn to 2017-18 and the inevitability of yet more “savings” to balance the books.

Brave new worlds

This summer will bring the discussion papers on the 2020 changes to financing local government – the brave new world where authorities will no longer rely on central government grant to finance services as business rates are fully devolved.

It has been confirmed that the changes will be fiscally neutral although that is not an idea shared by local authorities and central government alike.

The Chancellor is clear that local authorities receiving the full quantum of business rates will also acquire

Budget: The Chancellor George Osborn will deliver his second Budget this year in July

The Chancellor George Osborn

sufficient new services, or diminished specific grants, to ensure that the central coffers pay no more in total in local government support.

Local authorities, meanwhile, are keen to ensure that any new burdens are not included and that they receive sufficient additional funding to cover them.

For instance although the Local Government Association believe that it is almost inevitable that local authorities will take on Attendance Allowance, this should not happen without additional funding to match.

Slicing the cake

The difficulty about all this is how the funding cake is sliced in order to meet the unequal needs of local authorities. This is the objective of the sub group of the joint DCLG/LGA steering body, a group that is bound to toil away for a considerable time before it is able to reach a conclusion.

It will of course be complicated and the end result will inevitably fail to please all. It is the first really comprehensive review of needs for many years.

The original revenue support grant was based on a complicated regression analysis which tried to bring together as many as 50 measures of need. Each year it came with its own industrial effort to re-negotiate the measures.

Simples

Already there has been talk of a simple solution. The trouble is how accurately you wish to measure the needs of local authorities comparatively?

In the past simple solutions were seen as being rough and ready, not fair to all. To be equitable to all authorities needs a comprehensive solution which simply may not be possible.

How anyway do you measure need? A suggestion was that the starting point should be an analysis of historic budgets. But does this in anyway measure need, or does it just measure the outcome of pragmatic spending decisions drawn up to meet available resources?

In addition the picture is complicated by the business rates debate, which is difficult because of the piecemeal nature of devolution deals, many of which have allowed authorities to retain 100% of business rates already.

Interestingly the National Audit Office, in its study of devolution funding could find no common thread in the way they had been calculated. The NAO said that “deals agreed did not give a clear view of the landscape or, crucially, the destination.”

One of the other interesting things that will come out when the detailed budget statistics for 2016-17 are published is the degree that authorities have provided for the outcome of business rate appeals.

Anecdotal evidence is that there are huge variations in the risks taken by authorities in this area.

There is also a feeling that central government should shoulder some of the retrospective payments made on appeals and indeed many argue that to remove this whole area of uncertainty central government should underwrite losses on appeal entirely. I think that will be difficult within a regime of fiscal neutrality.

Richard Harbord is a consultant and a former chief executive of Boston Borough Council.

Share

You may also like...

  • Why infrastructure assets are the ugly ducklings of capital accounting 28th Apr, 2022
  • Local government investment balances rise as PWLB borrowing falls 19th Mar, 2021
  • An ethical charter for responsible investors 18th Oct, 2021
  • Cryptocurrencies: Are they an asset class for LGPS funds? 6th Jul, 2021

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • Homes England agrees strategic partnership with two authorities
    • Soaring inflation and pay pressures to add £3.6bn to council budgets
    • Underfunded social care reforms could ‘exacerbate workforce pressures’
    • Nottingham City Council leader labels proposed intervention as ‘disappointing’
    • Government preparing to intervene in Nottingham City Council
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 5 hours ago

    Hillier confirmed as keynote speaker for LATIF/FDs’ Summit: Dame Meg Hillier, chair of the Public Accounts Committee, has been confirmed as a keynote speaker for Room151’s combined Local Authority Treasurers Investment Forum (LATIF) and FDs Summit. The… dlvr.it/ST70F7 pic.twitter.com/hxV676Iley

    Room151 6 hours ago

    Councils’ funding at risk due to ‘undercounting’ in census data: Population estimates in London and Manchester may have been significantly underestimated in the 2021 census potentially threatening government funding for frontline services in these… dlvr.it/ST707J pic.twitter.com/VncIyaXa01

    Room151 2 days ago

    Gove at LGA: councils to receive two-year financial settlement: Michael Gove has announced that councils will receive a two-year financial settlement from next year to provide authorities with “financial certainty” and allow them to plan ahead. The… dlvr.it/ST0kSV pic.twitter.com/wxL3UM4sGO

    Room151 2 days ago

    LGPS valuations: the digital journey: Rob Bilton explains how technology is helping to deliver one of the most complex data exercises in the world of public sector pensions. The 2022 valuations for LGPS funds in[...] dlvr.it/ST0kMq pic.twitter.com/VxjSPC2Uvo

    Room151 6 days ago

    Conrad Hall: ‘more sophisticated’ regulation needed for local government: The chair of the CIPFA/LASAAC Code Board has questioned the sophistication of financial regulation in local government and the continuing focus of the Department for Levelling Up,… dlvr.it/SSnPBV pic.twitter.com/G5d7JCWF8c

    Room151 1 week ago

    Slough Council approves plans to restructure finance department: Slough Borough Council has approved plans to restructure its finance department to enhance capacity and capability and to address a “significant weakness” in the function. The local… dlvr.it/SSf8DG pic.twitter.com/l5lmyHmkBg

  • Register to become a Room151 user

  • Previous story News round-up: Record low for 10-year gilts, Bond agency banks, Croydon’s 1,000 homes, London CIV award, shared service deal
  • Next story James Bevan: The bond market ‘supernova’

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares