Vic Allison on investing in the community

Vic Allison is deputy managing director and S151 officer for Wychavon District Council. He has been with the authority for seven years and before that worked at West Oxfordshire and Stratford-upon-Avon.

Room 151: Is business rates retention looking like a good incentive for your area?

Vic Allison: The jury is out on that because we have got a local pool here in Worcestershire. It’s four of the six local districts plus the county. We’re all tariff districts so would end up getting very little out of it individually but with the pool we save the levy and it gets redistributed within Worcestershire. So we have improved the pence in the pound that we get out of business rates growth from what would have been 20p to 25p directly, plus an opportunity to get the other 25p in the pound through the local scheme and stuff that we agree with our partners.

What we get back is better than it would have been had we not pooled, so that was a sensible move. What worries us on business rates though is the outstanding appeals. We have huge appeals on business rates out there, as does the rest of the country: in terms of amounts for us it is millions and millions going back to 2005 and until we are clear on where we are going with those, we can’t start to forecast with any degree of reliability what we might gain out of it.

Of course a successful appeal doesn’t mean that the businesses who have submitted the appeal pay nothing; they pay a reduced amount. So we need to take a view on the success rate and what level of reduction they’re likely to get and it very quickly becomes a guessing game. We have assumed average success and average appeals and plugged that into our model and it looks just about manageable, but there is so much potential for that to be wrong. We wouldn’t be able to cope with any of the big appeals or a large number of the smaller ones being successful, that would have a big effect on us going forward.  and we’re worried about it.

On a point of principle we are quite unhappy about it too because we are going to have to pay for all the successful appeals in respect of business rates that have been collected by central government. These appeals relate to the period pre-April 1, 2013 when the government collected 100% of business rates. So it is a bit of a bizarre arrangement, in my view: the Government has had the benefit of all the business rates before that date but we’ll be paying for 50% of any successful appeals. We’re taking a 50% risk in business rates that have been 100% collected by Government.

That doesn’t sound right to me – it’s a well trodden path of an argument. I’ve said it before and other people like the treasurer of Newcastle have said it but I think that we’re going to have to accept that we’re not going to get anywhere with it.

In terms of business rates that is the big black cloud and whatever assumptions we make could be wiped out with a successful appeal.

Room 151: When we last spoke you had a couple of letters in to Government about New Homes Bonus. Did you get anything back?

VA: We wrote to Brandon Lewis about the New Homes Bonus being rolled into our overall settlement and complained bitterly. Our core grant from the government had gone down by £400,000 this year and they responded by saying our actual spending power had only gone down by a very small amount.

Government was able to say that because they took into account that we got New Homes Bonus of £400,00-odd next year. Essentially we lost £400,000 on grant and gained £400,000 on New Homes Bonus and so they said ‘there you go, we’re quits’.

Our response was: hang on a minute, that’s a policy shift if that is the case because when New Homes Bonus was introduced it was supposed to be to reward communities for accepting new houses, not to be part of core funding. The amount came out of the local government pot but what individual councils got was meant to be a bonus. So we argued that there had been this shift in policy. We did get a response but it effectively avoided the direct question. The letter said it was up to councils what they did with their money locally.

Our MPs got quite excited about that – and they’re conservative MPs as well – and started pestering people in Parliament, in bars and cafes, saying this is not on. But I don’t realistically expect there to be any change. We’re into another round of savings next year and we have got the comprehensive spending review in 15-16 so the government will use those sorts of things to make it sound a lot less painful than it really is. It’s not on really but if I was in Government would I do the same? Probably, yes.

Room 151: Did you see the recent National Audit Office report that found the Government had made an error in its calculations for New Homes Bonus?

VA: I saw that, and there was a report that compared housing numbers now in those councils doing well out of New Homes Bonus to what it was like in the previous regime and there hasn’t been a marked improvement. So what they are saying is it is a lot of money that is not having the desired effect, i.e. prompting councils to build new houses.

Room 151: Because they’re having to channel it into frontline services.

VA: Yes. The incentive is not having the desired effect.

We quite like the New Homes Bonus, that said. What we do with it here is making a difference. We’re not using it as core funding at the moment, although we are under pressure to do so. We’re actually using it. 40% of it goes straight back out to parish and town councils for them to do what they want with it as long as we are happy with their proposals.

There have been quite a few innovative things in terms of towns and parishes using their money. That has had two effects: firstly it is providing facilities that wouldn’t otherwise be there and secondly it’s bringing together communities. It’s creating a bit more of a community ‘thing’ with people thinking more about their parish councils than they used to because they have now got lots of money to spend on good causes. So not to sound too cheesy but it is building community spirit and it is providing facilities.

So we quite like it and we quite like what we are doing with it. What we don’t like is the Government’s assumption that now it is there to provide core services, which is not what it was originally intended for.

Room 151: How is your sharing services going?

VA: Yes, we’ve done that to death now. We’ve got shared services for revenues and benefits, IT, building control, regulatory services. We provide HR to Malvern Hills DC, we provide land drainage to county, Worcester and Malvern. There’s very little that isn’t shared here and what’s left is housing and planning and even that we are looking at to see what is possible.

At the moment, we’re looking at our revs and bens which we did the shared service for five or six years ago and now we’re looking at finding a strategic partnership to take that forward. We are down to two companies, Civica and Capita, who will take the staff and service on, grow it and bring in other councils and other work. A lot of that is about protecting local jobs as well as making money.

Five or six years into sharing services we are making savings of a million a year between us, Malvern Hills and Worcester City. The next place to take it to is what can the private sector bring to the party. We tried to get new bits in ourselves but we think that Capita or Civica will bring with them a whole long list of councils that they already have relationships with. We think that will be a success and then we can apply that to other shared services we have.

Room 151: Your council has just given planning permission for a 19 acre solar farm hasn’t it?

VA: Yes. It’s a private venture and we are looking at investing in it.

Room 151: Why?

VA: We like investments that pay a reasonable return and we like supporting projects that are a good cause. We’re the council that has built a superstore for Waitrose and a hospital for the PCT: it’s a good thing to do for the local economy but it’s also a good financial return for the council, those investments deliver us a rate of interest way over what we would get on the money market.

Room 151: How do you invest? Do you borrow?

VA: No, we’ve got capital receipts from the sale of council houses, we’re still cash-rich. Rather than have capital on money markets at 1% if we are lucky we invest in projects. It has to be a good thing for the community though, so hence the hospital, the superstore and, potentially, the solar farm.