Agenda item

As part of the 2019/20 Local Government Finance settlement the MHCLG issued two high level consultation papers with responses due back on 21^st February. It is proposed that a presentation be made to the Select Committee detailing the proposals that have been put forward and the Committee provide comments and make suggestions for the proposed response.

The Committee was taken through two consultations issued by the Ministry of Housing, Communities and Local Government (MHCLG); one on the Fair Funding Review and one on Business Rates Retention. The Fair Funding review was what the government thought we need to spend and the Business Rates Retention was on how we could raise the money. This also related to the transitional arrangements for the new funding regime.

Business rates would be the Council’s new form of funding. The government was committed to giving local authorities control of their business rates (75% by 2021). However, people putting in appeals on their business rates was the biggest issue facing the council and therefore it had to maintain a contingency fund for this.

The Fair Funding Review

The Fair Funding Review looked at the relative needs of local authorities (presentation attached); this was the amount they needed to spend on services. They were also looking at relative resources, i.e. how much councils could raise locally, but not through the business rates. And, using various formulas worked out our funding needs.

The Committee made the following suggestions to put into the consultation response on relative needs:

1)    Could we include the cost of ‘flytipping’ to the council, especially as we were a rural council close to London particularly prone to this and it was an increasing problem.

2)    Could we also include the cost of pollution, especially now that we have the Special Areas of Conservation (SACs) in our area; could we get costs for this.

3)    Could cost for the provision of services for an aging population be added, as we had a lot of people who move out here when they retire.

The Committee made the following suggestions to put into the consultation response on relative resources:

1)    That we recommend that the government use the actual amount of our Council Tax figure rather than a notional amount.

2)    Recommend that the government did not use a “one size fits all” formula, and have a variation of schemes across the country. We would like to have an adjustment based on our Council Tax level and not a general regional one.

3)    We recommend that we go with an average collection rate.

4)    That Fees and Charges not be taken into account, only Council Tax.

5)    The Committee were happy with the 4 principles used, that of: Stable, Transparent, Time Limited and Flexibility.

The Committee had asked what period of time would this scheme last for. They were told that it would start in 2021 and probably be for a 4 year period. They went on to ask how would this would be paid and was told that it would probably be a fixed sum paid in 2021.

The committee noted that Councillor Mohindra would also be asked for his views on this scheme. There was a very tight deadline for getting our views back to the MHCLG. Hopefully with a 4 year assessment it would make long term planning easier.

Business Rate Retention

R Pavey took the Committee through the consultation on business rate retention. He noted that although we collected about £36million in business rates we only kept £3.2million. Responding to a question he said that we could not invest it in savings accounts due to the low interest rate and the quick turnover of the fund.

Asked if we could make recommendations to the government on how we can collect owed business rates from local failed companies, Mr Pavey said that this was a long standing problem. It took a long time to recover this money and the government was aware of this; but we were constrained by company law.

Asked if there was any transparency as to how the business rates were spent, Mr Maddock said that was difficult to answer as it went into a general account to fund council services, nothing specific could be pointed to.

R Pavey went on to say that the government wanted to reward economic growth and in 2020 our business rate position would be baselined and any growth would be measured from there and then be reset again after a year. However, some local authorities had lost a lot of their business rate income and the government was reviewing the levy and safety net arrangements. They would also be bringing in the concept of “Extraordinary Growth” but we were not aware of how this would work at present.

Mr Maddock noted that we had benefitted by the sum of £613k by currently being a member of the Essex Business Pool.

It was also noted that Business Rate appeals are funded out of the council’s own funds but future appeal losses were unknown as the VOA IT system was problematic for appellants.  

We would transition into the new system for 2020/2021 and the government had promised to work with us so the next consultation would be more useful.

Councillor Bedford thanked the officers for explaining all this to the committee. The Chairman asked the permission of the Committee to agree a draft response put together by officers which would then be sent out; this response would then be put into the Members Bulletin for information. This was agreed.

RESOLVED:

That the Chairman be authorised to agree a draft response to the consultations and that this response would be put into the Members Bulletin for information.