Fairer Funding Review: making your voice heard


By Caroline Lee, CIPFA Benefits and Revenues Advisor

The current self-sufficiency consultation on business rates focuses on the approaches and decisions to be taken around the new scheme. However, it is essential that thought is also given to the call for evidence on needs and redistribution that was published simultaneously and shares the same deadline date. 

There is a worry that with the depth of detail needed on business rates this call for evidence will become forgotten – and authorities will have missed the opportunity to influence this important piece of work.

What makes this review and the accompanying business rates consultation such a challenge – apart from the complexity of the subject – is the need to involve a number of people in the discussion. Those charged with writing the response will often need to have a draft ready for late August if they are to stand any chance of getting it through internal approval. With holiday season upon us that is no small expectation.

The focus is shifting

With the changes in business rates there is a shift from a funding system which is focused on relative needs to one which provides an incentive to promote local business growth. However this change in approach places some authorities that are more grant dependent and less able to generate income in a more vulnerable position. 

This funding shift forces everyone familiar with the changes to consider the role of equalisation and how we are able to balance incentive with balanced distribution. Understanding need is an essential element in this debate.

Therefore it was not surprising that when the government announced the local government finance settlement for 2016/17, it also announced its intention to conduct a fair funding review, with Greg Clark saying in February 2016:

“There is good reason to believe that the demographic pressures affecting particular areas – such as the growth in the elderly population – have affected different areas in different ways, as has the cost of providing services. So I can announce that we will conduct a review of what the needs assessment formula should be in a world in which all local government spending is funded by local resources not central grant, and use it to determine the transition to 100% business rates retention.”

What’s in the review?

The review will look at the relative needs and resources of councils across England to determine a relative needs assessment formula to be used following the implementation of 100% business rates retention. The outcome of the review will establish the funding baselines for 100% business rates retention and this is a key part of the funding scheme when the new business rates system is finalised.

Think back a couple of years to all those diagrams about business rate baseline versus needs baseline and remember how your funding was allocated.

Top of the list for your comments are key questions including:

  • whether the distribution of funds to local authorities should be based on simple or complex formulae
  • how to measure relative need
  • whether the assessment of needs should be carried out over a wider geographical area – eg combined authorities.

Hopefully the sector will not be limited to the questions on the page but will take the opportunity to take a high level view of the challenges faced and present a strong body of evidence to make sure the solutions are long term and sustainable. 

However the task is approached, those charged with delivering this will already have recognised that time is not on their side, and that initial draft deadline will be looming.

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