Rate This Page
Print
10-05-2006
Comments on the proposal to return Scottish non-domestic rate setting and retention to local authority control
DOWNLOAD THE RESPONSE IN FULL [PDF document, 171K]
1. GENERAL COMMENTS
1.1. The general principle of the Member’s proposal is one which CIPFA has supported for a number of years. At the outset, the position of CIPFA can be clearly stated, which is that:
• Non-Domestic Rates should be returned to the formal control of local authorities. The aim of this should be to work towards a balance of funding, of which more than one half is within local authority control.
1.2 CIPFA’s views on NDRI and other elements of the local government finance system are summarised at Appendix 1. These represent extracted comments from CIPFA’s submission to the independent Local Government Taxation Review Committee in March 2005.
1.3 The author is seeking comments to help him finalise the proposal to re-localise non-domestic rates. This consultation will undoubtedly result in a number of responses, which may show the historic positions of stakeholders developed over many years. In agreeing at the outset with the proposal, CIPFA believes that the time is right to consider more wide-ranging questions, and to seek a modernised solution to this ongoing issue.
Partnership with business
1.4 The return of NDRI to local government has long been seen as a way of re-establishing its links with the business community. Recent public sector reforms, however, have introduced a number of new ways for delivering public services, which have themselves now become established, for example:
• PFI;
• BIDS; and
• the use of independent residential care homes.
1.5 The common characteristic is that all of these methods of public service delivery rely on a partnership between the public and private sector.
1.6 In our detailed comments, we cover some of the comments made by business to the Lyons Inquiry, which indicate that some businesses are willing, under certain circumstances, to pay more proportional tax. Evidence exists which demonstrates that the domestic taxpayer has made a larger contribution to the cost of local government services over time. This is expressed in section 3 of this submission. It would be unfortunate if the intention of this proposal were simply to transfer this contribution to the business community, without any discussion about the benefits which arise from closer working with the business community.
1.7 Financial planning at a macroeconomic level, including funding mechanisms, is there to support and ensure the achievement of all strategic Scottish public service goals. Any review of local government taxation which fails to take account of these wider issues may serve the status quo, but not the progressive direction of Scottish public services. The opportunity exists, with the return of NDRI, to consider more fundamentally the role of business not only in terms of meeting the public sector’s goals, but also in working to achieve wider economic objectives. Similarly, there is an opportunity to consider the investment which should be made by local government to support business – by whom and on what. This is particularly relevant to the community planning role of local government.
Accountability
1.8 The proposal is “designed to return to democratically elected local authorities the power to set and retain NDR in pursuit of greater local authority accountability and financial autonomy”.
1.9 The partnership models described above have existed within a method of accountability which favours the individual (the council tax payer). That same level of accountability is not afforded to business partners (the non-domestic ratepayer). One of the consequences of this unequal relationship is that tension between public and private sectors has long been a feature of the non-domestic rate. If today it is now recognised that public services can be delivered by a range of business partners, then these tensions should as a minimum be “designed out” of any reformed system and replaced by an approach to accountability which reflects that service delivery partnership.
1.10 Consequently, any finalised proposal will need to set out in more detail how it will lead to greater accountability and financial autonomy. In CIPFA’s detailed comments, the inadequacy of the current accountability arrangements for NDRI is set out. Fundamentally, the draft proposal does not yet discuss reforms which will ensure that accountability is improved by the return of the rate.
1.11 Notably, irrespective of whether the proposed member’s bill is successful, in CIPFA’s opinion there is a need for this “accountability deficit” to be addressed.
1.12 In the following section, we have set out our initial thoughts on the specific questions which consultees are invited to comment upon. In some instances CIPFA poses some additional questions within its comments. CIPFA believes that seeking the answers to these questions, or at least being able to demonstrate that answers have been sought, will make the final proposal more robust.
DOWNLOAD THE RESPONSE IN FULL [PDF document, 171K]