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CIPFA, the Chartered Institute of Public Finance and Accountancy, has said that there are inherent tensions at the heart of the plan to allow local authorities to retain 100% of local business rates, which will have to be managed carefully if it is to be a long-term success.
In its response to the Department for Communities and Local Government’s (DCLG) consultation Self-sufficient Local Government: 100% Business Rates Retention, CIPFA agrees the proposal is a positive step towards greater financial autonomy for local authorities. However, the long-term opportunities come with a number of short- and medium-term challenges.
CIPFA’s response to the consultation includes eight key points:
Sean Nolan, Director of Local Government at CIPFA, said: “The move to 100% business rates retention is not simply a technical matter, but represents a step-change in how all our vital local government services will be funded in future.
“The long-term opportunities for local government come with short-term challenges and trade-offs will need to be made if the reforms are to succeed. The launch of the scheme could coincide with a major shift of resources between councils and thereafter, and at the heart of those challenges is the trade-off between those areas with strong local business rates prospects and those where the reverse is true.
“Fundamentally, that will raise the inevitable question as to what is considered to be an acceptable level of divergence over time in local spending power between local councils and areas as part of a national funding framework.
“We must also consider the risks and challenges around the volatility of business rates income. The final design must be thoroughly stress tested, not just on day one, but over time, so that changing pressures and business rate profiles can be fully assessed.”
CIPFA's full consultation response can be viewed here.
For media enquiries contact the CIPFA press office on T: 020 7543 5830/07833 091 303 or email E: firstname.lastname@example.org
The Chartered Institute of Public Finance and Accountancy (CIPFA) is one of the leading professional accountancy bodies in the UK and the only one which specialises in the public services. It is responsible for the education and training of professional accountants and for their regulation through the setting and monitoring of professional standards.
Uniquely among the professional accountancy bodies in the UK, CIPFA has responsibility for setting accounting standards for a significant part of the economy, namely local government. CIPFA’s members work (often at the most senior level) in the public service bodies, in the national audit agencies and major accountancy firms. They are respected throughout for their high technical and ethical standards and professional integrity. CIPFA also provides a range of high quality advisory, information and training and consultancy services to public service organisations. As such, CIPFA is the leading independent commentator on managing and accounting for public money.