Public services and local government: the end of the principle of ‘funding following duties’

ABSTRACT

Recent attention to local government finance in England has focused on the substantial cuts in grant funding during the 2010–15 Parliament. However, the newly introduced Business Rates Retention Scheme, which links the distribution of central funding to business rate revenue raised in each local area, constitutes a historically significant disjuncture in the funding of English local authorities. Since the nineteenth century, with the exception of one short period, funding of English local government has followed statutory duties set by Parliament, a principle which underlay a variety of central control and audit regimes throughout the twentieth century. The new system breaks that link, implying a rejection of responsibility for local services by central government. This plays into demands for greater ‘autonomy’ currently emanating from local authorities, but this may not be a panacea for the stretched financial situation that many of them are experiencing at present.

KEYWORDS:

• Local government
• House of Commons
• local government finance
• Business Rates Retention Scheme
• central-local relations

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. The additional grant is called ‘Revenue Support Grant’ (RSG). Confusingly, before 2013–14 this term was also used to refer to the general grant as a whole; in other words, for 2013–14 RSG was replaced by SFA, which was made up of RSG and retained rates.

2. The overall allocations to each authority under the 2013–14 SFA were set with reference to the average formula grant (RSG) received by each local authority in 2011–12 and 2012–13. For each authority, after the tariff or the top-up was applied to the authority’s 50% share of the business rate revenue, the RSG to be added to the remaining business rate revenue was calculated so as to arrive at the ‘correct’ overall amount of SFA. In effect, the move to the BRRS was intended to not in itself cause any change to a local authority’s budget level.

3. See DCLG, Business rates retention: policy statement, 2012, p.24, which suggests that a new needs assessment will take place when the retention scheme is reset in 2020. However, no detail is yet available of what this will involve.

4. Brandon Lewis, Oral evidence to Communities and Local Government Committee, 27 January 2014, pp. 3–5

5. Brandon Lewis, Oral evidence to Communities and Local Government Committee, 27 January 2014, p. 4–5

6. The former leader of Birmingham City Council, Sir Albert Bore, stated in 2011 that the reductions in local government grant funding planned for the 2010–15 Parliament marked ‘the end of local government as we know it’.

Additional information

Notes on contributors

Mark Sandford

Mark Sandford is a senior research analyst in the House of Commons Library, covering local government structures and finance and English regional devolution. He recently participated in the Political Studies Association’s Commission on Informal Governance, and advised a recent research project piloting Citizens’ Assemblies in Sheffield and Southampton which examined the issue of devolution within England.