Recommendation 3

The question of the BRRS is closely related to the debate about the longstanding role of equalisation in how local government in England is funded. Whilst the purpose of equalisation is to ensure fairness between councils, there is little agreement on the appropriate level: 100% equalisation would provide local authorities with no incentive to build up their tax base, whereas no equalisation would leave some councils chronically underfunded through no fault of their own. The system of local government finance should both enable councils to increase revenue by growing their tax base and protect those in more deprived areas. Rules about equalisation need to be transparent, comprehensible and predictable.