Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 3
3
Paragraph: 25
The question of the BRRS is closely related to the debate about the longstanding role...
Conclusion
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.
Paragraph Reference:
25
Government Response
Acknowledged
HM Government
Acknowledged
The Government announced last year that it would not proceed with the implementation of the Review of Relative Needs and Resources (formerly the Fair Funding Review) and 75% Business Rates Retention in 2021/22. We also decided not to reset accumulated business rates growth in 2021/22. These decisions have allowed both the Government and councils to focus on meeting the immediate public health challenges posed by the COVID-19 pandemic, driving forward recovery and maintaining critical services. This decision was broadly welcomed across the sector. We now need to take stock of the impact the pandemic has had on both local authority resources and service pressures to determine the direction of local government finance reform. Decisions on the way forward will be taken at the ongoing Spending Review.