Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 8
8
Paragraph: 37
We recommend that the Government widen the funding base of local government to make it...
Recommendation
We recommend that the Government widen the funding base of local government to make it less vulnerable to shocks such as the covid-19 pandemic, including by giving councils more flexibility over local taxes and other revenue-raising powers. This would also align with giving local authorities more powers over spending, which we will consider in our future report on devolution in England. Giving local government more powers to raise and spend money is a position supported by our predecessor Committee. We also recommend that the Government reform business rates, in particular by finding a mechanism by which to level the playing field between bricks- and-mortar and online retailers. This is an issue we will return to in our upcoming report on supporting high streets after covid-19.
Paragraph Reference:
37
Government Response
Acknowledged
HM Government
Acknowledged
The Government considers that the current charging regime for individual services strikes the right balance between allowing councils to raise revenue to cover the cost of providing services and ensuring that service users are treated fairly and fully informed of costs incurred. For statutory services, the power to charge is prescribed by service specific legislation, which may specify the charging framework. For discretionary services, local authorities have the power to charge up to full cost recovery provided the user has agreed to be charged and there is no pre-existing legislation governing the charging regime. If local authorities wish to charge above cost recovery for services, they are able to do this commercially via a trading company. It has always been the case that council tax decisions are taken by local authorities. In line with its manifesto commitment, the Government continues to maintain a referendum threshold to ensure that local residents can have the final say over excessive increases. The Government has set varied referendum thresholds from year to year and for different types of local authority to reflect differing circumstances, following annual consultation with the sector. The principles – which are approved by the House of Commons each year – are not a cap and it is open to an authority to set a larger increase and make the case for it to voters. The Government has also responded to requests for local flexibility through providing councils with greater discretion over a number of council tax discounts, levels of empty homes premium and the design of local council tax support schemes. Through the Chancellor’s Fundamental Review of Business Rates, the Government is considering options for reforming the business rates system. The Review’s Call for Evidence, published in July 2020, sought views on a range of potential reforms, including options for alternative taxes to either replace of complement the business rate system. Within the existing system, the Review also explored whether business rates reliefs and exemptions should be set locally, and options for greater local flexibility to adjust the multipliers. The Review will conclude in the Autumn. In addition, following the Prime Minister’s statement on 7 September, revenue from a new Health and Social Care Levy will go to local authorities.