Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Government has had plans to enact a range of local government financial reforms for a...
Conclusion
Government has had plans to enact a range of local government financial reforms for a number of years, but these have not yet been introduced.55 Witnesses from the sector were clear that this reform was still required. The Society of Local Authority Chief Executives (SOLACE) described current arrangements as “a very broken system”.56 However, CIPFA raised questions over whether simply restarting the previous planned reform arrangements to increase the share of locally retained business rates to 75% and design a new funding allocation model were appropriate in the light of the impact of the pandemic. Manchester City Council explained that a key issue was the uncertainty over the impact that the pandemic has had on business rates over the long-term. This was in addition to existing concerns, expressed by SOLACE for instance, over whether a business tax system based on physical properties was effective in the context of the rapid growth of online business activity. As a result of the pandemic local authorities expect to collect £1.6 billion less from business rates for 2020–21 than budgeted.57
Government Response
Acknowledged
HM Government
Acknowledged
6.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 6.2 The government will set out the future plan for local government funding at the 2021 Spending Review. The government has been clear that in determining a way forward, it will need to take stock of the impact the pandemic has had on both local authority resources and service pressures to determine the appropriateness of the previous proposals for local government finance reform. Equally, the government will want to ensure that local government is able to play a vital role in levelling up. 6.3 The timing of this exercise and our response to this recommendation is therefore subject to the conclusion of the upcoming 2021 Spending Review.