Funding for district councils

by Harry Fone, Grassroots Campaign Manager

Funding for local government has been a major issue in recent years and one that continues to divide opinion. Indeed, the TPA recently held a debate considering
whether councils should spend taxpayers’ money on commercial property and investments. Councillors Ferris Cowper and Gerald Vernon-Jackson - representing different political parties - argued passionately that their models, a combination of service sharing and commercial investment, have seen public services improve and council tax bills go down.

So it was interesting to read the transcript of a recent parliamentary debate led by Mark Pawsey MP, analysing the importance of district councils and the financial pressures they face. As a former district councillor for Rugby, Mr Pawsey is a passionate advocate for district councils: “there are 192 district councils. In two-tier areas, they deliver 86 of 137 essential local government services to 22 million people, which is 40% of the population. District councils cover 68% of the country by area.”

On funding for district councils, he restated that: “All councils have had to work hard to achieve more with less. Between 2010 and 2020, councils in England will have lost almost 60p of every pound of central Government funding. For district councils, that equates to almost £1 billion.”

He called on the government to find the “right level of funding for local government” and cites his own local council: “Rugby Borough Council, for example, tells me that it faces several risks from the forthcoming funding reform and has concerns about whether it can continue to deliver the high level of services it provides.”

In part I agree that a stable funding model needs to be found for local government. The current system clearly isn’t working, as I hear time and time again on TPA action days around the country. But before talking about how councils should be funded, we should ask what they do with the funding they already receive.

In this, Rugby is a good case study for many councils around the country. They don’t have an unblemished record of looking after taxpayers’ money. Back in November 2018, it was revealed that the council had “invested” £1.2 million into a rugby museum to celebrate the birth of the sport in the town after which it is named. Unsurprisingly the museum was a flop, as all too many council investments are - ticket sales were woeful and taxpayers’ money was at risk. This is the flip side to the case so brilliantly presented by Councillors Cowper and Vernon-Jackson.

Leaving that aside, Mr Pawsey does make some excellent points when it comes to how they should be funded - and councils retaining more of the revenue that they raise. Currently councils are only able to keep 50 per cent of revenues raised from business rates, while the remainder is funnelled back to central government. The government aims to increase this retention rate to 75 per cent for 2019/20, although currently there are few encouraging signs of this happening. This uncertainty is doing little to instill confidence in many councils, as noted in a report last year by the Housing, Communities and Local Government Committee.

Ultimately, the government’s plan is for councils to retain 100 per cent of business rates and this is something the TaxPayers’ Alliance very much supports. But officials need to get a move on. The Ministry of Housing, Communities & Local Government should stop dragging its heels and give councils a clear timeline on its plans for business rates retention.

While we wait, money is being wasted and councils can still do more to eradicate wasteful spending. Our press office receives many requests every week for comments on stories about local councils wasting money. So many in fact that I have a special section of the TPA Weekly Bulletin dedicated to them.

There are many different views on local government finance models. Some councils embrace commercial property investments with great success; others get it badly wrong. Mr Pawsey is a respected advocate for district councils. In the coming months, the TPA will be publishing work analysing the benefits and drawbacks of the unitary model. But whatever the preferred approach, most will agree that what councils need is the certainty to calculate their long term financial plans.

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