Developments within Local Government Finance

Cllr Steve ElingDeputy Leader and Cabinet Member for Strategic Resources

Stuart KellasDirector – Strategic Resources

Melanie DudleyDirector - Improvement and Efficiency

Key Developments

• Re-Localisation of Business Rates• Housing Revenue Account - Self

Financing Model• Localising Support for Council Tax• Public Health Transfer

Re-Localisation of Business Rates

• Proposal – to cease the current system of pooling and national redistribution of business rates income in favour of local authorities retaining the income collected in their area.

• Proposed Implementation Date – consultation ends 24th October 2011. Implementation April 2013.

• Key Impact – potential to disadvantage the most deprived communities with low business tax bases

Re-Localisation of Business Rates

Key Government Drivers• Localism agenda• Link between success of local businesses

and local authority finances. Risks To Sandwell• Heavy reliance on formula grant funding• Weaker tax base than other authorities

Housing Revenue Account (HRA) Self Financing Proposals

• Proposal – to replace the current HRA subsidy system with a self-supporting system under which there is no ongoing support from central government

• Implementation Date – 1st April 2012• Key Impact – debt liability levels will be

adjusted so that authorities will have an increase or decrease in their debt

Housing Revenue Account (HRA) Self Financing Proposals

Key Government Drivers• Localism agenda• The present subsidy system determines the

financial levels of support one year ahead only, this does not enable longer term financial planning

Risks To Sandwell• Additional HRA debt liability/ reduced ability

to fund capital projects

Localising Support For Council Tax

• Proposal - to localise support for Council Tax but more significantly to reduce the level of overall expenditure by 10%

• Proposed Implementation Date –consultation ends 14th October 2011. Implementation April 2013

• Key Impact – potential to disadvantage the most deprived communities who are reliant on such support.

Localising Support For Council Tax

Key Government Drivers

• Welfare Reform Bill – contained provision to abolish the current benefit system and allow local schemes to be developed

• Localism agenda - Reinforcement of local control over Council Tax

Risks To Sandwell• High reliance on support. Protection of pensioners

and vulnerable groups will mean that the overall saving of 10% will need to be found from the remaining claimants

Public Health Transfer

• Proposal – to transfer public health responsibilities currently undertaken by Primary Care Trusts and Strategic Health Authorities to Local Authorities.

• Implementation Date – 1st April 2013• Key Impact - Introduction of a ‘payment by

results system’

Public Health TransferKey Government Drivers• Move away from centralised, top down approach.• To provide local government and local communities

with the freedom to decide actions locallyRisks To Sandwell• The ‘payment by results’ system has the potential to

disadvantage the most deprived communities who have different starting points on their journey to better health and wellbeing.

Key messages

• Local Government Finance is facing a significant period of reform at a time of unprecedented economic uncertainty

• Challenging implications of the proposals – the full extent of which cannot yet be quantified.

What next?