Stockton's Infinity Bridge

North East Councils' reaction to Government announcement on Local Government Resource Review

19 December 2011

The Department for Communities and Local Government has today announced its response to the consultation on proposals to localise Business Rates, which North East Councils made a detailed response to earlier this year (24 October), outlining issues of concern for authorities in this area of the country.

Whilst the full impact and implications of the Government's response have yet to be considered in detail, several of the areas highlighted by ANEC for consideration are addressed and reflected in the document released today. Given that all 12 councils in the North East will be 'top up' authorities, ANEC welcomes the statement that tariffs and top ups will be up rated by RPI Business Rates multiplier, so that - as stated in the Government's response - a major part of 'top up' authorities' income within the scheme is not eroded in real terms. We also welcome confirmation that Government will adopt the option for up-rating baseline funding levels by RPI. The commitment given to update all existing datasets and consider limited technical adjustments to the relative need formulae for the cost of rural services and concessionary travel and to look again at resource equalisation prior to further consultation is also positively received by ANEC authorities. Resource equalisation was one of the key issues highlighted by ANEC in its representations to Government to help mitigate the risk of the development of a postcode lottery in the provision of vital services.

In this context, the starting point for the implementation of any new funding system is critically important and should be fair from the outset. ANEC is disappointed, therefore, that the Government is opting to adopt the 2012/13 baseline.

Commenting on this aspect of today's announcement, Cllr Paul Watson, Chair of ANEC said: "Equality and fairness in service provision has to be the same for people across the country no matter who they are, where they live, or how their local economy is performing. The Government understands that council services must not be placed at the mercy of economic output, which is affected by a range of forces often beyond the control of councils. The adoption of the 2012/13 baseline for the new funding arrangements will be challenging for North East authorities as this reflects a finance settlement which has resulted in above average reductions in cash grants over the last two years."

Cllr Watson said he was also concerned that the aspiration for a ten year 'reset' period for top ups and tariffs would prove difficult, given the current economic uncertainties, advocating instead that there should be built into the new arrangements, regular assessments of impacts, fluctuations, demographic profile and changes in needs and resources.

In relation to economic volatility, Cllr Watson said: "Every council in the North East is focusing its efforts on economic growth and stability, but having in place adequate safety nets will be critical for places like the North East where the economy is fragile and has further to go. We need to have assurances that there will be adequate mechanisms for dealing with major economic shocks that are outside a council's control, such as the one we have experienced recently in Northumberland with Rio Tinto's announcement to close its aluminium smelter plant in Lynemouth."

Finally, Cllr Watson said: "Today's announcement provides some clarity in relation to the Government's proposals for the future funding of councils, though the devil will be in the detail. There are a number of areas, such as in relation to resource equalisation, use of more recent data and in relation to funding mechanisms such as Tax Increment Financing, that we would wish to enter into further discussions on. ANEC is offering its full support to Ministers and Civil Servants over the coming months to influence policy decisions in advance of the implementation of new arrangements in 2013, to best meet the needs and circumstances of this area of the country."

For further information please contact Bethan Hughes on 0191 261 3917 or 07957 823 864 (mobile); email