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Changes to the Local Government Finance System 11 October 2013

Changes to the Local Government Finance System 11 October 2013. Changes to the Local Government Finance System. How the Business Rates Retention Scheme works What are its implications for FRAs. Changes to the Local Government Finance System. Local Government Resource Review:-

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Changes to the Local Government Finance System 11 October 2013

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  1. Changes to the Local Government Finance System11 October 2013

  2. Changes to the Local Government Finance System • How the Business Rates Retention Scheme works • What are its implications for FRAs

  3. Changes to the Local Government Finance System Local Government Resource Review:- • Formula Grant system ended in 2012/13 • 2013/14 saw the launch of the Business Rates Retention Scheme • 2013/14 also saw the localisation of Council Tax Benefit • Community budgets

  4. Changes to the Local Government Finance System Rudiments of the new system……nationally:- (£26bn)Settlement Funding Assessment (SFA) (total formula grant for 2013/14 + rolled in grants) Split between (£15bn) (£11bn) Revenue Support Grant (RSG) Business Rate Retention Scheme (50% of estimated total business rates income)

  5. Changes to the Local Government Finance System Rudiments of the new system……locally:- (£32.5m) Settlement Funding Assessment (individual formula grant calculation) Split between (£19.5m) (£13m) Revenue support grant + Baseline Funding Level/Baseline Need (the amount of SFA to be funded from share of business rates) Split between (£5.9m) (£7.1m) Business Rate Baseline + Top Up Grant (Amount of business rates received (Difference between from billing authorities = 2% funding needed and rates received)

  6. Changes to the Local Government Finance System Other features of the Business Rates Retention Scheme:- • Safety net (92.5% of Baseline Funding Level) • Levy system for retaining share of growth (1:1 basis) • Pooling

  7. Changes to the Local Government Finance System Implications for FRAs:- • Transfers a degree of risk/financial exposure from Government to FRAs • Only change to Settlement Funding Assessment will be to reflect Spending Review decisions • No resetting of baseline until 2020 and thereafter every 10 years • Incentive for Business Rates growth

  8. Changes to the Local Government Finance System Some thoughts:- • Don’t try to understand it • Main area to lobby is around the total Settlement Funding Assessment ie SR 15 • Focus on how to generate business rate growth can be achieved

  9. What are the unique aspects of budgeting for FRAs • Budgets are based on risk not demand • It’s a 24 hour, 365 day service • Relies on natural wastage to reduce operational numbers • Wider role as part of Critical National Infrastructure • Materiality of Council Tax % increases • ……….. and of course Pensions

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