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Local government finance review must be wide ranging

January 20, 2011

After speaking with Greg Clark last week I have high expectations for the government’s announcement on the review of local government finance.    It seems though that there is a conflict at the heart of the coalition about how ‘radical’ to be.   Allister Hayman over at LGC has more on this.    My two pennyworth, which I have said to Ministers, is that the review should at least start with a broad remit and a long view around implementing real change, rather than just tweaking the current system.  The LGiU recently published a pamphlet on local government finance which explores a range of options.   It is encouraging to hear that Nick Clegg shares our view on the key areas that the review should consider: fundamental reform of the grant system; the potential for local taxes; the freedom for councils to determine local charging for services; and council’s freedom to borrow.   This last point requires very urgent consideration as under the current system the Treasury will block councils from doing anything that adds to the Public Sector Borrowing Requirement (now known as the Public Sector Net Cash Requirement).   One consequence is that councils won’t be able to capitalise the costs of the redundancies that many will be making, and will instead have to use their revenue funding, i.e. the money for local services.

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