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Consultation for new LG finance system ‘not just a paper exercise’

The government’s formal consultation on the relative needs and resources of local government finances is aiming to create a “whole new system,” Sajid Javid has stated this week.

Speaking at the LGA’s Finance Conference yesterday, the newly reappointed housing and communities secretary said that the thinking behind this year’s finance settlement was to give local administrations the freedom to be a truly local government, though he also accepted that: “last month’s draft wasn’t greeted with wild enthusiasm from the sector.”

Javid reiterated that the settlement is part of a broader process aiming to establish what local government needs to continue to deliver services – but the housing and communities secretary explained that there are still plenty more discussions to be had.

“We need an updated and more responsive way of distributing funding,” he told delegates. “One that gives councils the confidence to face the challenges and opportunities of the future.

“That’s why I was pleased to launch a formal consultation on relative needs and resources. It’s not just a paper exercise.

“It’s going to be used to create a whole new system - one that fairly reflects modern needs, and I hope to have that system in place by 2020-21.”

The cabinet minister continued: “We’re building a country that’s fit for the future.

“This review will make sure that we have a local government finance system that’s suited to the challenges and the opportunities of the years that lie ahead.”

Javid added that alongside the new methodology, the ministry is also implementing the latest phase of its business rates retention plan.

The government hopes that local authorities will retain 75% of business rates by 2020-21, which the politician said will be achieved through incorporation of existing grants into the programme, such as the revenue support grant and the public health grant.

Councils will also be able to keep 75% of the growth in their business rates from the new baselines in 2020-21 when that system is reset, and there are plans in place to increase business rates retention further when it is right to do so.

Javid went on to say that it was “no surprise” that the 100% retention pilots had proved so popular with councils up and down the country.

Originally, plans were in place for an additional five pilots, but Javid said that they had been “overwhelmed” with responses.

Over 200 local authorities put themselves forward for the scheme, and yesterday the secretary announced 10 further pilots, covering a large geographic and demographic spread, with more piloting planned for 2019-20.

Top Image: MarioGuti

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