Select Committee Jobs & Enterprise, Regeneration & Resources, Culture & wellbeing – 11th October 2011 Local Government Resource Review Stuart Reid Head of Finance

Current system of Local Government Funding Government Proposals Implications for South Tyneside Budget Next Steps Introduction

Current System of Local Government Funding

Set nationally but collected locally Business rates passed to Government Business rates form part of Government grant Business Rates

Consultation paper issued 18 th July Technical Papers issued 19 th August Response date 24 th October Consultation Details

Current finance system weakens accountability Councils highly dependent upon central Government funding No incentive for councils to promote local economic growth? Rationale for Review

Councils to retain business rates collected within their area If baseline funding set by Government greater than business rates collected - Council to receive top-up funding If baseline funding set by Government received through grant less than business rates collected - Council to pay tariff Government Proposals (1)

Top Ups / Levies Top Up Funding Rates Collected £m

Set-aside for excess business rates forecast Fire / police funding guaranteed Levy imposed on “disproportionate” gains Government Proposals (2)

LA’s retain all proceeds where: 1)Enterprise Zone (for 25 years) 2)New non-domestic renewable energy projects 3) Tax Increment Financing Government Proposals (3)

Formula Grant: Business Rates £69m + Revenue Support Grant £14m = Total Formula Grant£83m - Business rates collected per annum £26m = Top Up Received £57m Implications for South Tyneside (1)

South Tyneside Example Rates Collected Top Up £m

Gearing Effect £M£M

Resources re-distributed to “richer” authorities over longer term? Greater funding volatility Risk of non-collection falls upon Council Implications for South Tyneside (2)

Impact Upon Regeneration Policy? Implications for South Tyneside (3)

Freezes “unfair” grant settlement on 2012/13 figures Baseline fixed for 10 years? Council would bear costs of economic “shocks” (mitigated by pooling with others) Implications for South Tyneside (4)

Can we grow faster than other parts of the country? Key Challenge

Ability to reduce level of business rates locally but not increase Cost of reduction borne by local authority in full Some LA’s seek to gain competitive advantage? Additional Powers

ANEC led North – East group to research and respond to consultation by 24 th October Liaison with other authorities through SIGOMA Continue to press “unfairness” of current grant distribution to NE authorities Next Steps