There is no better time to sort out funding

By Heather Jameson | 09 February 2021
  • Heather Jameson

When the Government announced councils should hold off on business rates billing until after the March Budget last week it became clear there is an announcement afoot.

On the whole, most of the sector seems grateful for the heads-up, saved the time and effort of billing twice, but equally perplexed at a Government that keeps them in the dark on their finances, right up to the wire of the annual budget-setting.

From the very start of the COVID crisis, council budgets have been hampered by a lack of central Government clarity. From the communities secretary back-tracking on his funding pledge to an 11th hour question mark over business rates income, finance directors have been expected to provide financial sustainability and stability amid short-term funding solutions.

It is unsurprising. Central Government – caught in a spiral of uncertainty, throwing money at public services and propping up the economy in a desperate bid to hold the country together – is firefighting emergencies and grasping at short-term fixes.

But this short-term funding system predates the COVID crisis as the Treasury is forced to patch up a finance system that is no longer fit for purpose.

Council tax and business rates can’t keep up with the needs of social care.

In London in particular, a rapid drop in population in the Census year, a cut in council tax collection due to job losses and an increase in businesses’ claim for a rates reduction are all ramping up the uncertainty.

The business rates billing pause is expected to have been prompted by an extension to rates relief in the March Budget, rather than a fundamental reform of finance. But the Treasury knows it can’t carry on.

The business rates review announced in the summer is yet to emerge but is expected to tackle online retail – that alone is just not enough.

With a dozen councils in negotiations with the MHCLG over a financial rescue and more to come, tinkering at the edges of reform will not do

It will take a wholesale rethink of local government funding – and a social care bill – to fix finances. And there is no better time to start than now.

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