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Local government and your business

By Richard Watts, Chair of the Local Government Association’s Resources Board

Local government is part of the fabric of our country. Councils are uniquely placed to help make a difference to people’s lives – from building desperately-needed homes, creating jobs and school places, to providing dignified care for elderly and disabled people and boosting economic growth. 

But the money local government has to maintain these vital services that businesses rely on is running out fast. We estimate that councils in England face a funding gap of £8billion in 2024/25. This gap reflects the minimum funding needed to sustain existing services at current levels and does not assume bringing back services that have been cut or making significant service improvements. 

Local government has great ambitions to get on with the job of building homes, creating jobs, supporting small business and investing in new infrastructure, but has been hamstrung by funding cuts from central government.
Very often it is those who are most vulnerable and need support across a range of services to improve life chances that rely on our local services the most. Pressures are growing in children’s services, adult social care, and efforts to tackle homelessness. This is leaving less money for councils to fund other services businesses rely on, like fixing potholes and improving roads and transport links. Councils have worked hard to protect such services because they know how important they are to communities and local businesses, but this task is being made harder by continued funding cuts. 
Local authorities also face a lack of clarity over future funding. With further Business Rates Retention, the Spending Review and the outcome of the Fair Funding Review all to come, local authorities have no reliable basis on which to appropriately plan their budgets even in the short term. At the moment it is unclear how much funding there will be from April 2020, how it will be distributed, and the means of delivery. As any business owner will know, uncertainty over finances makes it extremely difficult to plan ahead. 
Councils want to see a business rates system which is responsive to local needs, fair to all and promotes growth through incentives – and local government has strong interest in a reformed business rates system which commands confidence.

Whilst the level of business rates businesses pay is a matter for central government, how the proceeds are distributed is a vital issue for local councils. We support the increase to 75 per cent business rates retention planned from April 2020 and consider that the Government should introduce 100 per cent business rates retention. We also support the continuation of a system of top-ups and tariffs to equalise between funding need and ability to raise business rates for different councils.
The remaining 25 per cent of business rates should be retained by local government to plug funding gaps, deliver services businesses rely on and to ensure that no authority loses out as part of the current Fair Funding Review.
Without a doubt, the 2019 Spending Review will be make or break for vital local government services.
That is why the LGA has launched its #CouncilsCan campaign to build support among the public, councils, Parliament and central government for long-term investment in local government at that Spending Review. 

Local government needs a sustainable funding system which provides the resources councils need to deliver local services. With the right funding and powers, councils can continue to lead their local areas, support businesses, improve residents’ lives, reduce demand for public services and save money for the taxpayer.