Annal Nayyar reports on release that suggests Council services ‘at risk from finance reforms’

Reforms to local government finance mean councils will be increasingly dependent on economic growth to fund services, which could put further pressure on areas such as adult social care, the Centre for Cities warned today.

Changes such as the part-devolution of business rates, Housing Revenue Account self-financing and localisation of council tax benefit support schemes had ‘increased the portion of local government budgets that was locally raised and retained’, the think-tank report said.

However, as all these were affected by and dependent on local economic growth, councils also bore more financial risks, according to Ways and Means.

In particular, it said, business rate income could be volatile, with the loss of one large local firm potentially leading to a large reduction in business rates.  Other local government revenue streams also depended on growth and development, including the New Homes Bonus for new homes and the Community Infrastructure Levy paid on developments, the report added.

As a result of this, councils need to be more focused on supporting economic development to ensure that funding for local services could be maintained. ‘Greater proportions of funding will come from local residents and businesses in the future, and increasing local government budgets will be more predicated on economic growth in places,’ the report stated.

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