financing growth in local authorities

Financing Growth in Local Authorities

Alison ScottAssistant Director, Policy and TechnicalCIPFA

cipfa.org.ukwww.cipfa.org

Business Rates Retention


Non-Domestic Rates - current

Ratepayers Collection Fund

Billing AuthorityGeneral Fund

Preceptors

CentralGovernment


Non-Domestic Rates - current



CentralGovernment

Preceptors


Non-Domestic Rates - Proposed



CentralGovernment

Preceptors


Overview – Separate Fire Authority

Rates Distribution

Preceptor

Central

Billing

Fire


Baselines, top-ups and tariffs

Non-Domestic Rates baseline Average of contribution to pool over five years

Compared to the spending baseline Top-up or tariff determined

Set out in LGF Report


Safety Nets and Levies

Safety net payable if resources fall below 90% or 92.5% of baseline Threshold currently being consulted on Payable “on account” at start of the year

Levy net on “excessive growth” Individual rate for each authority so that 1%

growth in business rate = 1% growth in retained resources

Cash paid in the following financial year


Budget Setting

Set at the beginning of the year Payments will not vary

Changes in collection will come through as deficit or surplus on the Collection Fund

As a result will require formal approval process similar to Council Tax Base

Levies and safety net adjustment made in following year, cash comes through in surplus/deficit in collection fund.

Accounting different and complicated.


Put it all together...



CentralGovernment

Preceptors


TIF, New Homes Bonus, Community Infrastructure Levy


Tax Increment Financing

Mechanism through which Councils borrow against predicted growth in their locally raised business rates and use that borrowing to fund key infrastructure and other capital projects.

Been used in the USA for decades

However…

For long term viability TIF works best in a growing national economy

Levy payments and short reset periods may restrict the usefulness of TIF arrangements


New Homes Bonus Top sliced level of grant support to encourage the

building of homes NHB will be funded within the Spending Review

control totals Those who build above the national average will see

funding increased and those who build below will see funding reduced

The funding is not ring fenced and can be used for either revenue or capital purposes.

It includes an affordable Housing premium (£350 per unit in 2012-13) to encourage this type of Build

http://www.communities.gov.uk/housing/housingsupply/newhomesbonus/newhomesbonusquestions

/

http://www.communities.gov.uk/housing/housingsupply/newhomesbonus/newhomesbonusquestions/




Community Infrastructure Levy New levy that local authorities in England and Wales

can choose to charge on new developments in their area.

The money can be used to support development by funding infrastructure - for example new or safer road schemes, park improvements or a new health centre.

It applies to most new buildings and charges are based on the size and type of the new development.

The Community Infrastructure Levy (Amendment) Regulations 2011 came into force on 6 April 2011.

The levy is normally collected for the charging authority by the authority that grants planning permission district and metropolitan councils; unitary

authorities;


Community Infrastructure Levy

Charging schedule. Supported by evidence, such as the economic viability

of new development and the area’s infrastructure needs.

One standard rate or specific rates for different areas and types of development.

Differential rate must be justified by the economic viability of new development.

Charging authorities must consult. The charging schedule must also undergo a public

examination by an independent person before the charging authority can formally approve it


Community Infrastructure Levy

Planning obligations will continue For example, new affordable housing will continue to

be delivered through planning obligations rather than the levy.

Reforms have been introduced to restrict the use of planning

obligations. Some of these have already come into effect and others will take effect from April 2014 – or as soon as a charging authority starts to charge the levy.

After April 2014, planning obligations can no longer be used as the basis for a tariff to fund infrastructure.

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financing growth in local authorities

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