Schedule 1 — Local retention of non-domestic rates

Part of Local Government Finance Bill – in the House of Commons at 6:15 pm on 18th January 2012.

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Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government 6:15 pm, 18th January 2012

Let me finish the point and hon. Members may find that their intervention falls into place better.

Local authorities’ baseline funding levels are set on the basis of the 2012-13 formula grant. The calculation of the tariffs and the top-ups will then ensure that the funding at the outset of the scheme is in line with that assessment of relative need and resource. That is in our system. After that, the baseline levels, tariffs and top-up funding remain fixed and the budgets grow in line with the incentive.

If the system is reset too frequently, that undermines the incentive that we wish to achieve, and in particular it severely diminishes the value of the important introduction in the Bill of tax increment financing. For tax increment financing, which the local government world has wanted for a long time and which the Lyons review advocated introducing, it is important to have a reasonable degree of certainty about the income stream against which we can securitise. That is undermined if interference and change in the system are too frequent.

I understand the point made by my hon. Friend Mark Field about uprating in line with the RPI, and I accept that there has to be a degree of trade-off in this. It means that top-up local authorities will have a degree of assurance throughout the period of the reset that their income levels will grow by inflation. That is particularly important in the case of two-tier areas, where the county councils responsible for a large number of personal services will be predominantly top-up authorities. Much the same will apply to other precepting authorities, such as the combined and stand-alone fire and rescue authorities. I accept that arguments were made on either side, but, as is always the case, a balance has to be achieved, as I know my hon. Friend will recognise.