A third of councils could struggle to fund statutory duties: research

More than a third of local authorities believe there is a danger that financial constraints will put them in a position where they no longer have enough funding to fulfil their statutory duties, research has suggested.

The survey of 122 councils by think tank LGiU and The Municipal Journal found that a third were planning to use their reserves this year.

However, fewer than one in ten would consider holding a referendum on raising council tax by more than 2%. The cost involved was the principal reason for this view.

The vast majority (nine in ten respondents) said the current local government finance system was not fit for purpose.

According to the LGiU and the MJ, some 85% wanted the freedom to vary business rates, while almost half (49%) would like to see additional taxes localised such as a tourist tax and stamp duty as well as business rates 100% localised.

Dr Jonathan Carr-West, Chief Executive of LGiU, said: “The reality is that unless all parties can agree a radical future for council funding, everything from road sweeping to social care will be increasingly difficult to deliver. Councils have the freedom to collect business rates but not vary them. Council tax is locally collected but in practice can’t be raised due to the Government's insistence on local referenda.
 
“Everyone agrees the system needs radical reform but the only changes we are offered are piecemeal and marginal. We need clarity from central government: if its aspiration is for councils to become self-funding then it needs to legislate for radical change now. To allow for genuine local taxation, a brave review of property banding, reform of Treasury rules on investing and prudential borrowing, an understanding of how equalisation would work under a self-funded system and most importantly for councils to keep money they collect.”