ADEPT view on the potential impacts of Business Rate Retention on capital and revenue funding
Rupert Clubb, President of ADEPT said: "We believe that whatever funding is rolled in to the 100% business rates retention scheme must be done transparently. It should include an updated assessment of need at the point of transfer at regular intervals so that local government is not left having to fund large shortfalls.
"Demographic pressures on social care authorities have to be fully recognised, if not there will be a real pressure to use a disproportionate share of transferred funding to support social care costs. In a time of pressure on revenue budgets, capital investment on roads and schools (currently the recipients of the major capital grants) may be reduced. This could result in higher future maintenance costs and /or poorer quality infrastructure
"We have no issue with the transfer of highways maintenance and transport funding in principal, but it will be important for the government to set out how the transfer of such responsibilities will integrate with proposals for wider devolution, which will see transport responsibilities passing to structures other than a Local Authority.
"We would agree with the principle of allowing local decision makers to have the maximum flexibility in their funding decisions in order to respond to the needs and demands of their local communities. However, careful consideration would need to be given to removing the barrier between revenue and capital funding, particularly in terms of the impact that this would have on the level of capital investment undertaken by local authorities.
"The transfer of highways and transport funding with capital elements does link to growth and the economy, so it can be seen as a good fit with business rates. Whatever funding is transferred it should not be done with excessive conditions or ring-fencing to enable local authorities sufficient freedom to manage budgets and respond to local demand.
"We would have serious concerns with Government devolving business rates income but also seeking to apply some form of revenue / capital allocation within that funding stream, although at this stage we have seen no indication that this will be the case.
"Considering highways and transport funding specifically, we would have some concerns around potentially losing some one-off funding in periods of exceptionally bad weather and extra funding for potholes. We would also have concern that any assessment of need would not allocate enough funding to bring all roads up to standard. Any removal of the barrier between revenue and capital funding will add more responsibility on to local authorities to make sustainable investment decisions and control borrowing requirements for transport projects, but we would be glad to see locally elected Members making these local decisions.
"Clearly there will be accounting standard issues to address with any blurring of lines between revenue and capital funding. We would expect Government to address this and issue clear guidance for local authorities to follow. Including capital funding in to the 100% business rates retention scheme could lead to a transfer of borrowing requirements from central to local government, again we would expect more guidance on prudential borrowing if this were the case."