William Eichler 20 December 2018

Council revenues unlikely to ‘keep pace’ with demand on services

Revenues from business rates and council tax will not keep pace with rising costs and demands for services, financial experts have warned.

The Government last week published a consultation on its plans for a national 75% business rates retention from 2020–21, alongside the local government finance settlement for 2019–20.

In an opinion piece published today, the Institute for Fiscal Studies describes the move as ‘welcome’, but warns the revenues from business rates and council tax would not be enough to fund local services.

It gives adult social care services as an example. Even if council tax bills are increased by 4% a year, adult social care spending could increase from 38% to 45% of the revenues from business rates and council tax by the mid 2020s and 55% by the mid 2030s.

‘This would imply that the real-terms local tax revenues available to other services – such as public health, children’s social services, libraries, housing and refuse collection – would not increase at all during the 2020s and would be falling in the 2030s,’ the think tank’s researchers wrote.

‘It therefore seems highly likely that either grant funding paid for by national taxation would have to be re-introduced at some stage, or additional tax revenues devolved to councils – especially if the social care green paper (now due in the new year) recommends a more generous system,’ the article concluded.

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