PwC comment on Institute for Fiscal Studies report on the impact of major changes to local government finance

Commenting on today’s Institute for Fiscal Studies report on the impact of major changes to local government finance, Stephanie Hyde, PwC Executive Board member and head of regions said:

“By 2020 councils across England will retain 100% of their business rates revenues, reinforcing Government’s commitment to drive devolution across Britain.

“But as the business rates retention scheme expands, the prosperity gap between poorer, grant-dependent councils than their more affluent neighbours may widen. We have already seen spending on services amongst the poorest councils decline at almost four times the rate of their more prosperous neighbours, thanks to their ability to raise more of the money they need through council tax revenues.

“Replacing a highly centralised central government grants process with a system where councils as a group are self-funding, and where individual councils bear greater spending and revenue risk, is not without challenges. Devolving business rates in England is a small but significant first step in fiscal devolution, but as Government considers which additional services it will devolve, some councils are already pressing for further tax and fiscal freedoms. However, maximising tax competition without creating damaging complexity will prove a delicate balance.

“Our latest survey of local government leaders offers some insight into these challenges. Fewer than half of local authority chief executives are confident in their approach to digital security and less than half of councils are prepared for the shift to business rates. Fixing that will require a focus on supporting improved service delivery in areas such as data analytics and business intelligence - critical issues for councils as they become more self-sufficient and integrated into larger combined authorities.

“Nevertheless, devolution offers enormous opportunities for local government and the wider public to collaborate towards delivering better outcomes, both in terms of growth and public service reform, with seven-in-ten chief executives and council leaders telling our survey that they expect to be part of a combined authority by 2020.

“Today’s IFS report provides valuable insight into the financial issues surrounding devolution and we’re pleased to support this IFS research. This report and today’s findings should be required reading for business as well as for local government as they represent another step in informing and supporting partnerships to drive the devolution and decentralisation process.”

Ends

If you would would like an embargoed copy of the report, please contact the IFS press office.