With the high excitement of the Comprehensive Spending Review fading in the distance, the next challenge facing local government will be the Fair Funding Review.
If recent reports are to be believed, it doesn’t look as though the future will be all that rosy for London boroughs, as Angela Rayner is rumoured to be turning her back on the capital and funnelling funding to the Midlands and the North.
As things currently stand, councils’ finances are largely based on how much they get from Government in terms of Resident Support Grant, and that then informs how much each council needs to raise in Council Tax.
And it should be remembered that RSG is largely awarded to address localised issues of deprivation; areas with greater issues get more RSG.
Yes, there are other income streams like parking income, some business rates, and other bits of government grant funding, but broadly, the more RSG you get, the more flexibility you have with your council tax.
A massive over-simplification of a complex system, granted, but it’s pretty much this.
Richmond gets very little in terms of RSG, hence we have to rely more heavily on council tax to fund services.
While this model may appear perfectly reasonable, it can lead to some perverse outcomes which essentially equate to massive tax breaks for millionaires.
Take, for example, Mansion House in Cowley Street, Westminster.
This absolute pippin of a property boasts 7 bedrooms, 7 bathrooms, a private pool, a sauna and steam room, a grand dining room which can seat 16 people and, according to a delightful puff piece in Country Life magazine, was being marketed by Savills and Knight Frank for £36,000,000.
Nice if you can afford it, and even nicer when you consider that the owner of this palatial pad will pay less council tax than a couple living in a one-bedroom flat in Whitton.
Now slice it where you like, that’s really not fair.
While it’s true to say that the government has been reducing, sometimes quite dramatically, the level of funding received by some boroughs, their council tax has historically been set in the context of full grants, and as a result, their council tax is relatively low in comparison with boroughs like Richmond.
However, the completely unintended consequence is that the very wealthiest in society pay incredibly small amounts of council tax in comparison with people living just up the road in Richmond.
If this Labour Government is genuinely serious about reforming local government, as they claim to be, then they should have the guts to take a closer look at the whole way in which local government is funded.
However, there doesn’t seem to be any appetite for that.
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