City bosses fear risk to funding

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CIVIC leaders in Sunderland have voiced fears over the Government’s latest announcement on council funding.

As reported in the Echo, council leaders and MPs in the North East are worried about the effect of proposed changes to the business rates system.

Ministers say the shake-up will make councils more independent from Whitehall by giving them a chance to keep cash generated by business rates instead of relying on Government grants.

The present system sees cash put into a national pool, and distributed depending on need. But ministers want a system which means councils are more self-sufficient and have greater incentives to boost their economies.

The Association of North East Councils (ANEC) feared changes could leave less-affluent areas such as Sunderland out of pocket while allowing areas in the South to attract more business and jobs.

ANEC said the changes risked areas with stronger economies and less demand on services dropping their rates to attract more business, with councils such as Sunderland unable to compete, creating a spiral of decline.

Ministers have now released a response to a consultation on the proposals which ANEC said addressed some of the fears, including clarifying how a “top-up” system would work for councils such as Sunderland which generate less cash from business rates.

But Sunderland City Council leader Paul Watson, who chairs ANEC, said there was also disappointing news.

He said problems include the Government’s plan to track council funding to the baseline for 2012/13 – during which time North East councils will have suffered above-average funding cuts.

He said: “Equality and fairness in service provision has to be the same for people across the country no matter who they are, where they live, or how their local economy is performing.

“The Government understands that council services must not be placed at the mercy of economic output, which is affected by a range of forces often beyond the control of councils.

“The adoption of the 2012/13 baseline for the new funding arrangements will be challenging for North East authorities as this reflects a finance settlement which has resulted in above-average reductions in cash grants over the last two years.”

He added: “The announcement provides some clarity in relation to the Government’s proposals for the future funding of councils, though the devil will be in the detail.

“There are a number of areas, such as in relation to resource equalisation, use of more recent data and in relation to funding mechanisms such as Tax Increment Financing, that we would wish to enter into further discussions on.

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