Localism Act reforms local authority funding

The Localism Act , which recently received Royal Assent and passed into law, will introduce significant reforms to the way local authorities are funded. The question facing Jesmond is: how will these reforms affect our local services?

Last month a group of north east MPs attended a debate in the Commons, expressing concerns about the impact the legislation is likely to have on our region. Specifically, they were worried about reforms to the formula grant used to allocate funding to local authorities.

Under the previous system, funding collected through business rates was pooled by the Treasury and redistributed to local authorities based on need.

According to Julie Elliott MP, Labour, Sunderland Central, who secured the debate, the disparity between the amount collected in business rates and the amount allocated by the Treasury in the north east is some £400 million.

Under the new act, councils with larger tax bases will be able to keep a larger proportion of their business rates, creating an inequality in spending power between authorities in prosperous areas and those with less ability to generate income through council tax, such as the north east.

There will, however, be a baseline, based on current funding, below which future funding will not be allowed to fall.

Newcastle City Council’s director of finance and resources, Paul Woods, told JesmondLocal that Newcastle is in a better position than other parts of the north east, “due to our higher potential for retail and commercial property growth.”

However, he also added: “The concerns start with the funding baseline. Despite Previous ministerial promises about the cuts being fairly allocated, the cut in grants for Newcastle and the North East from 2010/11 to 2012/13 is much higher than in most other areas in the country, so the proposed baseline is not considered to be fair.”

Areas with high student populations, such as Jesmond, have also contributed to the cuts in Newcastle’s grant, the government noting that these areas are less well populated at certain times of year.

Conservative spokesman for North Jesmond James Bartle said that the cuts Newcastle has experienced are unavoidable in these “tough economic times,” adding that other more prosperous areas of the country, such as Oxfordshire, have also taken a hit.

He hoped that the reforms to funding would encourage the council to take a more “co-operative” approach to running local services and pointed to Jesmond Pool as an example of how resourceful communities can take up this challenge.

Image credit: Alan Cleaver

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