3 Transparency of new burdens
17.The new burdens guidance states that government departments must consider the impact of their actions on local authorities. If a department’s actions fall within the government’s definition of a new burden it must complete a new burden assessment to estimate the financial impact on local authorities for at least the first three years. If a financial impact is discovered, the department initiating the change must provide funding to local authorities to cover this, or remove other requirements that will allow authorities to make savings to offset the additional costs. The new burdens procedure applies to all government-initiated changes regardless of cost except where departments place the same requirements on local authorities and private sector bodies. It is the responsibility of individual government departments to raise potential new burdens with the Department for Communities and Local Government, which must sign-off completed new burden assessments.35
18.We asked the Department for Communities and Local Government what it was doing to ensure it learned about new burdens affecting local government. The Department for Communities and Local Government told us that it maintains a dialogue with other government departments, with the Local Government Association and with councils directly to identify potential new burdens.36 It scrutinises all potential new burdens that it learns about, and takes a proportionate approach to deciding whether or not a full new burden assessment should be undertaken by the department initiating a change. Although it has no reason not to, the Department for Communities and Local Government does not publish details of which potential and actual new burdens have been assessed by government, or publish details of the completed assessments.37 The Local Government Association and London Councils submitted evidence to express their concerns about this.38 We pressed the Department on why there was not more transparency for local government about which potential new burdens it was considering and which it had identified as possible new burdens that would then require a new burden assessment. The Department said it would reflect, not only on the level of transparency around new burden assessments, but also on whether there was enough transparency more widely in the context of an ever more devolved system of local government finance.39
19.When a new burden is identified and a funding transfer is required this usually takes the form of an unringfenced grant. However, it is usual in subsequent years for these grants to be subsumed into local authorities’ Revenue Support Grant (RSG), an unringfenced grant that councils can use to fund any revenue expenditure.40 London Councils submitted evidence arguing that the way RSG is calculated prevents a transparent and accurate assessment of whether local government is adequately funded for the services it delivers, making it difficult to determine the true level of funding for new burdens.41 We asked the Department for Communities and Local Government about the mechanisms for transferring funding for new burdens to local authorities.
The Department confirmed that it might administer grants paid by other departments or that funding might come through another funding mechanism.42 It said that ring-fenced grants, while more transparent, can limit the flexibility authorities have over how they spend the money they get with undesirable effects. The Department acknowledged, however, that the move towards having a single funding stream of revenue support grant, plus business rates and council tax, made it more important that government goes through a rigorous process with departments and stakeholders to work out the cost pressures facing local authorities.43
20.We asked the Department how it was planning to assess and fund new burdens local authorities when the revenue support grant is phased out, by 2020, and replaced by a system of retained business rates. The Department explained how local government as a whole would be almost entirely funded through locally raised income, including retaining 100% of business rates growth.44 The Department would continue to oversee an extended system of top-ups and tariffs designed to redistribute funding from areas that generate disproportionately high business rate receipts to those with disproportionately low receipts.45 This Greater devolution to councils of retaining locally raised revenue will have implications for how the government funds new burdens on local authorities, but the Department for Communities and Local Government has yet to set these implications out.46 The Department agreed to share with us, after the spending review, its high-level thinking and assumptions about how the proposals to phase out the revenue support grant in favour of retained business rates would impact on local government finances and authorities’ ability to meet their statutory duties.47
35 C&AG’s report, Local government new burdens
37 C&AG’s report, Local government new burdens, paragraphs 2.10, 2.13
38 London Councils submission paragraph 1; Local Government Association and Association of Directors of Adult Social Services submission, paragraph 2.4
40 C&AG’s report, Local government new burdens, paragraph 3.14
41 London Councils submission, page 1
© Parliamentary copyright 2015
Prepared 30 November 2015