Briefing: Future Local Authority Flood Funding

Local authority flood funding has changed over recent years, and is due to change again. Funding is currently made up of: council tax collected locally; 50% of the business rates collected locally; and a grant from central government called the revenue support grant. This is financed by central government funding and the 50% of local authorities business rates that they pay in to central government. As different geographical areas have different abilities to collect council tax and business rates, there is a system of redistribution through “tariffs” which takes money from those authorities who can raise more and gives “top ups” to those who can raise less.

The Autumn Statement 2015 announced that the revenue support grant will be phased out and instead 100% of business rates will remain within the local government sector. There has been a consultation on this. As well as being part of the localism agenda, part of the aim is to incentivise local authorities to generate economic activity to raise more business rates, and to build houses to raise council tax. It could come in from financial year 2019/20. DCLG and the LGA are carrying out a Fair Funding Review to develop a new redistribution system under 100% business rate retention (i.e. a new version of the tariff and top up arrangements).

Next steps
DCLG have asked Defra to suggest the basis on which flood related needs should be represented in a new distribution formula. The initial ask is for Defra to provide their suggestions for the “cost drivers” in relation to flooding, i.e. the factors which determine a local authorities’ level of need, such as: land drainage and enforcement activity on ordinary watercourses, Special Levies paid to IDBs, Local Levies paid to RFCCs, and surface water drainage advice. DCLG are planning a consultation on these cost drivers (as a whole) during 2017. ADA will continue to contribute to the discussion around fair funding for flood management by local authorities during 2017.

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