Seeing through ‘the fog’: Local government resource review in London

The votes are in but the verdict is far from conclusive for the Local Government Resource Review consultation, which closed this week. Announced by Eric Pickles in July, the LGRR set the tone for the coalition’s localism agenda, with plans for a radical review of the local government financing system. Now the debate returns to the house where they will be hard-tasked to get this right.

The LGRR is a complete shake-up to the way local authorities are funded and presents a real opportunity to give strong incentives for councils to say ‘yes’ to the development needed for economic growth. Such major changes are never without contention, and this proposal has generated significant debate among businesses, politicians and media.

One of the emerging criticisms is that the consultation proposals are extensive and complex. Earlier this year, Centre for Cities published research, Room for improvement: Creating the financial incentives needed for economic growth, which found that in order for incentives to be effective they need to keep things simple, targeted, predictable and long-term. Accordingly, we advocated that councils should be allowed to retain between 40% and 60% of all their future business rates growth.

This week in a new report, in collaboration with Future of London, we built on our national level research to look at how these changes would affect the local authorities of the UK’s biggest city.

Our report, Capital Gains: What does the Local Government Resource Review mean for London?, found that London as a whole would fare well if the changes in the LGRR are bold enough to incentivise councils to bring forward local development.