What do we get from central government?

Council funding has changed over the last few years as the government tries to reduce the deficit (money that government overspends according to their budget). While West Suffolk councils receive less money in government grants each year we now have greater opportunities to generate our own income. This gives us more freedom to spend money on matters important to our communities, but it also comes with greater risk - these risks are explored below.

The key schemes and grants that the government provide for include:

  • business rates retention scheme
  • housing services
  • local council tax reduction scheme
  • Revenue Support Grant (RSG)
  • New Homes Bonus (NHB)

Note: the government also provides a grant for housing benefit but this money is distributed to claimants.

Business rates retention scheme

National Non Domestic Rates (NNDR) commonly known as business rates are set by central government. Business rates are levied on non residential properties such as shops, offices, warehouses and factories. In April 2013 new arrangements were introduced regarding business rates. Under the new scheme we get to keep a proportion of locally generated business rates. The new scheme also means that we can make arrangements with other Suffolk councils to pool our business rates which allows us to retain even more of the money generated.  

The scheme gives us greater incentives to continue supporting the local economy because the proportion of business rates we are allowed to keep comes from new growth. But it is not extra income. It is money that goes towards filling the gap that already exists as central government cuts our other funding. As businesses take time to nurture and grow, the true value of business rates retention might not be realised for several years. Also, businesses may decide to relocate or scale down their operations, neither of which councils have any influence over.

Councils also face problems with the collection of business rates and the appeals process. Some businesses may avoid paying rates by (for example) taking advantage of loopholes in the law. As we are liable for the appeal, this means we are unable to collect money that could be put back into the local economy. In addition to this, the appeals process is long and unpredictable. Again, this means that money we could be using to strengthen the local economy is tied up whilst an appeal is being processed.

Housing services

Money for housing benefits is received as a grant and then distributed to those that need it. About 95% of the total housing services spend is spent on Housing Benefit.

Local Council Tax reduction scheme (Council Tax support)

Council Tax benefit was abolished in April 2013. Instead, councils were given the authority to set their own local Council Tax reduction schemes, sometimes it is known as Council Tax support.

Local Council Tax reduction schemes allow councils to set their own rules about how much Council Tax households on low incomes have to pay. The money councils receive to help meet the cost of funding their Council Tax reduction scheme comes from a grant from the government. 

Previously, the government provided all the money that was paid out in Council Tax benefit, the grant received by councils to fund Council Tax reduction is about 10% less than this. This means that councils need to make a decision about how they will fund Council Tax reduction with a reduced amount of money.

In addition to this, the government ruled that pensioners must still receive the same amount of support in paying their Council Tax as before. West Suffolk has an ageing population with almost 25% of its residents over 60. This means that in real terms, the grant we receive from the government to fund our Council Tax reduction scheme is stretched even further.

So how have West Suffolk councils risen to the challenge of funding our Council Tax reduction scheme with less money whilst protecting discounts for pensioners? As many other councils in England have done, both Forest Heath District Council and St Edmundsbury Borough Council have set a minimum Council Tax payment rate. This means everyone of working age has to pay at least some Council Tax even if they didn't previously (for example if their Council Tax was covered by benefit). In West Suffolk everyone of working age will need to pay at least 8.5% of their Council Tax.

By taking the decision to set a minimum payment, we hope to safeguard services for everyone whilst keeping payments at an affordable amount. You can see how all councils compare from the Institute for Fiscal Studies website page: Council Tax support scheme characteristics in English local authorities, 2013 to 2014

Details of the latest technical changes agreed can be found at:

Revenue Support Grant (RSG)

The Revenue Support Grant (RSG) is a grant given to all councils by government. The RSG can be spent on anything the council feels is appropriate.

The RSG, together with business rates retention is sometimes known as the 'formula grant'. This is because it is allocated to councils based on a complex formula that takes into account specific factors such as population size, services provided and the amount that can be collected through Council Tax.

Changes in government funding means the Revenue Support Grant has got smaller. Councils are expected to make up the shortfall through other schemes such as their share of business rates retention and the New Homes Bonus or by generating income from elsewhere (investments or charges). Other government grants also exist to address the reduction of the RSG but these are often 'ring fenced' grants that can only be used for specific services such as housing.

New Homes Bonus (NHB)

The New Homes Bonus is a scheme that financially rewards councils for new homes built in their area or for bringing empty homes back into use. There are additional incentives if affordable homes are built. The NHB scheme aims to encourage councils to work with communities to encourage housing development that will support economic growth and prosperity.

The amount of grant received is linked to the cost of Council Tax for an average home - which is band D. The grant is received every year for six years and councils can decide how to spend the money based on local needs and wishes.

It is not simply about encouraging the building of new homes for the sake of getting rewards though. All councils need to make sure they are working with communities to build within their existing planning and development policies. The goal is to reward those councils who actively support the right type of development that will improve local communities.

In West Suffolk, we work with communities and listen to your views through planning consultations, you can find out more about our planning policies from our planning policy section or you can view current planning consultations