Politics

Financing local government

Coins 20074266_l A summary of rating and other major sources of income for councils.

Funding for local government comes from rates, government grants, fees, charges, and loans with the rate providing the largest and most reliable revenue stream.

Councils are legally required to strike their district rates (both domestic and non-domestic) no later than 15 February each year. This obligation will also apply to the 11 new councils during their ‘shadow’ year. Rate payments are then collected by the Land and Property Services Agency.

In addition, the Department of Finance and Personnel strikes domestic and non-domestic regional rates – which pay for central government services. This increases annually with the level of inflation (2.7 per cent this year) i.e. a real terms freeze which has been in place since the 2008 Executive Budget.

“It is welcome news that the vast majority of councils have either not increased or have kept their rates rises to a minimum,” Environment Minister Mark H Durkan stated in February. The changes varied from a 1.5 per cent decrease (Omagh) to a 2.76 per cent increase (Larne) and fifteen of the 26 councils opted not to increase their rates.

Durkan added: “It is reassuring for householders and businesses that rate rises remain close to inflation in order to minimise any financial pressure during this challenging period for our economy.”

The Department of the Environment pays out two main grants to local government: the rates support grant (for those unable to meet their financial rates from district rates) and the de-rating grant (compensation for loss of income from de-rating for certain property).

The dereliction intervention funding programme allows councils to improve the appearance of an area – perhaps when preparing for a major event or where this could have a multiplier effect for the local economy. All councils can compete for this funding, which becomes available after departmental monitoring rounds.

Since 2007-2008, domestic rates have been determined by using capital valuations of property, assessed by Land and Property Services, using the valuation date of 1 January 2005. For non-domestic properties, the date is 1 April 2001. A revaluation of non-domestic properties is under way and will come into effect in 2015; this will be based on values as at 1 April 2013.

Industrial de-rating limits the rate liability of manufacturing plants to 30 per cent. The policy was introduced across the UK in 1929 as a response to growing competition in manufactured goods from abroad. It ended in England and Wales in 1963 and in Scotland in 1995 but has been retained by the Assembly in order to maintain Northern Ireland’s industrial base.

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