Question to the Department for Levelling Up, Housing & Communities:

To ask the Secretary of State for Housing, Communities and Local Government, what plans he has to review the rural sparsity factor in the calculation of Government support for rural areas; and if he will ensure that changes can be incorporated within the delivery of the Rural Services Delivery Grant.

The Government’s aim is to increase local government’s retention of business rates from 50 per cent to 75 per cent. To ensure the increase in business rates retention is fiscally neutral, some existing grants (including the Rural Services Delivery Grant) will be devolved to local authorities so that these responsibilities are funded through retained business rates. We recognise that some redistribution of business rates between authorities will continue to be necessary to ensure that no council loses out if it is unable to collect enough business rates locally to meet its needs. We are therefore undertaking a review of local authorities’ relative needs and resources to determine the basis on which redistribution will take place in the new system.

The review of relative needs and resources will set fresh baseline funding levels for councils in England, and we are working closely with local government representatives and others to examine all of the available evidence for the costs faced by authorities, including how geographical features such as rurality and density affect the cost of delivering services across the country, and how to account for these in a robust manner. In December 2018 we published a consultation paper that set out a proposed ‘Area Cost Adjustment’ methodology to account for these factors. This included consideration of how levels of 'accessibility' and 'remoteness' - the impact of journey times on labour and procurement costs - might account for the additional costs associated with sparsity, isolation or market size. For example, local authorities with longer journey times from service points to households may have to pay their staff (e.g. on domiciliary care visits) for more hours in order to deliver an equivalent level of service.

In developing this innovative new approach, we have worked closely with both local government and other government departments, including the Department for Transport and DEFRA as champions for rural proofing. Our most recent consultation closed on 21 February and we are considering the many representations made in response, before taking further decisions on the shape of the review.