The Relationship between Needs Assessment and Local Taxes
| Author | Peter Ritchie |
| Published date | 01 June 1989 |
| Date | 01 June 1989 |
| DOI | http://doi.org/10.1177/095207678900400206 |
| Subject Matter | Articles |
The Relationship between
Needs Assessment and Local Taxes
Peter Ritchie,
Fife Regional Council
Introduction
The relationship between expenditure needs assessment and local taxes is an
indirect one, operating through the grant machinery. The Client Group Approach
is used to allocate expenditure needs equalisation grants to individual local
authorities and the level of grant itself influences the local tax levied. Hence an
individual authority will be closely concerned with the precise method of
determining needs assessments and will seek to ensure that its relative
expenditure need is maximised.
To many people, needs assessment will seem a rather esoteric exercise, even
simply a technical procedure for distributing a given sum of money between
authorities. Some may even question whether it really matters and whether it
warrants the current high levels of concern and attention to detail paid by many
authorities. The answer is that it definitely does matter, because of the indirect
link between needs assessment and local taxes operating through the grant
system.
Under the former Rate Support Grant System authorities spending in excess of
what the Scottish Office thought was an appropriate level of expenditure were
penalised by having RSG withdrawn. This then impacted directly upon the rate
poundage. This penalty system was withdrawn in 1989-90, upon introduction on
the new Revenue Support Grant System.
Even so, needs assessment will still have important implications for grant and
therefore for local tax levels. In particular, errors in and changes to the fine detail
of needs assessment, both during and between financial years, can have a
considerable impact on the level of grant actually received by a local authority.
The objective of this paper is to illustrate the nature and financial
consequences of such errors and changes for local needs assessments,
highlighting the, at times, substantial financial impacts on authorities brought
about by what appear to be relatively minor changes to the fine detail of needs
assessment. This then can have a substantial knock-on impact on local tax levels,
whether rate bills or Community Charge bills.
48
The Financial Context
Through its use of the Penalty System, Scottish local authorities became very
suspicious of the client group system and how a relative measure of expenditure
need could be used to withdraw Rate Support Grant. Introduced in 1982/83, the
Client Group Approach had been welcomed by authorities as a more objective
measure of relative expenditure need than the one it replaced (weighted
population). Initially it was only used as a basis for distributing a given level of
expenditure provision (ie, a zero-sum game). It was not a system for determining
expenditure provision in an absolute sense. Its sole role was distributional. From
1984/85 the Client Group Approach was used as a basis for distributing RSG.
This was also acceptable since its role was still a relative one, indicating relative
expenditure need. However, from 1985/86 it was used to determine grant penalty,
effectively using the Client Group Approach as a precise and absolute measure of
expenditure need. This stretched the credibility of the system to breaking point.
Financial Effects of Changes in Needs Assessment
1. Changes in Needs Indicators.
Changes in the needs assessment can relate either to changes in the methodology
itself or to the accuracy of the data input into it. An example of the former was
the recent changeover from using...
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