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Should local business rates fund local public health? There’s not a simple answer


Back in March I suggested that the then Chancellor’s surprise announcement of a sugar levy in the budget drew attention away from what might turn out to be a far bigger – if seemingly more obscure – issue: the potential switch of the Department of Health local government public health grant to business rate funding, as part of a wider Department for Communities and Local Government (DCLG) consultation on how to increase the share of local government funding from local business rates rather than central government grants.

The principle of stronger reliance on local funding, as opposed to government grants, is one that local government has long argued for, given the UK is one of the developed world’s most fiscally centralised states. The argument goes that a government serious about devolution needs to devolve the means of raising revenue alongside the responsibilities for spending it. And moving more central government grant funding streams into business rates will create the incentive for local areas to focus on economic growth and the benefits that brings.

The consultation has now closed and responses are being considered. The Local Government Association’s submission about whether the responsibility for public health funding should switch to local decisions from an expanded business rate pot was terse and to the point: yes, subject to no ring-fencing or further cuts in funding.

We think this is such a big decision that it requires more consideration than a simple yes or no. There are strong reasons to maintain the public health grant from central government, or at least elements of it. A switch to business rate funding requires a high bar, for reasons set out below, and should be contingent on passing a number of key tests.

We reviewed how public health (and NHS) resources were allocated in 2013. We argued that there was a strong case for a blended approach to public health allocations, where health protection services – for example, water and environmental safety (characterised by large fixed costs, a clear definition of services and potentially catastrophic risks to population health if not in place) and mandated health improvement services (such as for sexual health with wide-scale risks to population health through communicable disease) – should be funded on the basis of a bottom-up costing of high-quality key services and functions that have to be in place to avoid significant public health risks. Other elements of public health were more suitable to other sources of funding, such as a formula (as now) or, perhaps, business rates funding.

Our view remains that there is a very strong case for the core elements of public health to remain outside either formula (from which they are currently funded) or business rate funding, to ensure that they are not put at risk. Rather, for these critical elements government needs to ensure that high quality services are in place and the funding directly made available, or there is a guarantee that they are put aside locally, to pay for them.

So, moving to business rates is a complex business. We propose that seven conditions need to be met before local public health is funded through business rates, as detailed in our submission and summarised below.

  • The Department of Health and DCLG estimate an appropriate level of spend for public health functions in total, and ensure this is equitably distributed at the point the new system begins. Local authorities need to be in ‘the right starting position’ under a business rate regime.

  • A switch to business funding would need to guarantee a minimum level and quality of service for core public health activities of local and national significance – including health protection and communicable disease services – and the funding to deliver it over time. Leaving this reliant purely on uncertain local funding could be catastrophic, one local authority’s decision to cut funding could easily spill-over into other areas as disease spreads. The Department of Health and Public Health England need to be involved in deciding the terms of these minimal levels of funding and quality guarantees.

  • The Department of Health and DCLG undertake an analysis of the inter-dependence of NHS-funded public health activity and local government-funded activity. Significant public health expenditure, approximately £2 billion, remains ‘in the NHS’. We and many others have warned before about the knock-on consequences of cuts and changes in local authority spending on public health for NHS public health activity (and vice-versa), and ultimately patient care.

  • Reassurance is needed that the overall switch to business rate funding of a broad swathe of government grants outside the public health grant remit (for example early years and rural sparsity grants) will not undermine progress in addressing the wider determinants of health. The Department of Health and DCLG should undertake an analysis of the impact of this on the switch to business rates.

  • Getting the proposed compensatory mechanism right will be critical; the Advisory Committee on Resource Allocation (ACRA) should advise on the design of this. The Association of Directors of Public Health has warned that the move to business rate funding could lead to greater inequality in public health spending over time, as wealthier councils that can generate more income from business rates will have more funds to spend on public health than poorer areas with lower rates but much higher need. The government has accepted that there will be a compensatory mechanism; getting its design right will therefore be critical.

  • The welcome transparency introduced by the health reforms over what is actually spent on public health locally needs to be maintained for accountability.

  • If a switch results in unacceptable variation in quality, coverage or inequality between areas, the Secretary of State for Heath should reserve the right to intervene.

In conclusion, while we understand the overall principle of moving to business rate funding, we believe that far more analysis, thought and reassurance is needed before public health is funded this way. A simple ‘yes’ to the question of whether business rates should fund local government public health in future is too simple an answer.