The Abolition of Derating

The structure of local government in England and Wales is once more attracting a great deal of attention, and not the least of the problems urgently requiring solution is that of local government finance. Local authorities are at present dependent on the central government for over 40 per cent. of their revenue. In 1952-53, of total local government revenues amounting to ?905m., ?384m. was derived from central govemment grants of one kind or another, whereas income from rates was only ?351m. (the remaining revenues being derived from rents, fees, trading activities, etc.). In order that this financial dependence upon the central government might be reduced, it has been suggested that the derating of agricultural, industrial, and freight transport hereditaments might be abolished.' It is not the purpose of this paper to argue the case for or against such abolition, but merely to provide a framework within which its major financial implications can be discussed clearly and dispassionately. To do so it will be necessary to consider the problem within the conceptual framework of differential incidence, i.e. it will be assumed that changes in the total income (or expenditure) of any sector of the economy are precisely offset by corresponding changes in its expenditure (or income). The nett position is always left the same as it was beforehand; it is the structure of each sector's accounts that changes. The analysis therefore refers to a situation in which the present tax burden has been placed on different shoulders-it has been redistributed between ratepayers in different authorities; between different classes of ratepayer within any particular authority; between ratepayers as a group and taxpayers in general, and between the various income strata of general taxpayers-without any change in the total burden to be borne by the community as a whole. Within this framework a quantitative estimate has been attempted, of the probable effects of the abolition of derating not only upon local authorities, but also upon the different classes of ratepayer, the central government, and the various income groups. As will become apparent, the evidence upon which some of these estimates are based is rather scanty, and in other cases what evidence there is is unreliable, so that not too much weight must be attached to them except as indicators of the probable direction of change. Before turning to the statistical material, however, the mechanics of the Exchequer Equalisation Grant will first be described quite briefly

Demographic economics · Derating · Differential (mechanical device) · Economics · Electrical engineering · Incidence (geometry) · Engineering · Fiscal Policy and Economic Growth · Housing Market and Economics · Local Government Finance and Decentralization · Mathematics