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1. Introduction

The resources adjustment proposed is to account for the differing council tax raising ability for local authorities through the use of a measure of the Council Tax base. This tax base will be multiplied by an assumed (or 鈥渘otional鈥�) level of Council Tax. To fully account for ability to raise Council Tax, the government proposes setting the assumed or notional level at the (weighed) average level of Council Tax in England. This will mean that, all else being equal, local authorities with stronger Council Tax bases will receive lower funding allocations than those with weaker Council Tax bases. Local leaders will remain wholly responsible for local Council Tax decisions. Changes to actual Council Tax levels will therefore not be reflected in funding allocations, retaining local discretion on Council Tax changes.

2. Proposed methodology overview

In determining a measure of the Council Tax base there are various factors that potentially need to be accounted for including:

• A measure of the tax base, including treatment of discounts, exemptions, premiums and local council tax support, multiplied by;
• A measure (if included) of the Council Tax collection rate, shared according to;
• An approach to Council Tax tier splits in multi-tier areas.

The government proposes that the adjustment uses the latest council tax base data at local authority level as the starting point. It also proposes including the full impact of mandatory exemptions and discounts on the tax base and to assume there is no use made of discretionary discounts and premiums. A uniform assumption is proposed for the collection rate and deductions for localised council tax support would be through a modelled approach for the working-age element and for pensioners the actual impact from the statistical data release for each local authority. Finally, to go from billing authority level for the resources adjustment to all local authorities, the government proposes that the tax base is split using the average tier split in multi-tier areas. To do this, the government proposes that the average share in Council Tax receipts in multi-tier areas between the shire county precept, the shire district element and the fire element of Council Tax bills across the country is calculated. The resulting percentages would then be uniformly applied to the measure of Council Tax in the resources adjustment for relevant areas.

3. Detailed steps in production

The proposed steps to calculate the resources adjustment are as follows:

1. The latest local authority-level data council tax base data will be used (currently 2024 data)^{[footnote 1]}.
2. The following lines of the 鈥楥ouncil Taxbase Data鈥� worksheet will be obtained for the Band A to H breakdown (note some lines include A entitled columns): - Table 1.01 Total Number of Dwellings on Valuation List (Line 1) - Table 1.02. Number of dwellings on valuation list exempt on 2 October 2023 (Class B & D to W exemptions) (Line 2) - Table 1.03. Number of demolished dwellings and dwellings outside area of authority on 2 October 2023 (Line 3) - Table 1.05. Number of chargeable dwellings in line 4 subject to disabled reduction on 2 October 2023 (Line 5) - Table 1.06. Number of dwellings effectively subject to council tax for this band by virtue of disabled relief (Line 6) - Table 1.08. Number of dwellings in line 7 entitled to a single adult household 25% discount on 2 October 2023 (Line 8) - Table 1.09. Number of dwellings in line 7 entitled to a 25% discount on 2 October 2023 due to all but one resident being disregarded for council tax purposes (Line 9) - Table 1.10. Number of dwellings in line 7 entitled to a 50% discount on 2 October 2023 due to all residents being disregarded for council tax purposes (Line 10)
3. The following line of the 鈥楥ouncil Taxbase Support Data鈥� worksheet will be obtained for the Band A entitled to H breakdown: - Table 3.05. Reduction in council tax base due to council tax support - pensioners (dwelling equivalents)
4. The relevant council tax Band D equivalent ratios^{[footnote 2]} would then be applied to this data to calculate for each billing authority the total Band D equivalents for these lines.
5. In addition, the government proposes adjusting for the following lines (note these are already in Band D equivalents):
- Table 1.23. Reduction in taxbase as a result of the Family Annexe discount (Line 21) - Table 1.32. Number of band D equivalents of contributions in lieu (in respect of Class O exempt dwellings) (line 25)
6. Next, the ratio values shown in Table 1 would be applied to each of the Band D equivalent totals for the above lines so that they are either added or subtracted to/from the starting position of the number of Band D equivalent total dwellings.

Table 1: Ratio values for dwelling exemptions and reductions

Line	Ratio applied
Dwellings	1.00
Exemptions	-1.00
Demolished	-1.00
Disabled reduction (minus)	-1.00
Disabled relief (plus)	1.00
Single	-0.25
Discount 25%	-0.25
Discount 50%	-0.50
Family annex	-1.00
Class O (armed forces)	1.00
LCTS pensioners	-1.00

7. At this point in the proposed steps, there would be an initial total number of Band D equivalent dwellings for each billing authority.

Working-age Local Council Tax Support (WA-LCTS) adjustment

8. The next step the government proposes is to make an adjustment for working-age local council tax support on the tax base. The government proposes using a linear regression approach to estimate the proportion of Band D equivalent dwellings in a billing authority which receive working-age LCTS.

9. The dependent variable will be obtained by first taking the following line of the 鈥楥ouncil Taxbase Support Data鈥� worksheet for the Band A entitled to H breakdown (note some lines include A entitled columns):

• Table 3.06. Reduction in council tax base due to council tax support - working age people (dwelling equivalents)

10. The relevant council tax Band D equivalent ratios would then be applied to this data to calculate for each billing authority the total Band D equivalent for this line.

11. The dependent variable would then be defined as this Band D equivalent value divided by the total Band D equivalent amount of dwellings per Table 1.01 in the 鈥楥ouncil Taxbase Data鈥� worksheet.

12. The proposed regression model will use two independent variables:

• the population-weighted Index of Multiple Deprivation (IMD) average score of an authority^{[footnote 3]}, and
• the proportion of the total population that is of working age (18-64), based on Office for National Statistics (ONS) .

13. The modelled proportions from the regression will then be multiplied by the total number of Band D equivalent dwellings for each authority to arrive at an estimated number of Band D equivalent properties receiving WA-LCTS. Finally, the proportions that each authority represents of the total in the previous step would be taken and applied to the actual England total for the reduction in tax base due to WA-LCTS.

14. This would give the estimated total reduction in tax base for each billing authority due to working-age LCTS (rather than using the actual data for each authority).

15. Next, the initial total number of Band D equivalent dwellings for each billing authority (calculated in step 6) would then have subtracted from it the modelled working-age LCTS Band D equivalents to arrive at a new interim total tax base at billing authority level.

Council tax collection rate

16. Next, a uniform assumption on the collection rate is proposed to be applied to the tax base (calculated up to the previous step).

Tier splits in multi-tier areas

17. The government proposes to then split the tax base for multi-tier areas using the average tier split for council tax receipts^{[footnote 4]} in multi-tier areas between the shire county precept, the shire district element and the fire element of Council Tax bills across the country. These percentages would be applied uniformly for relevant areas.

18. Table 2 below provides the Band D tier split proportion for England, using 2024/25 data.

Table 2: Band D tier split proportions

Resource tier split	GLA[footnote 5]	London Boroughs	Upper Tier	Lower Tier	Fire Tier
2024-25	2.3%	82.1%	84.4%	11.0%	4.6%

19. Applying these proportions to the council tax base calculated thus far would thus determine the final council tax base for all local authorities in scope of the resources adjustment.

20. To give an example, a particular Shire District in a shire area would get 11.0% of the total district tax base. The respective Shire County would then receive either 84.4% of the district tax base, if it is not responsible for delivering fire and rescue services, or 89% (84.4% plus 4.6%), if it does have such responsibilities. The shire county would, in addition, get the same proportion of the other constituent shire districts鈥� tax bases. Its total tax base would be the sum of these shares of the respective individual shire district tax bases.