Readers of this insight should be aware that revised Minimum Revenue Provision (MRP) Guidance has been issued for English local authorities, which will take effect in most cases from April 1, 2025.
In summary, the revised Guidance ensures that:
If we delve into the Guidance in more detail, several areas emerge that our clients should consider during the remainder of this financial year. This will help ensure that any opportunities to benefit from the current Guidance are fully optimised and that the full extent of any amendments resulting from the new Guidance are understood during the budget-setting process.
The revised Guidance makes it clear that “local authorities should not change their MRP policy or methodologies where the primary objective of any change is to reduce the revenue charge.” Under the current Guidance, this is not explicitly mentioned, meaning there is a short window to make changes in the current financial year that could provide both immediate and long-term benefits.
While it may be possible to make changes now to provide a benefit, the new Guidance clearly states that MRP must ensure the CFR is fully financed over time, and that the CFR used to calculate MRP is accurately and consistently determined in accordance with the Prudential Code. This underlines the importance of calculating the CFR directly from the balance sheet. Local authorities must, therefore, be able to demonstrate how their CFR is calculated and how their MRP schedule will fully finance this figure.
Based on our detailed experience, we often see CFR figures in the notes to the accounts that cannot be fully reconciled, as well as limited MRP calculations to back up the financing of the amount.
The new MRP Guidance has been introduced to close certain loopholes that were previously being exploited. It is now clear that the CFR must be fully financed, and it is more difficult to exclude any item from this requirement. It would be worthwhile to spend time between now and the budget-setting process ensuring full compliance with the requirements of the new Guidance. If any issues need addressing, it is important to fully understand the implications for future revenue budgets.
At Arlingclose, we believe this is an ideal time to review your MRP policy, procedures, and processes to give your MRP a health check to ensure it is fully compliant with the new Guidance. We are currently conducting such reviews for several clients. If you would like to discuss the benefits of such a review, please contact your usual client representative or contact us at info@arlingclose.com or on 08448 808 200.
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