Minimum Revenue Provision - Revised Guidance

News headlines have recently been dominated with Brexit as well as diplomatic relations with the Russian Federation. It’s therefore possible that some people may have missed the announcement that the comedian Jim Bowen had died. 

For fourteen years commencing in 1981 Jim was the presenter of the Sunday teatime TV gameshow “Bullseye”. The show combined darts playing with a general knowledge quiz. The contestants were in teams of two people.  One team member was a dart player whilst the other answered the quiz questions.  After knock out rounds during the show the finalists could gamble the prizes they had won for the chance of winning the star prize. They had to score 101 points or more with 6 darts; non-dart player throwing first.

Star prizes included caravans, speedboats and cars. The actual prize on the day was not revealed until the end of the show. Jim would warn the finalists that if they gambled and lost, all they would receive was their "BFH” i.e. their Bus Fare Home. In the event that they lost, Jim would offer his commiserations before walking the pair of them across the studio telling them to “come and have a look at what you could have won” as the star prize was revealed.

Which brings me onto the topic of Minimum Revenue Provision (MRP) and the fact that the Ministry of Housing, Communities and Local Government (MHCLG) has recently produced its updated Guidance on MRP for English local authorities. 

The revised Guidance applies for accounting periods starting on or after 1 April 2019, with the exception of paragraphs 27-29 of the Guidance “Changing methods for calculating MRP”, which apply for accounting periods starting on or after 1 April 2018. 

Paragraph 29 is explicit that “The calculation of MRP under the new method(s) should be based on the residual CFR at the point the change in method is made (i.e. it should not be applied retrospectively).” This will end the practice that some local authorities have engaged in of reviewing MRP charged in previous years in order to reduce the MRP charge in the current year. This will mean that it will not be possible to recalculate and “come and have a look at what the CFR could have been” in order to take the star prize of an MRP “holiday”.

MHCLG encourages early adoption of the latest Guidance. On the other hand local authority finance officers are required to balance the books in what can only be described as challenging times. That’s why so many local authorities have already reviewed MRP calculations to determine whether “reprofiling” of financing charges could assist in dealing with current Revenue budget pressures. The revised Guidance does not rule this out moving forward. It’s the retrospective aspect that is coming to an end.

With the closure of the accounts for financial year 2017/18 looming local authorities have limited time available to review of their existing MRP methodologies retrospectively. Once 2017/18 accounts are completed any retrospective adjustments will not be permitted. After that it could be a case of “come and have a look at what you could have done”. If elected members suspect that an opportunity has been missed some local authority finance officers may have some explaining to do if they want to avoid receiving their “BFH”.

Please contact your Arlingclose Executive if you wish to discuss issues surrounding MRP.