Minimum Revenue Provision (MRP)

When MRP Guidance was last updated in England and in Wales there was an initial impression that MRP reviews would become a thing of the past.

The sets of Guidance still permit local authorities to change their methods for calculating MRP but make it clear that changes cannot be applied retrospectively meaning that it is not possible to recover “overpayments” of MRP relating to previous years.

Where a local authority changes the method(s) that it uses to calculate MRP it should explain in its MRP Statement why the change will better allow it to make prudent provision.

The rules were therefore tightened up to prevent perceived abuses of the system, but the intention was not to rule out changes to MRP policies.

Local authorities are still required to calculate in each financial year an amount of MRP they consider to be prudent. The broad aim of prudent provision is to require local authorities to put aside revenue over time to cover their Capital Financing Requirement.

There remain ready-made options for calculating prudent provision in the English and Welsh sets of Guidance. Their existence does not prevent a local authority from using alternative methods where they are appropriate.

The Guidance is silent regarding the correction of genuine errors in historic MRP calculations.

When putting together the annual MRP Statement a review of the Council’s MRP policy should therefore be regarded as good practice in making sure that the method(s) adopted remains relevant to the individual circumstances of that local authority whilst taking into account the provisions contained within the appropriate MRP Guidance.

At Arlingclose we have a great track record of finding efficiencies in MRP and a strong list of local authority references to back this up. If you think its now time to revisit MRP then get in touch at treasury@arlingclose.com to discuss what we can do for you.