Select Committee on Agriculture Minutes of Evidence


Annex C

FUNDING ARRANGEMENTS FOR OPERATING AUTHORITIES

  1.  The EA's non grant-aided flood defence expenditure is funded primarily from levies on local authorities and also from IDB contributions. In Anglian Region only, it is also funded from a general drainage charge per hectare, payable by farmers, on land which is not within Internal Drainage Districts. IDBs are funded primarily by the combination of special levies on local authorities and drainage rates payable on agricultural land and agricultural buildings.

  2.  Where local authority flood and coastal defence schemes are grant-aided, the Ministry issues Supplementary Credit Approvals (SCAs) to enable local authorities to borrow to cover the residual costs of the scheme.

  3.  The way in which local authority costs are financed is a function of the general funding arrangements for local authorities. Flood and coastal defence revenue expenditure including Environment Agency levies and IDB special levies is reflected in the Standard Spending Assessments (SSAs) for local authorities and in the Revenue Support Grant (RSG) made available to them. Flood defence and coast protection expenditure appear as two separate sub-elements in the SSAs of local authorities.

  4.  RSG is distributed to each receiving authority so that if it were to spend at the level of its SSA then, subject to certain qualifications, all billing authorities could set broadly the same council tax for dwellings in the same valuation band in any area.

  5.  There are two parts of the SSA which are relevant to flood defence and coast protection. One relates to the day-to-day costs associated with these services. The other relates to the cost of servicing borrowing undertaken on the strength of SCAs.

  6.  An authority's share of the national totals of SSA for the day-to-day expenditure on flood defence and coast protection is its share of budgeted expenditure in the previous year. The national totals reflect an estimate by MAFF/DETR of expenditure on Environment Agency Levies and IDB special levies, together with authorities' own spending.

  7.  The element of the SSAs relating to the cost of servicing borrowing is based on a notional debt for each authority, reflecting the SCAs which have been issued to the authority.[1][2]

  8.  The overall effect of these arrangements is that nearly all of the day-to-day costs of flood defence and coast protection which might otherwise fall on local authorities and their council tax payers are met by central government through the Revenue Support Grant, as is the majority of the debt charges.

  (a)  allowing the county council to make only a token contribution (but this is possible only with agreement of both parties); or

prior to the issues of an SCA by the Ministry for the non-grant aided costs of an approved project, then the SCA can be apportioned accordingly between the district and county, and reflected in RSG calculations.


1   SCAs issued before 1997/98 also increase the negative element of SSAs relating to interest earned on set-aside capital receipts. This reduction no longer applies to new credit approvals. Back

2   Under the CPA 1949, s.20, county councils are required to make a contribution towards the borrowing costs of grant aided coast protection projects carried out by district councils within their area. But to avoid placing an unnecessary financial burden on a local authority, and to avoid any double counting of RSG, it may be necessary to consider either: Back


 
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