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Session 1999-2000
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Delegated Legislation Committee Debates

Local Authorities (Funds) (England) (Amendment No.2) Regulations 1999

First Standing Committee on Delegated Legislation

Wednesday 9 February 2000

[Mr. Barry Jones in the Chair]

Local Authorities (Funds)(England) (Amendment No. 2) Regulations 1999

4.39 pm

Mr. Peter Atkinson (Hexham): I beg to move,

    That the Committee has considered the Local Authorities (Funds) (England) (Amendment No. 2) Regulations 1999.

I hope that we will not detain you and the Committee too long, Mr. Jones. The purpose of asking the Minister to explain the regulations is to see whether he can throw light on what appears to be an incomprehensible document--that is not to blame anybody, because I know from my own experience that anything to do with local government finance is, in essence, extremely difficult--and to hear an explanation of the strange algebraic sums on pages 2, 3 and 4, on which I understand the hon. Member for St. Helens, South (Mr. Bermingham) will give us the answer later. I also wish to ask the Minister whether there will be any winners or losers.

The Metropolitan police are effectively surrendering part of their territory to surrounding forces in Surrey, Kent, Essex and Hertfordshire. As the Metropolitan police operate on a higher income level which reflects the cost of policing in London, and as their officers received additional London weighting, how will that difference be resolved for county forces?

Will the Minister assure us that there will not be any winners or losers in the London boroughs? Presumably the inner and outer London boroughs will have to adjust the balances when the Greater London Authority comes into operation. Will the same amount of money go to a borough that would have gone to it had the change not been made? I hope that the Minister understands the point that I am trying to make.

The Chairman: I call Mr. David Hill. [Hon. Members: "Keith."] I call Mr. Keith Hill.

4.41 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Keith Hill): I am delighted to be appearing at my first Delegated Legislation Standing Committee as a Minister. I have been let off the hook--perhaps too much so, to judge from the expression of my Whip. Your introduction Mr. Jones, took me back to my very first appearance in the Chamber where, as a quaking novice Member of Parliament about to make my maiden speech on 18 May 1992, I rose to my feet to hear the Speaker of the House of Commons cry out, "Mr. David Hill". How does a new Member correct the Speaker of the House of Commons in those circumstances? She was rapidly reminded of the correct terminology.

I am grateful to the hon. Member for Hexham (Mr. Atkinson) for opening the debate. I hope that he has not unleashed more of a can of worms on himself and other members of the Committee than he might have wished. In due course, I shall address the two issues that he raised.

The regulations are rather technical; so, rather than enter into the fine details--I am perfectly able to explain the formulae, but understanding them is a different matter--it might be helpful to set out the background. The Government announced last February that the Secretary of State would set the first year's budgets for the Greater London Authority and its functional bodies covering fire, police, transport and economic developments and regeneration. The mayor and Assembly will not be in place until May, which is too late to set the budgets for the financial year 2000-01. In 2001-02 and later years, the mayor and Assembly will, of course, set them.

The budgets will cover the full financial year. However, the GLA will not be established until 8 May and its functional bodies--Transport for London, the London Development Agency, the Metropolitan Police Authority and the London Fire and Emergency Planning Authority--will not be created until 3 July. Therefore, in addition to covering spending by those new bodies, the budgets will also cover spending by their predecessor bodies. In addition to setting the budgets, the Secretary of State will issue the GLA precepts, which will raise moneys from council taxpayers through the bills issued by the City of London and each of the London boroughs.

The hon. Member for Hexham asked about winners or losers. There are no winners or losers between the boroughs. We are not dealing with a substantial global sum. The total is 500,000, which amounts to 18p next year for band D council tax payers--a fraction of 1 per cent. of the council tax payment.

As members of the Committee with experience of local government will know, the calculation and issue of a precept are not straightforward matters. Various statutory instruments need to be in place before that can be carried out and the statutory instrument we are debating is one of them.

Part of the precepting process is to take into account how successfully the previous year's council tax was collected. That is done by estimating and sharing the surplus or deficit in a billing authority's collection fund. A collection fund is a statutory fund maintained by billing authorities--in this case, the London boroughs and certain district councils in Essex, Hertfordshire and Surrey. It is used to record income from local taxes and non-domestic rates collected by the authority. It is also used for payments to precepting authorities, the national pool of non-domestic rates and the billing authority's own general fund.

Last year there was no GLA. In London, surpluses or deficits on collection funds were shared between the boroughs and two preceptors: the receiver for the Metropolitan police district and the London fire and civil defence authority. However, the London fire and civil defence authority will not issue precepts next year. The receiver will not issue precepts in respect of police 5 6 services. He will issue precepts only to the inner-London boroughs, for reasons that I will explain in due course.

The GLA precept will replace the separate precepts for fire and police services in the Metropolitan police district, but the GLA should inherit its share of surpluses and deficits from previous years; otherwise, London alone would not be taking these amounts properly into account when setting council tax levels for 2000-01.

The regulations sort out the way in which the change in preceptor is to be handled. Unfortunately, it is not as straightforward as members of the Committee might at first think. It is not a case of simply substituting the GLA for the police and fire bodies. There are two reasons for that. First, the receiver for the Metropolitan police district is also financially responsible for magistrates courts and probation services in inner London. Last year, his precept therefore included amounts for them as well as for police services. The magistrates courts and probation services are to remain with the receiver for the time being, so he should still be entitled to a share of any surplus or deficit carried forward from last year.

Secondly, the Metropolitan police boundary is changing from 1 April. It will no longer contain areas outside Greater London. Again, a share of surplus and deficits should be transferred to the police authorities that will take over responsibility for policing in these fringe districts. The small sum of surpluses and deficits will be shared out equitably between the police districts on the periphery of London that are taking over new responsibilities, according to the formulae set out in the regulations. Again, there will be no winners or losers.

That is all I want to say on the background to the regulations, but I am willing to answer more detailed questions.

Mr. Gerald Bermingham (St. Helens, South) rose--

Mr. Hill: I rather feared that there might be one from my hon. Friend, the ever-inquisitive Member for St. Helens, South.

Mr. Bermingham: I fully understand what E, F, G, H, I, J and K mean and to what they are attributable because that is in the regulations. The only trouble is that A, B and C are not, so we do not know what they are. Unless the Minister tells us, we could all go happily away in total ignorance.

Mr. Hill: I am most grateful to my hon. Friend for giving me the opportunity to set out the details of the formulae that appear in the regulations. I think he is drawing our attention to page 2 of the regulations. Let me explain. The first formula is A times the product of E plus F divided by B plus C. This formula calculates how much of an outer London borough's surplus or deficit is to be passed to the GLA. That is in the regulations. However, the following information may be of greater assistance to my hon. Friend, at least I hope so.

A is the borough's surplus or deficit. E plus F is the sum of the police and fire precepts on that borough last year. B plus C is the sum of the borough's own council tax plus all precepts--the total amount raised from the borough's council tax payers last year. This means that, if police and fire precepts last year were, say, 10 per cent. of the total council tax, 10 per cent. of a surplus or a deficit would be passed to the GLA. I hope that is helpful to my hon. Friend.

Mr. Bermingham: I am grateful to the Minister because he now solves the problem. We now know how to do the arithmetic and it is clear and simple. It would have helped if sub-paragraphs (2) and (3) were in the regulations; that would have explained what A, B and C were. That was too much to expect.

Mr. Hill: As ever, after ostensibly giving me a rough time, my hon. Friend's essentially gentlemanly nature lets me off the hook at the end of his grilling of me. I hope that I have set out the background of the regulations to the satisfaction of the Committee.

Mr. Adrian Sanders (Torbay): I apologise for being a bit late. I was telling for my party in that Division and, therefore, was not able to get here as early as other hon. Members. There are three points on which I would like clarification.


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