Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Rural Services Partnership (LGB 15)


  1.  The Rural Services Partnership [RSP], is a coalition of almost 60 local authorities which cover some of the most rural areas in England. The members of the RSP are listed in Annex A.

  1.1  The Rural Services Partnership [previously known as the Most Sparsely Populated Council's Group], is a Special Interest Group of the Local Government Association.

  1.2  The RSP has members from District, County and Unitary Authorities and is entirely cross-party.


  2.1  The RSP welcomes Clause 3 of the Bill. By:

    —  placing the duty on each local authority to determine how much it can afford to borrow;

    —  enabling the Secretary of State to introduce regulations that will provide the peg upon which to hang the CIPFA Prudential Code;

  the clause makes it possible for the Government to introduce the new Prudential Borrowing System.

  2.2  The above having been said, the RSP has concerns about three other clauses:

    —  clause 4—which would give the Secretary of State complete freedom to limit the borrowing of local authorities in aggregate, and by specified local authorities without any requirement for the Secretary of State to:

      —  make a statement to the House of Commons explaining why he/she needs to impose a limit on the aggregate of local authority borrowing; or

      —  obtain the support of Parliament for the imposition of an aggregate borrowing limit; or

      —  consult local authorities and/or their representatives about the imposition of the aggregate borrowing levels; or

      —  consult the relevant local authorities and/or their representatives before making a direction to limit the borrowing of a particular local authority;

    —  Clause 6—this may be more restrictive than the existing legislation in relation to credit agreement; and

    —  Clause 10—which would give the Secretary of State the power to specify how local authorities may use their capital receipts—and will enable the Secretary of State to require a local authority to pay over a capital receipt to him/her

  2.3  In the view of the RSP, the legislation as drafted would enable the Secretary of State to make the new capital finance system as restrictive as the existing system.


  3.1  The RSP notes that Clauses 26 and 27 would place new statutory duties on Councils and their Chief Finance Officers in relation to the budget calculations and budget monitoring, even though most local authorities as a matter of course, already meet these requirements.

  3.2  The RSP also notes that if an authority is minded to behave imprudently, it would still be able to meet the requirements of Clause 26[4] and still set a council tax that, for example, assumes a higher level of council tax collection than that assumed by the Chief Finance Officer in making his/her budget calculation. Put quite simply, the requirements of Clauses 26 and 27 will place new statutory duties on all local authorities and their Chief Financial Officers, but would not necessarily affect the decisions taken by the tiny minority of local authorities that might choose to act imprudently.


Merger of Revenue Support Grant and National Non Domestic Rate

  4.1  The RSP sees no merit in the proposal to merge Revenue Support Grant [RSG], and the income from the National Non Domestic Rate [NNDR], into a single funding stream. However, it sees good reasons why the two income streams should remain separate.

  4.2  The Office of the Deputy Prime Minister [ODPM], recognises in a technical paper [RGD][02][04], that the merger of the two income streams would have "virtually no impact on the distribution of support between authorities", and would have no impact on the introduction on Business Improvement Districts. So there are no good technical reasons for the merger of the two income streams.

  4.3  The RSP believes that the claim in that same technical paper that "Central Government support for local authority spending will be much simpler for stakeholders to understand with a single integrated funding stream" is spurious, given that local authorities have so many income streams, including a raft of specific grants, targeted grants, income from fees and charges and income from European sources.

  4.4  In contrast, the Partnership believes that there are good local government reasons against the merger of the RSG and NNDR.

  4.5  Prior to April 1990, the National Non Domestic Rate was a local tax. The local tax was determined locally and the tax was collected, as it is now, by local authorities. The tax was "nationalised" in 1990, as part of the package of reforms to local government finance that included the introduction of the community charge.

  4.6  Local authorities income from NNDR is not Government Grant Aid. The income from the NNDR is the yield from an assigned revenue—ie; the income from a tax which is determined nationally, but is wholly attributable to local government.

  4.7  Many local authorities believe that the non domestic rate should be returned to local control.

  4.8  The RSP believes that, if the income from the NNDR were to be merged with grant income into a single stream, it would be harder for local government to argue for the return of the non domestic rate to local control. Accordingly the Partnership is opposed to the proposal to merge the RSG and the redistributed NNDR into a single funding stream.

The New SSA Formula; The Treatment of Sparsity Issues

  4.9  For some years the RSP has been asking the Government to examine the effects of rurality on the costs of service provision. Most recently, in response to the December 2001 White Paper "Strong Local Leadership—Quality Public Services" [Cm 5237], the RSP set out its concerns that no research has been commissioned into the effects of population dispersal and rural settlement patterns on the cost of service delivery. The RSP expressed its surprise at this, given that research carried out in Scotland and Wales shows that it would be possible to develop more sophisticated indicators of sparsity/rurality than those currently included in the SSA Formulae for England—ie;

    —  settlement pattern indicators that reflect the higher costs of providing multiple delivery points—ie; larger numbers of smaller schools, sub-offices, and depots—in order to provide those who live in rural areas with reasonable access to services; and

    —  dispersion indicators that reflect the higher costs of providing home base services such as refuse collection and domiciliary care services—in rural areas.

  4.10  In meetings with the researchers who carried out the work on the effects of population dispersal, and settlement patterns in Scotland and Wales, the RSP has not observed "pessimism" about "applicability" of their work "to England" noted by the Department in the Draft Formula Review Group Report.

  4.11  The Partnership remains of the view that, at the very least, the Government should have commissioned a feasibility study into the development of more sophisticated sparsity/rurality indicators for England.

  4.12  The RSP wishes to re-iterate its concerns:

    —  that three to four years into the Local Government Finance Review, no research has been commissioned into the effects of population dispersal and rural settlement patterns on the costs of service delivery; and

    —  about the piecemeal treatment of the sparsity/rurality issues in the review


  5.1  The RSP welcomes the proposals set out in Part 4 of the Bill, and suggests that the Government should extend the Business Improvement District arrangements to areas without an identifiable business community, so that business communities in essentially rural areas also have the opportunity to develop new ways of working with their District Councils if they so wish.


  6.1  The RSP welcomes the proposals in relation to small business relief and also welcomes the proposed amendment to Schedule 5 of the Local Government Finance Act 1988 to reflect modern farming practices.

  6.2  The RSP has some reservations about the feasibility of the statutory self financing transitional relief scheme relating to small business relief. The Partnership remembers the attempt by a previous Government to operate a similar non-statutory scheme in the 1990's, which was introduced in 1990-91 and abandoned in 1992-93, primarily because it attracted so much criticism from the business community.


  7.1  The RSP welcomes:

    —  the proposal under Clause 79 to introduce a statutory re-valuation cycle;

    —  the proposal to change the number of valuation bands—and suggests that a new lower value band should be introduced when the 1 April 2007 valuation list comes into operation;

    —  the proposal in Clause 85 to exempt students from joint and several liability for the council tax;

    —  the proposal in Clause 86 to designate combined fire authorities as major precepting bodies; and

    —  the proposal in Clause 87 to repeal Clause 31 of the Local Government Act 1999 [the Clause underpinning the Council Tax Benefit Limitation Scheme].

  7.2  The Partnership considers that within the proposed Act, or a separate Act to be promoted as soon as possible, the primary legislation needed to remove or reduce the existing 50 per cent council tax discount on second homes should be incorporated.


  8.1  The RSP is concerned about the contents of Clause 97.

  8.2  The notes to the Bill say that "the purpose of this Clause is to ensure that when rent rebates are removed from the Housing Revenue Account, and met by the non-housing revenue account housing benefit subsidy, there is a mechanism to ensure that authorities which are able to generate surplus rent income, even though incurring management and maintenance expenditure comparable with other authorities, make a contribution towards meeting the costs of authorities which cannot generate sufficient rent income to meet such costs."

  8.3  The RSP feels that this is another example of the Government expecting the "nearly poor" to support the "poor."


  9.1  The RSP has concerns about the Comprehensive Performance Assessment Framework [CPA].

  9.2  The RSP assumes that whatever the final definition of the proposed categories, they are intended to sum up the CPA assessment of an authority in language that is fair to the authority and clear and understandable to local people and the Government. The RSP does not object to poor performance being identified as such, but the RSP is concerned that the terms used for some of the categories may neither be fair, nor convey an accurate summary of the CPA assessment.

  9.3  The RSP shares the LGA's view that an authority with excellent current performance, but judged to have poor capacity for improvement, is very different one with only fair current performers whose capacity for improvement is also judged fair—even though both could be labelled the same way under CPA. The RSP's preferred option would be for CPA to report both scores, as is the practice with both Audit Commission inspections and Social Services Joint Reviews, but shares the LGA's view that the alternative of increasing the number of categories would be an improvement on the current proposals, and would simplify the search for appropriate terms to describe each category.

  9.4  The RSP is particularly concerned that CPA should judge an authority's performance on the basis of the resources available to it.

  9.5  The RSP is concerned about the costs of compliance with the CPA framework for its member authorities.

  9.6  The RSP suggests that the Select Committee may wish to explore the nature of the CPA process in the oral evidence session.

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Prepared 8 July 2002