Memorandum by Rural Services Partnership
(LGB 15)
1. THE RURAL
SERVICES PARTNERSHIP
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. CAPITAL FINANCE
AND ACCOUNTS
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. FINANCIAL
ADMINISTRATION
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.
4. FORMULA GRANT
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. BUSINESS IMPROVEMENT
DISTRICT
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. NON DOMESTIC
RATES
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. COUNCIL TAX
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. HOUSING FINANCE
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. MISCELLANEOUS
AND GENERAL
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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