Memorandum by Sefton Council (LGB 17)
1. INTRODUCTION
The draft Local Government Bill covers a broad
spectrum of policy areas although it is largely related to financial
matters. The inclusion of a number of permissive clauses enabling
additional flexibility for local authorities can only enhance
local choice and democracy and is to be supported. However, to
receive unqualified support the opportunities must be available
equally to all authorities and not determined by other factors
such as an inequitable resource distribution system, tax base
or subjective opinion.
2. COMMENTS ON
THE DRAFT
BILL
Sefton Council will comment more fully on the
Bill in accordance with the specified deadline for responses.
However, there are a number of areas within the draft Bill for
which significant detail will need to be published before a full
assessment can be made of the value of the proposals. These include:
— Capital Finance—the increased
flexibility to borrow outside Government controls is to be welcomed,
subject to clarification of the continuing form of external funding
support and the replacement for the existing Commutation Adjustment.
— The introduction of a merged formula
grant appears to be a major change merely to simplify the administrative
payment system. The explanatory notes published with the Bill
indicates that this new grant "will have no effect on the
total amount of Government support, and almost no effect on the
amount of support which each authority receives." The implication
of this statement is that the formula grant represents more than
the sum of the current RSG and NNDR payments.
— The transfer of HRA Housing Benefit
into the General Fund represents the correction of an obvious
anomaly in the Housing ring-fence legislation. However, a transparent
and equivalent transfer of subsidy and grant will need to be confirmed
to avoid any additional new burden falling on council taxpayers.
The outstanding issues identified above are
all financial. It is Sefton's view that a full evaluation of the
proposals in the draft Bill can only be made following the publication
of detailed proposals for amending the Revenue Support Grant Methodology
and a comprehensive assessment of the impact of those proposals.
The Select Committee is urged to consider the impact of the RSG
methodology change as part of the Review.
3. FUNDING ISSUES—SEFTON
COUNCIL
Whilst the draft Bill includes several proposals
that are to be welcomed by Local Government, the benefits will
be eroded without an equitable RSG mechanism. The remainder of
this paper focuses on the key resource problems facing Sigoma
authorities in general and Sefton in particular.
The Audit Commission's draft CPA Corporate Assessment
for Sefton states that, in 2002-03, Sefton Council:
"received £673 of external government
funding per head of population compared to a Metropolitan District
average of £759 per head. Despite modest spending at £977
per head the Council has relatively high council tax levels compared
to the Metropolitan District Band D average."
The anomalous position that Sefton finds itself
in results from the inadequacy of the current RSG mechanism. The
weaknesses are well documented but, in Sefton's view, the key
areas that need addressing for 2003-04 are:
3.1 Education
— the additional costs of educating
within deprived areas must be recognised and adequately funded
to ensure that areas faced with educational disadvantage have
sufficient resources to tackle their local issues;
— the Area Cost Adjustment should reflect
actual costs incurred in expenditure and not notional costs. The
recent paper by Coventry City Council demonstrates that in 2000-01
only 40 per cent of ACA resources allocated to London to fund
teachers pay was actually spent on that purpose;
— reduce the number of different revenue
streams available to schools to promote a clearer understanding
of resources provided for the service.
3.2 Personal Social Services
— Sefton's area includes Southport,
which along with a number of other resort towns, has a disproportionate
number of elderly and very elderly residents. This places an additional
strain on resources within Social Services. In 1999-2000 the Government
changed the measure of the elderly population in the SSA calculation
from the total resident elderly population to the elderly population
living in private households. This change had been considered
and dismissed in 1998-99 but was applied a year later, although
no further studies had been commissioned to justify the methodology
change. Nine resort authorities, led by Blackpool, commissioned
a report on this issue by Rita Hale Associates in 2001. This report
estimated that the cost of this unjustified change to the nine
resort authorities was approximately £10 million per year,
Sefton being the authority that lost the greatest amount—£2.5
million per year. The new SSA methodology must reflect the implication
of the age profile of resort authorities and use a more accurate
measure for elderly population.
— The foster care adjustment in the
Children's sub-block, reflecting regional variations in costs,
is inappropriate as it duplicates the ACA.
3.3 EPCS
— Given the proposal to transfer HRA
housing benefit into the General Fund, the current method of funding
rent allowances should be reviewed and replaced with a 100 per
cent grant. Sefton supports the study by Tameside MBC that proposes
this option.
— The ACA should not be used to subsidise
council tax levels. Resources allocated to reflect additional
costs should be spent for that purpose.
3.4 Earmarked resources
— In accordance with the stated objectives
of the Local Government White Paper, the recent trend towards
increasing the number and size of specific grants should be reversed
to allow greater discretion on expenditure at a local level.
— If, however, specific grants are
retained clear indications should be announced at the earliest
opportunity regarding the nature of the grant. Authorities should
be advised if the grant is a one-off, for a fixed period or will
be subsumed into future years settlement before any new expenditure
commitments are entered into.
— Similarly the Government's recent
pressure on local authorities to pass on increases in service
SSAs does not allow local circumstances to be taken into account
by Council members.
3.5 Floors and Ceilings
— One of the purposes of the Government's
Spending Reviews (SR) is to support better budget planning. Following
the publication of SR2002 the Government should announce floors
and ceilings in external funding for the period of the SR.
3.6 Resource Equalisation
A key element that needs to be addressed in
the new SSA system is the equalisation of resources between authorities
with different tax bases. Sefton supports the principles of the
joint SIGOMA/ANEC report on resource equalisation.
4. CONCLUSION
The next few months will see the publication
of a plethora of consultation papers, proposals and ultimately
legislation affecting Local Government Finance. It is essential
that all the changes are considered together to ensure the real
impact is assessed and examined. The Select Committee should carefully
consider the appropriate time to publish any findings.
A W Yates
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