Memorandum by Lancashire County Council
1. Lancashire County Council wishes to submit
the following brief comments by way of evidence to the House of
Commons Transport, Local Government and the Regions Select Committee
Inquiry into the draft Bill. The Council is supportive of the
response emerging nationally from the Local Government Association
to the Bill, but would particularly want to emphasise the following
79 TO 81)
2. Accurate calibration of the council tax
base of individual authorities is of fundamental importance to
the equity of the current system of local government finance.
The value of the tax base governs the extent of government grant
drawn in to an authority to support the funding of its Standard
Spending Assessment; and of course the value placed on an individual
property defines the amount payable by its owner in council tax
3. It is therefore a welcome move for the
Bill to require revaluations to take place at a maximum period
of 10 years, and to empower the Secretary of State to vary the
council tax bands involved. But the County Council would question
whether this goes far enough. In a time of volatile house prices,
large differentials can emerge between different regions of England
within a period as long as 10 years. The problem is compounded
if, as is the case at present, the bands for council tax valuation
are set in such a way as not fully to capture the full range of
house price values that may emerge.
4. Currently there are eight valuation bands,
into which properties were allocated on 1 April 1993 on the basis
of their values on 1 April 1991. Band A covers all properties
then valued at £40,000 or below; Band H covers all properties
valued at over £320,000; and Bands B to G cover the points
between. The distribution of property between these eight bands
now varies widely across the country. For example, for England
as a whole, 25.9 per cent of all properties fall into Band A and
0.6 per cent into Band H; in the South-East (including London),
6.2 per cent of properties fall into Band A and 1.3 per cent into
Band H; here in Lancashire, 38.8 per cent properties fall into
Band A and 0.1 per cent into Band H. (Data from the Valuation
Office Agency of the Inland Revenue, as at 26 March 2002).
5. The County Council would argue that the
bands must be changed for the next valuation to capture more fairly
the true value of the council tax base that now exists. For example:
There has been a collapse of property
values in deprived urban areas of Lancashire (and elsewhere) which
is at present not fully reflected in the standard Band A category:
there needs to be an "A minus" band to reflect this
There has been a disproportionate
increase in the values of property in the South-East at the other
end of the spectrum: there needs to be at least one "H plus"
band to reflect this
6. Lancashire's view on the Bill is therefore
that it is not enough to give the Secretary of State a power to
vary the bands that currently are set. If the interval between
valuations can be as long as 10 years, the Secretary of State
of the day should have a duty to review the bands such that they
fairly capture the shape of the property market at the valuation
date. Without such a duty, revaluation of individual properties
alone will not guarantee that the council tax base is fairly calibrated.
(CLAUSES 1 TO
7. Lancashire's officers have been assisting
at a national level with the development of the new capital regime,
and the County Council is also a pilot site for trialling the
new regime in practice. We are therefore very supportive of the
general approach indicated in the Bill. However, perhaps because
of the uncertainty involved in so radical a reshaping of the current
arrangements, the Bill seems at times to be overly prescriptive.
8. In particular, Lancashire's view is that
it is unnecessary, and against the spirit of self-regulation implicit
in the new regime, to give the Secretary of State a power of direction
to set limits in relation to the borrowing of money by a particular
local authority (clause 4 (1) b). The guidance accompanying the
Bill understandably explains the need for a long-stop power to
impose a limit on all local authority borrowing if the macroeconomic
situation required it (clause 4 (1) a); but no rationale is given
for the extension of such a direction to the level of an individual
authority other than that it may be necessary to "prevent
imprudent action at a local level". The whole regime of prudential
borrowing limits being created by the Bill ought to be good enough
to prevent such action, without the need to give the Secretary
of State power to intervene directly in this way.
(CLAUSES 25 TO
9. Lancashire has been regularly commended
by its external auditor for the robustness of its financial management.
From our perspective, and indeed from the perspective of any well-run
authority, the section of the Bill imposing statutory requirements
on the level of financial reserves, the validity of the budget,
and the monitoring of expenditure in-year, is wholly unnecessary.
Not only is it unnecessary; it is damaging to good governance.
For example, the prescription of a common level of reserves cannot
capture the individual circumstances of local authorities, and
risks (through an over-cautious "lowest common denominator"
approach) tying up unnecessarily large amounts of public money
in financial balances. Statute is a clumsy weapon to enforce the
details of sound budget management, and these matters should be
left to authorities, their professional officers and their auditors.