APPENDIX 14
Memorandum submitted by the County Councils
Network
The County Councils Network (CCN) is a Special
Interest Group within the Local Government Association (LGA),
with all 37 English Shire Counties in membership. The Network
exists to promote the voice of our members within the LGA, and
the values and interests of the English Counties. Together these
authorities represent 48% of the population of England and provide
services across 87% of its land area.
Thank you for the opportunity to comment on
local transport financial settlements. I am writing in my capacity
as Lead Financial Adviser to the CCN, as I have not had the opportunity
to propose a formal response to CCN members.
Whilst individual counties may wish to answer
in detail the questions set out in the press notice, I would like
to bring to the Committee's attention a most significant concern
held by the CCN regarding the financial grant settlements for
2006-07 and 2007-08 as announced by the ODPM on 31 January 2006,
which is the level of revenue grant support for capital ("Supported
Borrowing").
The grant settlements for 2006-07 and 2007-08
result in 18 counties receiving a minimum "floor" increase
in grant (outside schools) of 2% in 2006-07 and 2.7% in 2007-08.
The remaining 19 counties have not fared much better as their
grant increases have been severely scaled back to finance the
floor increase for the 18 counties referred to. All this reflects
damping arrangements put in place by Government to mitigate the
effects of changes in the underlying formula distribution. CCN
have major concerns about this but that is not my main point in
writing.
The reality going forward is that 18 counties
will not recognise any additional grant support for the cost of
new borrowing and the remaining 19 will only recognise very modest
grant support.
The significance of this is that Counties will
not be able to take up the full "allocation" from the
Department of Transport of the so called "supported"
borrowing allocations which government award in favour of approved
Local Transport Plan schemes. In practice there will be no (or
virtually no) grant to cover new borrowings. This means that,
as a result, the council tax payers will pick up all (or virtually
all) of the borrowing burden and this is bound to reduce actual
Local Transport Plan investment in practice (as councils seek
to limit council tax pressure).
In addition to transport, this will adversely
affect the ability of counties to invest in other capital projects
funded by supported borrowing, such as Schools Modernisation and
Building Schools for the Future. The CCN will shortly be carrying
out a detailed survey of the effect of grant formula changes on
counties' capital investment programmes, and will submit the results
of this research to the Government. The CCN will be happy to share
these findings with the Committee.
The CCN believes there is only one possible
solution and that is for the Government to provide additional
new funding for a Capital Grant. Considering the level of "supported"
capital approvals and the level of funding currently in the system,
it is evident that additional resources must be found to enable
authorities to carry out the levels of investment indicated by
the Government.
In conclusion, the CCN is greatly concerned
that the changes to the revenue grant distribution formula, combined
with the tight financial settlements for 2006-07 and 2007-08,
mean that "supported borrowing" is effectively unsupported,
and that this will have a very detrimental impact on the ability
of counties to deliver LTPs and other important capital investment.
26 April 2006
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