House of Lords
Publications on the internet
Other Bills before Parliament
Arrangement of Clauses (Contents)
|Local Government Bill|
These notes refer to the Local Government Bill
LOCAL GOVERNMENT BILL
1. These explanatory notes relate to the Local Government Bill as brought from the House of Commons on 25th March 1999. They have been prepared by the Department of the Environment, Transport and the Regions and the Welsh Office in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
2. These notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
3. The purpose of Part I of the Bill is two-fold. Firstly, it subjects most bodies within the local government finance system in England and Wales to a new duty to make arrangements for the achievement of best value in the performance of their functions.
* Best value for these purposes is described as securing continuous improvement in the exercise of all functions undertaken by the authority, whether statutory or not, having regard to a combination of economy, efficiency and effectiveness.
Secondly, the Bill provides for the abolition of Part III of the Local Government, Planning and Land Act 1980, Part I of the Local Government Act 1988, and certain provisions within the Local Government Act 1992, which require certain defined authorities-including councils and police and fire authorities-to submit specified activities to Compulsory Competitive Tendering (CCT).
4. The purpose of Part II of the Bill is to enable the Government to regulate increases in council tax. Firstly, the Bill will repeal the existing capping legislation used for this purpose and take reserve powers that are more flexible. As with the existing legislation, the powers will be exercised on the basis of the budget requirement. Secondly, the Bill will make provision for payments between tiers of authorities so that any shortfall in council tax benefit arising from excessive increases in council tax fall on the authority responsible.
5. The Government published a provisional list of twelve Key Principles of Best Value in June 1997, which were later reproduced in both the English and Welsh Green Papers referred to below.
6. The Government built upon these Key Principles in its Green Paper Modernising Local Government: improving local services through best value, which was published on 3 March 1998, and Modernising Local Government in Wales: improving local services through best value, published in April 1998. The latest statement of the Government's policy on best value was contained in Chapter 7 of the White Paper Modern Local Government: In Touch with the People and in Chapter 7 of Local Voices: Modernising Local Government in Wales, which were both published in July 1998, setting out the Government's wider plans for the future of local government.
Council tax regulation
7. The Government set out its proposals for improving local financial accountability, including fulfilling its Manifesto commitment to abolish crude and universal capping, in its Green Paper Modernising Local Government: improving local financial accountability, which was published in March 1998, and Modernising Local Government in Wales: improving local accountability for council tax, published in April 1998. The latest statement of the Government's policy on improving local financial accountability was contained in Chapter 5 of the White Paper Modern Local Government: In Touch with the People and in Chapter 5 of Local Voices: Modernising Local Government in Wales as above.
8. The provisions in Part I of the Bill (best value) are divided into six main categories:
9. Part II of the Bill consists of two clauses giving effect to Schedule 1 on reserve powers to regulate council tax, and providing for payments from a major precepting authority to a billing authority.
10. The new reserve powers will allow the Secretary of State to look at an authority's changes in budget requirement over a number of years. It will also allow the Secretary of State to require a local authority to reduce its budget requirement over a number of years, and to require authorities to reduce their budget requirements below those of previous years or below their standard spending assessment. In addition, the Secretary of State will be able to exempt certain categories of authorities from budgetary controls, for example those with small budgets or those which provide only particular services. He will also be able to take into account factors such as the authorities' performance in delivery of best value, the support of local electorates for authorities' proposed budgets, and whether the council has beacon status, when deciding if the budget requirement is excessive.
11. The new reserve powers will operate as follows:
a) The Secretary of State will first have to decide if the budget requirement is excessive. He will be able to determine the set of principles he will use to decide whether or not the budget requirement set by a local authority is excessive. The set of principles must contain a comparison with the budget requirement of a previous year. He may also determine categories of authorities and use a different set of principles for each category.
b) If the Secretary of State decides that the budget requirement is excessive, he will be able to designate the authority for the year under consideration or for the following year. Where an authority is designated for a year, the Secretary of State will inform the authority of a target budget requirement and a maximum amount for that year. In some cases the target and maximum will be the same because the Secretary of State considers the local authority can reduce its budget requirement to target in a single year. However, if they are different the intention will be to designate the authority over a number of years until the target is reached. The Secretary of State will indicate how many years he considers it may take to reach the target (updated as necessary e.g. because of inflation).
c) An authority may be nominated by the Secretary of State instead of designated. In this case, he may set a notional budget requirement for the year under consideration. The notional budget requirement will be taken into account, instead of the actual budget requirement, if using that year to make a comparison when considering if future budget requirements are excessive.
d) The procedures for designation are similar to the current capping procedures. Where designation takes place in year the procedure is largely unchanged. Where designation takes place for the following year, again similar procedures are followed but the process will start at around the time of the announcement of the provisional Local Government Finance Settlement and be completed at the end of February and beginning of March.
12. In addition, the Bill will contain provisions to require major precepting authorities to make payments to billing authorities to cover any shortfall in benefit arising from the decision of a precepting authority to increase its budget requirement above a guideline set by the Secretary of State.
13. In Wales, the powers described above will largely be exercised by the National Assembly for Wales rather than by the Secretary of State.
COMMENTARY ON CLAUSES
PART I: BEST VALUE
Clauses 1 and 2: Best value authorities
14. Clause 1 sets out those authorities which will be subject to the duty of best value ("best value authorities"). They include local and other authorities in England and Wales, as well as the soon-to-be-created Greater London Authority (subject to the passage of the Greater London Authority Bill, itself currently before Parliament) and its main constituent elements. All of the authorities described in this clause are within the scope of the local government finance system as billing, precepting or levying bodies.
15. Clause 2 provides the Secretary of State with a power to extend the duty of best value to other named bodies within the local government finance system who are not included in clause 1, and to modify the nature of the duty as it applies to them if it seems appropriate. It also provides the Secretary of State with a discretionary power to disapply (by order) specified elements of the duty of best value for any best value authority or categories of authority where they would otherwise be subject to them. This power might, for instance, be used to exempt the smaller town and parish councils (community councils in Wales) from the full duty of best value where the costs of complying with it are considered to be excessive.
16. Clause 2 makes further specific provisions in respect of the Greater London Authority (GLA), subject as above to the passage of the GLA Bill. Subsection 2(4) provides the Secretary of State with an order-making power which would allow him to extend the application of the duty of best value, as set out in clause 1, in one of two ways, namely:
17. The former power could be used, for example, to apply the duty to functions which are exercised through the GLA's Assembly, rather than the Mayor. For example, the Assembly may directly undertake some functions of the GLA, such as the recruitment of personnel. An example of the use of the latter power could be in respect of functions where the GLA, through the Mayor, carries out a strategic rôle in relation to an operational function of another body. This might, for instance, be the case where the Mayor undertakes a strategic rôle in respect of the transport function, where the operational rôle is carried out by Transport for London.
Clauses 3-6 : Duties
18. Clause 3 describes the general duty of best value. The duty is not described exhaustively, but requires best value authorities to make arrangements to secure continuous improvements in the exercise of their functions, judged against named criteria and with regard to a combination of economy, efficiency and effectiveness.
19. For the purposes of fulfilling the general duty, the clause also imposes upon best value authorities a mandatory duty to consult with representative groups of people falling within specified categories, and in doing so, to have regard to any relevant guidance issued by the Secretary of State.
20. Clause 4 provides for the creation of the performance measurement framework which will be applicable in respect of the duty of best value. It provides the Secretary of State with a discretionary power to prescribe by order factors of performance (performance indicators) against which best value authorities will be measured. In addition, the Secretary of State may set national standards in respect of any such performance indicators which he prescribes, and where he does so, best value authorities must meet the relevant standard in order to satisfactorily discharge the duty of best value. Clause 4 also gives the Secretary of State discretion to specify different performance indicators and standards.
21. As a matter of general principle clause 4 also provides that, in setting indicators and standards, the Secretary of State must have regard to the general nature of the duty of best value described within clause 3, and also to any relevant recommendations which the Audit Commission make to him in respect of performance measurement. And, when making changes to performance indicators and standards, the Secretary of State will be obliged to consult with such persons as he sees fit. The Audit Commission, which has responsibility (under section 44 of the Audit Commission Act 1998) for the prescribing of performance indicators, is expected to continue to analyse performance data under best value and make recommendations based upon its findings to the Secretary of State as to how the indicators and standards might be amended or adjusted in the future.
22. Clause 5 is concerned with the manner in which best value authorities conduct reviews of their functions, reviews being one of the key procedural components of best value.
* Review is used here in the sense of requiring best value authorities to carry out an initial assessment of whether functions are to be performed, how, by whom and to what standard.
Thus an authority which was considering how education might be provided to excluded children would begin, initially, by considering whether it ought to provide the service at all. In this case, there are certain statutory standards that the authority needs to observe in terms of the minimum level of education provided, and its further consideration under the review might result in the authority only providing the statutory minimum level of education, or something higher; and giving an indication of how the function is to be performed-e.g. by home visits or through education centres.
23. The clause provides that best value authorities must review all of their functions within a time period which is specified by the Secretary of State. The Government expects that, initially, this period will be set at five years. In conducting reviews authorities must also have due regard to the general nature of the duty as described within clause 3, and to any relevant guidance issued by the Secretary of State. The clause also describes a number of key stages in any review which authorities will be expected to complete. These include not only a consideration of the level at and the way in which a function should be performed, as is described above, but the best value authority's objectives with regard to the function and the extent to which it is meeting any standards and targets which have already been set. The Secretary of State will have a power to make orders setting out what elements will comprise a review, and to issue guidance on them.
24. The clause provides the Secretary of State with a power to issue guidance to best value authorities on the form, content and timing of reviews, and may include specific guidance on the way in which the performance indicators and targets should be used in attaining best value. As will be seen under clause 6 below, action plans and targets emerging from the conduct of reviews are expected to form a key part of the content of Local Performance Plans.
25. As is provided for at paragraph 7.18 of the White Paper Modern Local Government: In Touch With the People (paragraph 7.26 of the White Paper Local Voices: Modernising Local Government in Wales), clause 5 provides the Secretary of State with a power to issue guidance in respect of the main component elements of the review process.
26. Clause 6 requires best value authorities to prepare and publish Local Performance Plans (LPPs) on an annual basis. These plans are the main instruments by which best value authorities will be held accountable for delivering best value by their local communities.
27. The clause requires best value authorities to produce their plan for the financial year ahead by 31 March, and annually thereafter; and will allow the Secretary of State to alter the date by which plans must be published. The clause provides for LPPs to achieve three main functions:
28. The Secretary of State will have a power to make orders in respect of best value authorities setting out the elements which must be included within a Local Performance Plan. He will also have a power to issue guidance in respect of those orders to which best value authorities must have regard.
Clauses 7-9: Audit of best value performance plans
29. The Government's approach to scrutiny of best value was set out in both its English and Welsh Green Papers, which included the following principles:
30. Clause 7 sets out how Local Performance Plans are to be scrutinised and reported upon. The assessment of a Plan for any given year will be carried out by the auditor who audited the accounts of the authority concerned in the previous year, and, in the light of this, the auditor's rights of access to documents and information under the best value process will closely follow those provided to an auditor in respect of accounts under section 6 of the Audit Commission Act 1998.
31. Under clause 7, auditors will be expected to perform the following functions:
Clause 7 also provides how and when the auditor will be expected to report publicly on the results of his assessment.
32. In conducting the scrutiny process, auditors will be expected to follow any Code of Practice which the Audit Commission may produce in respect of best value under clause 8.
33. Clause 9 sets out a best value authority's obligation when it is in receipt of an auditor's report on its local performance plan. In all cases, it will be required to publish the auditor's report. Where the report contains recommendations under subparagraphs 7(4)(c) to (f) in respect of amendments or follow up action needed by the authority, or inspection or intervention by the Audit Commission or Secretary of State, clause 9 sets out the further obligations which will apply to the best value authority in question.
34. In such cases, the authority will be required, within 30 working days of the production of the report (or such other period as the auditor may specify), to publish a statement of the action it proposes to take in respect of it, and its timetable for doing so. The statement must also be incorporated into the authority's next local performance plan. In those cases where the auditor has recommended that the Secretary of State use powers of intervention under clause 14, the authority will additionally need to send its statement of action to the Secretary of State, again within 30 working days of the production of the report.
Clauses 10-14: Best value inspections and intervention
35. At paragraph 7.39 of the English White Paper (paragraph 7.53 in Wales), the Government states its belief that, whilst annual audit arrangements of the type described above will be an important form of scrutiny, in themselves they will not always deliver the degree of rigour which the policy requires. It has therefore, within clause 10, provided the Audit Commission with a power to carry out inspections aimed at assessing the degree to which authorities comply with the requirements of the legal framework.
36. In many cases, these inspections will be programmed so as to allow the inspectors to assess the outcome of reviews under clause 5 which are considered above. Paragraph 7.42 of the English White Paper (7.60 in Wales) describes some of the purposes of inspections, which include:
37. In some cases, however, the Government will wish to provide for ad hoc unprogrammed inspections to take place. This might, for instance, be the case where the standard of performance of a function within a best value authority is considered to be well below that required, and there are no immediate plans within the authority to review the function in question. Clause 10 provides the Secretary of State with a power to direct the Audit Commission to carry out an inspection of the authority concerned in respect of those functions.
38. The Government intends that the Commission's powers of access to documents and information should be broadly similar to those enjoyed by auditors of accounts, and which are provided under section 6 of the Audit Commission Act 1998. Clause 11 provides for this, and also for inspectors to have reasonable rights of access to premises. This latter provision goes beyond the powers of auditors in the 1998 Act, but is included to take account of the fact that the ability to conduct an inspection of a function such as the administration of council tax benefit payments might be seriously inhibited if the inspector were not able to inspect, for example, the manner in which benefits offices were managed in the authority in question.
39. Clause 12 sets out the new powers which the Audit Commission will have to set a scale of fees for best value inspections. This power complements the powers it has to set scales of fees for best value audits, which are set out at clause 8. In addition, the Commission will have discretion to charge a fee which departs from any such scale where it judges the amount of work involved in an inspection to be substantially more or less than normal. Before setting a scale of fees, the Commission is required to consult both the Secretary of State and persons which it judges to be representative of best value authorities.
40. As with the audit of plans, whenever inspectors scrutinise reviews the Audit Commission will be expected to publish a report outlining their findings. The sequence of events which follows, and which is provided for at clause 13, will vary according to the nature of the findings.
41. In all cases, the Commission will send a copy of its report to the relevant best value authority. Where the report identifies matters in respect of which the Commission believes the authority is failing to comply with duty of best value but which are not considered to be serious enough to be referred to the Secretary of State, then, as is provided for in respect of the audit of Local Performance Plans, the authority will be required to record the failure and the action taken in respect of it within the following Local Performance Plan.
42. Conversely, where an inspection discloses serious failure to comply with the duty which leads to the Commission recommending action by the Secretary of State, then the report will also be sent to the Secretary of State as well as to the authority, and will constitute one of the objective triggers upon which enforcement action, dealt with by clause 14, might be based. It will be open to the Commission, in deciding upon whether to recommend intervention, to further recommend to the Secretary of State what the appropriate form of intervention might be.
43. The Government stated at paragraph 7.48 of the English White Paper that it intended that any intervention by Ministers would be based upon objective triggers. These will include not only reports by auditor and inspectors appointed by Commission, but also other forms of inspection activity, including those undertaken by the Social Services Inspectorate, OFSTED (OHMCI in Wales), Her Majesty's Inspectorate of Constabulary, the Benefit and Fraud Inspectorate, and the Fire Inspectorate. They will also include information from other sources which give the Secretary of State concern about whether an authority is meeting the duty of best value. A very serious example of this might be where a child is harmed or put at risk whilst in local authority care; this might give the Secretary of State legitimate concern about the effectiveness of the Social Services Department of the authority in question, such that he may wish to order the authority to immediately review its operation of the function pursuant to clause 5-or perhaps, as is provided for by clause 14, to order an immediate inquiry.
44. Clause 14 offers the Secretary of State a wide range of intervention powers in response to failures. These include some which are of a procedural nature, and others which involve more substantive action either on the part of the authority (where, for example, it might be required to externalise a function), or on the part of the Secretary of State (who might, in extreme cases of failure, intervene to exercise a function of the authority himself or through a nominee). In any case, where the Secretary of State intends to take action against an authority based upon recommendations of inspectors, he will normally be required to allow the relevant authority to make representations both about the recommendation itself, and the action which is proposed in respect of it.
45. In some cases, however, the Secretary of State may judge the failure so serious, or the immediate risk to sections of the community so great, that he may wish to intervene directly without waiting to consider any representations which the best value authority concerned might wish to make. In such exceptional circumstances, a possible example of which is set out at paragraph 43 above, subsection 14(8) allows the Secretary of State to give a direction to the best value authority without allowing an interval for representations such as is set out at subsections 14(6) and 14(7). However, if the Secretary of State chooses to use his powers under subsection 14(8), he will be obliged to inform both the authority concerned and any appropriate representative body of both the direction, and the reason why it was given, without recourse to the normal procedure allowed for by subsections 14(6) and (7).
Clauses 15 and 16: Exercise of functions by best value authorities
46. Clause 15 creates ancillary powers for best value authorities to act in pursuance of best value. It does so:
47. This power will not be exercised by the National Assembly for Wales. However, the Secretary of State will need to consult the Assembly before exercising this power in respect of Wales.
48. Clause 16 describes the procedure the Secretary of State shall follow in making an order under subsections 15(1) and (2). He is required to consult such authorities or persons as appear to him to be representative of interests affected by his proposals, and to lay before each House of Parliament a document explaining his proposals. Clause 15 already sets out that orders made under subsections 15(1) and (2) are subject to the affirmative resolution procedure in both Houses.
49. Clause 17 provides a power in similar terms to that under section 70 of the Deregulation and Contracting Out Act 1994, which enables the Secretary of State to provide by order for best value authorities to contract out functions (subject to certain restrictions similar in terms to those under section 71 of the 1994 Act). An example of an order which might be made under this provision would be one which, for example, allowed relevant best value authorities to contract out housing benefits determination work. The procedure under and circumstances in which this power can be used are set out at subsection 17(2). This power cannot be exercised by the National Assembly for Wales.
50. Regarding good procurement practice, paragraph 7.26 of the English White Paper (7.35 in Wales) says that the Government will look for an early legislative opportunity to amend the list of factors which authorities can take into account in inviting tenders and awarding contracts, consistent with European obligations and with the principle of the achievement of value for money. Clause 18 therefore provides for the Secretary of State to specify by order, in relation to best value authorities, matters which will cease to be "non-commercial matters" for the purposes of section 17 of the Local Government Act 1988. (The 1988 Act already provides for the Secretary of State to specify additional non-commercial matters.) This provision might be used to enable best value authorities to have regard to certain work force matters in the contractual process.
51. Where a matter ceases, by virtue of an order under clause 18, to be a non-commercial one, then in the future exercise of the function concerned, best value authorities will be required to have regard to any guidance issued by the Secretary of State.
52. Clause 19 of the Bill extends the application of section 2(1) of the Local Government, Planning and Land Act 1980 to cover all best value authorities. As presently drafted, it applies to only some of them and does not, for instance, capture the Greater London Authority or any of its constituent bodies. This section of the 1980 Act provides the Secretary of State with a power to issue a Code of recommended practice as to the publication of information by relevant authorities regarding how they discharge their functions. It should be read in conjunction with clause 22 (see paragraphs 56-57 below), which is concerned with the preparation, keeping and certification of accounts.
Clauses 20-28: General provisions
53. Clause 20 repeals the legislation requiring some best value authorities to subject certain functions to CCT, this repeal taking effect from 2 January 2000. It also provides powers for the Secretary of State to issue guidance to best value authorities with regard to the interim period between 2 January 2000 and the date when the general duty of best value will be applied. This guidance will cover the way in which they exercise their functions and might include, for example, a consideration of how procurement and contractual arrangements should be approached in the light of the imminent application of the duty of best value.
54. Clause 21 makes amendments to certain provisions in Parts III and IV of the Audit Commission Act 1998, in the light of the Commission's new functions under best value. It widens the application of section 33 of the 1998 Act by amending it to refer to the exercise of local authority functions, rather than merely the provision of local authority services. It also amends the provisions at section 49 of the Act to allow the Commission to disclose information relating to best value authorities for the purposes of discharging its functions in relation to best value as provided for by this Bill, particularly with regard to best value inspections as set out at clauses 10-12 above.
55. Clause 21 also makes provision for the Housing Corporation in England (in Wales the functions are exercised by the Secretary of State, and in due course the National Assembly) to provide advice and assistance to the Audit Commission in relation to the exercise of the Commission's best value functions, where the Audit Commission requests it. It also makes provision for the Corporation to be paid by the Commission for any such advice or assistance it provides.
56. Clause 22 provides the Secretary of State with a power to create a statutory accounting framework which will apply to best value authorities. In doing so, it closely, though not exactly, follows the model laid out at section 27 of the Audit Commission Act 1998. Clause 22 provides the Secretary of State with powers
57. It complements the rather wider powers relating to publication of information contained in clause 19. Before using clause 22 powers, the Secretary of State is obliged to consult with the Audit Commission, best value authorities or persons appearing to him to represent them, and such bodies of accountants as he deems appropriate.
58. Clause 23 makes changes to the Police Act 1996 which are designed to strengthen collaboration between police forces and police authorities, and place the rôle of Her Majesty's Inspectorate of Constabulary (HMIC) in best value on a clear statutory footing. Subsection 23(1) adds to the provisions at section 8(2) of the 1996 Act a specific requirement that Chief Constables, in preparing the first draft of a police authority's local policing plan, shall include particulars of any action proposed for the purpose of complying with the police authority's duty to achieve best value.
59. Subsections 23(2) and 23(3) extend HMIC's powers of inspection for the purposes of best value by amending section 54 and 55 of the Police Act 1996. Section 54, in its current form, provides HMIC with a power to inspect police forces only. Police forces are not best value authorities, whereas police authorities are. Clause 23 therefore provides that HMIC may inspect police authorities, but this power of inspection extends only to a consideration of the extent to which police authorities are complying with the duty of best value.
60. The Government made it clear in its Local Government White Papers that it would ensure that different inspectorates worked together to develop a consistent approach to best value inspections. Paragraph 7.44 of the English White Paper (7.58 in Wales) stated that the Government "will take a power to enable the Secretary of State to make such arrangements as necessary in consultation with the inspectorates to ensure the smooth and efficient operation of the inspection process".
61. Clause 24 provides that the persons and bodies it describes are, when arranging and carrying out best value inspections, to have regard to any guidance which the Secretary of State issues for the purposes of securing their co-ordination. The bodies in question include the Audit Commission, inspectors of fire brigades and constabulary, the Chief Inspectors of Schools in England and Wales, and inspectors appointed under the Local Authority Social Services Act 1970, National Health Service and Community Care Act 1990, Children Act 1989 and Social Security Administration Act 1992 respectively. Clause 24 also provides the Secretary of State with a power to amend this list of persons and bodies in future.
62. Clause 25 provides the Secretary of State with a general power of guidance in respect of all the provisions in Part I of the Bill. It allows the Secretary of State, in issuing guidance to best value authorities about the manner in which they comply with best value, to issue both general guidance, capable of widespread application, as well as guidance aimed specifically at one or more authorities (which could, for instance, be targeted at bodies with a particular range of functions, such as the GLA).
63. It also allows the Secretary of State to issue different guidance to different authorities, thus allowing flexibility, for instance, to issue guidance aimed at police authorities which differed in some respects from that issued to local authorities generally. Clause 25 also provides that the Secretary of State, before issuing any relevant statutory guidance, must consult the authorities concerned or those persons who appear to him to represent them.
64. This general guidance power is designed to complement the more specific powers of guidance which are set out elsewhere in Part I, e.g. in respect of the setting of performance targets and the conduct of best value reviews. The possible issues which it might be used to address will include, for instance, how best value authorities tackle cross-cutting issues such as social exclusion, equality and sustainable development.
65. Clause 26 allows for the commencement of clauses 1 to 19 and 21-25 in Part I 12 months after Royal Assent, or on an earlier date by order. This order-making power rests with the Secretary of State, in relation to England, and the National Assembly for Wales, in relation to Wales.
66. Clause 28 provides that, in relation to the application of Part I to Wales, the Parliamentary procedures in that Part are to be omitted, and references to the National Assembly for Wales are to be substituted for references to the Secretary of State. These changes do not apply in relation to police and fire authorities. Nor do they apply in relation to the Secretary of State powers in clauses 15 and 16 (deregulation) and 17 (contracting out of best value authority functions).
PART II: COUNCIL TAX REGULATION
Clause 29 and Schedule 1: Regulation of council tax and precepts
67. Clause 29 of the Bill inserts a new Chapter IVA into Part I of the Local Government Finance Act 1992, and provides for the new chapter to have effect from 1 April 2000. References to sections in what follows are references to the proposed new sections of the 1992 Act.
68. Section 52A defines the authorities which will be affected by this Chapter.
69. Section 52B gives the Secretary of State the power to take action against an authority (under section 52D) if he decides that its budget requirement for the year under consideration is excessive. The Secretary of State must determine a set of principles that will be used to decide if the budget requirement is excessive and this set of principles must contain a comparison of the budget requirement for the year under consideration with that of an earlier year. The Secretary of State may also determine categories of authorities and any principles applied to authorities must be the same for all authorities within the category. If the Secretary of State does not determine categories, the same set of principles must be used for all authorities.
70. Section 52C provides that the Secretary of State may set a notional amount for the budget requirement for an authority. It may be used to set a notional amount for an authority where there has been a change in function or boundary so that a valid comparison can be made with the budget requirement for the year under consideration. It may also be used to set a notional amount where there was no budget requirement set for an earlier year.
71. Section 52D enables the Secretary of State, if he decides that the budget requirement is excessive, to designate or nominate the authority.
72. Section 52E sets out the procedure that is followed if the Secretary of State designates an authority under section 52D. This is 'in year' designation and the procedure would normally start as soon as possible after the beginning of the financial year, in April or May.
73. The Secretary of State must notify the authority that it has been designated and inform it of the set of principles used to decide that its budget requirement was excessive and the category into which the authority falls. He will also state the amount which he proposes should be the maximum amount for the budget requirement for the year and the target amount for the budget requirement. The target amount is the maximum amount which the Secretary of State considers should be the budget requirement for the authority without it being excessive. In most cases it is expected that the maximum set for the year will be the same as the target amount. However, where the Secretary of State considers that the local authority should reduce its budget requirement over several years to reach the target, he may set a different maximum for the year. The Secretary of State will also inform the authority when he expects it to reach the target amount (uprated as necessary e.g. because of inflation). The local authority then has 21 days to accept the maximum amount or challenge it and put forward an alternative.
74. Section 52F sets out the procedure if the local authority challenges the maximum amount. After the Secretary of State has considered any information put forward by the local authority he will inform the local authority of the amount which will be the maximum for its budget requirement of the year. The amount decided by the Secretary of State as the maximum for the year may not exceed an amount already calculated by the local authority, but may be greater or smaller or the same as that already notified by the Secretary of State under section 52E. He may also alter the target amount for the year. This may be necessary if he alters the maximum amount as future year designation is triggered if the budget requirement is above the target.
75. The maximum amount will be set out in an order which must be approved by resolution of the House of Commons. The local authority is then informed of the maximum amount in a notice.
76. Section 52G provides for the procedure if a local authority accepts the maximum amount. The Secretary of State simply sends the local authority a notice confirming the maximum amount.
77. Section 52H provides for what happens if the local authority does not challenge the maximum amount or accept it. The maximum amount will be set out in an order which must be approved by resolution of the House of Commons. The local authority is then informed of the maximum amount in a notice.
78. Section 52I provides for what a billing authority must do if it receives a notice informing it of the maximum amount. It must make substitute calculations so that its budget requirement is at or below the maximum amount.
79. Section 52J provides for what a precepting authority must do if it receives a notice informing it of the maximum amount. It must recalculate its budget requirement so that it is at or below the maximum amount.
80. Section 52K sets out the procedure that applies if an authority which has received a notice setting out the maximum amount fails to recalculate its budget requirement within 21 days, or 35 days in the case of the Greater London Authority. If it is a billing authority, it cannot transfer any resources from its collection fund to the general fund. Thus it cannot make use of any council tax collected. In the case of a precepting authority, the authority which collects council tax on its behalf has no power to transfer this money to it. These restrictions apply until the local authority has recalculated its budget requirement.
81. Section 52L provides for what happens if an authority is nominated rather than designated under section 52D. The Secretary of State informs the local authority that it has been nominated, the set of principles used to decide that its budget requirement was excessive and the category into which the authority falls. He also informs the local authority of the target amount for the budget requirement. It is expected that local authorities that are nominated would be informed of the nomination early in the financial year, around May or June.
82. Once a local authority has been nominated, the Secretary of State will decide whether to proceed under section 52M or under section 52N.
83. Section 52M sets out the procedure for an authority that is designated after being nominated. This is 'following year' designation and affects the year after the year under consideration. Generally it is expected that the local authority will be nominated at around the same time as in-year designation takes place, i.e. around May or June. However, designation for the following year will not take place until around the time of the announcement of the provisional finance settlement i.e. November/December.
84. The Secretary of State will notify the authority of the designation, the amount which he proposes should be the maximum amount for the budget requirement for the following year, the target amount for the budget requirement for that year (which may be the same as the maximum amount) and when he expects the authority's budget requirement not to be excessive.
85. The Secretary of State will also inform the authority how long they have to challenge or accept the maximum amount. It is expected that the period will be timed to coincide with the end of the consultation period for the provisional local government financial settlement.
86. The authority may challenge the maximum amount and put forward an alternative or it may accept it.
87. Section 52N provides for the procedure if an authority is nominated by the Secretary of State but is not designated. Instead, the Secretary of State will determine an amount which will be taken as the notional budget requirement for the year under consideration. This notional amount will be used in any future years when making comparisons to decide whether or not the budget requirement in future years is excessive. The local authority will have 21 days in which to challenge this amount. At the end of the 21 days the Secretary of State will determine the notional amount (taking into account any challenge by the local authority) and notify the local authority. It would be expected that this would take place shortly after nomination, around June or July.
88. Section 52P sets out the procedure that will be followed if an authority is designated after it has been designated in a previous year. If an authority has been designated for a year, a maximum amount and a target amount will have been set. If the budget requirement set by the authority for the year is higher than the target amount, then this section operates and the local authority will be designated for the following year.
89. This procedure is the same as that described for section 52M because, as in that section, the authority is being designated for the following year. And again it is expected that this procedure will start at around the same time as the provisional local government finance settlement is announced, in November or December.
90. Sections 52Q, 52R, 52S, 52T, 52U, and 52V set out the procedures that will be followed once an authority has been designated for the following year. The procedures are very similar to those described for in-year designation. These sections set out what happens if the local authority challenges the maximum amount, accepts the maximum amount, or does not challenge or accept the maximum amount. They also provide that an authority must make substitute calculations once it receives a notice of the maximum amount and set out what happens if they fail to make substitute calculations.
91. Section 52W provides that the budget requirement should be calculated according to definitions set out in the Local Government Finance Act 1992 and the Great London Authority Act 1999.
92. Section 52X provides that, for the purposes of this Chapter, the budget requirement of a billing authority should be net of local precepts, as should the target amount and maximum amount set by the Secretary of State. However, the Secretary of State may, by order, provide that local precepts be included.
93. The Local Government Finance Act 1992 provides that billing authorities must set their budget requirement by 11 March and major precepting authorities must do so by 1 March. Section 52Y requires local authorities to provide the Secretary of State with their budget requirement seven days after it has been set. This information is needed by the Secretary of State to decide whether or not the budget requirement is excessive. The billing authority must also inform the Secretary of State of any local precepts, as the Secretary of State needs to know what these are to work out the net budget requirement.
94. Capping powers in Wales under the 1992 Act are currently exercised by the Secretary of State for Wales. The Bill provides that the National Assembly for Wales will exercise the new reserve powers to limit local authority expenditure in Wales. Section 52Z does three things to that end:
95. The modifications made by subsection 52Z(2) are:
96. Clause 30 provides that if the budget requirement of a major precepting authority is excessive, that authority shall make payments to the billing authorities to which it issues a precept. Excessiveness is to be determined by criteria specified by the Secretary of State. These criteria may be based on such factors as the Secretary of State sees fit, which can be different from the factors used to decide if the budget requirement is excessive for the purpose of Chapter IVA. The calculation of the payment shall be in accordance with regulations which will also require the precepting authority to provide information to the billing authority. This clause applies for the financial year beginning on 1 April 1999 and subsequent years and comes into force on Royal Assent. In the year beginning on 1 April 1999, excessiveness shall be determined by the Secretary of State (and not in accordance with specified criteria). In Wales the powers of the Secretary of State shall be exercised by the National Assembly for Wales.
PART III: GENERAL
Clause 32: Finance
97. Clause 32 makes provision for certain expenditure which arises as a result of the introduction of this Act to be met by monies provided by Parliament. The expenditure concerned includes expenses incurred by the Secretary of State under the Act; increases in expenditure under other enactments which are attributable to the provisions of this Act, and expenditure incurred by the Audit Commission in discharging its functions under the Act, which is to be met in part by grant.
98. In the case of the Audit Commission, clause 31 makes specific provision for the National Assembly for Wales to also make grants to the Audit Commission in respect of expenditure it incurs under the Act.
EFFECTS OF THE BILL ON PUBLIC SECTOR FINANCES
99. The intended purpose of the best value provisions is to secure continuous improvements in the way in which local government exercises its functions. The improved efficiency and effectiveness in the use of resources which result is expected to deliver significant costs savings across the board, as well as improvements in service quality.
100. There will be some costs of compliance with the best value provisions of the Bill which will fall upon authorities, and which may involve them incurring new costs (such as whatever additional costs arise from the new duty of consultation). Such costs will be expected to be contained within existing budgets, save those relating to audit and inspection, for which the Government intends to make explicit provision within Revenue Support Grant.
101. The council tax provisions will enable the Government to restrict excessive increases in council tax. This will have the effect of controlling total revenue expenditure in England of over £50 billion (1998/99).
EFFECTS OF THE BILL ON PUBLIC SECTOR MANPOWER
102. No significant impact on the manpower levels of central or local government is expected. Manpower levels of the Audit Commission, however, are expected to rise as it recruits new staff to allow it to carry out its inspectorate functions in respect of best value. It will, however, recoup the costs of inspection partly through fee income and partly through grant.
SUMMARY OF THE REGULATORY APPRAISAL
103. It is not expected that this Bill will impose any burden on business, charities or voluntary bodies. Best value will provide new opportunities for the private and voluntary sectors.
104. Clauses 1 to 19 and 21-25 of Part I of the Bill will commence 12 months after Royal Assent unless an order is made to commence these provisions earlier. An order is particularly likely to be made in respect of a number of specific provisions (which confer an order-making power on the Secretary of State, or which allow him or the Audit Commission to issue guidance or Codes of Practice to authorities and auditors) to provide for commencement as soon as possible after Royal Assent. The provisions in question are:
EUROPEAN CONVENTION ON HUMAN RIGHTS
105. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). On 25 March 1999 Lord Whitty, Parliamentary Under-Secretary of State for the Environment, Transport and the Regions, made the following statement:
In my view the provisions of the Local Government Bill are compatible with the Convention rights.
|© Parliamentary copyright 1999||Prepared: 26 March 1999|