Select Committee on Transport, Local Government and the Regions Fifteenth Report


A new approach to local government

67. Given the Government's overall aspirations to change the relationship between central and local government, we are disappointed that this legislation is not braver. Mr Travers told


"I used the word "war weariness" in my memorandum to describe the wider problem that any discussion of local government now tends to be war weary because over the last 15, 20, 25 years we have lived through staggering levels of local government reform affecting structure, finance, functions, often again and again and again. There is a risk that we all think nothing can ever be done, this is the best it can ever be... If it were my Bill it would be rather more radical than this one... I think it would be a more radical look at the whole position of local government's place within the constitutional arrangements of England within the UK... to consider the question of how national government, regional government and local government fit together and what their respective financing and service arrangements are we are probably at a time now when rather than iteratively doing little bits at a time there would be a good place for such a review."[90]

68. The Local Government Association has called for a 50:50 balance between funding raised locally and funding provided from the centre, compared to the current 25: 50.[91] Our predecessor Committee undertook an inquiry into Local Government Finance in May 1999, which concluded that more local government finance should be raised locally to improve democratic accountability and that the 'least worst option' to redress the imbalance would be to give local authorities control of the national non-domestic rate.[92] We were pleased to see the commitment in the White Paper to review the central / local balance of funding, including "a high-level working group involving Ministers and senior figures from local government, to look at all aspects of the questionsreviewing the evidence and looking at reform options."[93] The review has not yet begun formally and the Minister could not give us a date for its start or end.[94] We recommend that the Government set a date for an interim report to be produced by the high level working group looking at the central / local funding balance. Against this background, there is no logic to the Government's proposals to merge the revenue support grant and national non-domestic rate (see paragraphs 26-28). Another major constraint in local government finance is ring-fenced grant. The LGA told us that ring-fenced grants now finance 12% of local government expenditure the Association would like to see it returned to around 4%.[95]

69. We heard about the need to identify new ways to raise funding locally. Mr Travers said,

"Local government's tax base is not only very, very visible, the tax that people pay is visible, but the base is not buoyant, as you rightly say, it has to be revalued. When it is revalued it will simply jump all over the place, for some people it will be good news and for others bad news but it does not feel terribly logical because the steps are big. So it is not a buoyant tax base and I think that is a profound disadvantage for local government."[96]

Professor Stoker told us,

"At the moment, in addition to congestion charging, car park fees and so on, one could imagine possibly a proposal which was put forward by the urban investigation suggesting that in a way you could have micro-zones within urban areas and where property values had been increased through regeneration measures that the additional business rate or property rates raised through that could then be made available to the local authority. I would also like some experimentation with tourist taxes in certain areas. It is a common tax in other places. You could think about labelled rental taxes, something that has been piloted in a couple of areas and would be a tax on utilities when they were disrupting our highways. You could think about takeaway taxes. You could think quite broadly about a range of other environmental taxes as well. I also would be quite interested in seeing whether you could extend the principle of BIDs, the Business Improvement District idea, to a kind of negotiated agreement with other sectors in the economy, not just business people."[97]

70. The only tax local authorities currently havethe council taxis highly visible, but not very buoyant; the Government controls the level and distribution of about 75% of their income; and too much of that income from central Government is ring-fenced. Put simply, they have very little financial room for manoeuvre. What is needed us a new approach to local government finance that has regard to the structure and functions of local government in England, the appropriate relationship between central and local government and the balance between central and local funding of government services that would be consistent with all of these. The Committee recommends the Government undertake such a wide ranging review and come forward with proposals.

71. Chapter 5 of the White Paper described the Government's proposals to help support councils, "support for capacity building for councils and training for member and officers is an important part of our proposals to see excellent local government services and leadership."[98] The evidence we have received on the draft Bill argues that it suggests a level of mistrust of local government by central Government.[99] We have received evidence that the draft Bill suggests a lack of trust in councils by central Government. This does not sit easily with the Governments commitment to support and empower councillors and their officers, in the recent White Paper. More emphasis on such issues is needed.

Specific measures


72. The Local Government Act 2000 included provisions for the payment of pensions to executive members and the chairmen of overview and scrutiny committees. Our inquiry into that Act heard that there remain unresolved issues about both councillors allowances and pensions.[100] This inquiry received evidence from several councillors that the issues of allowances and pensions could usefully have been addressed in the draft Bill.[101] We recommend that the Government addresses the issues of councillors' allowances and pensions in the final Bill.

73. The Local Government Information Unit argued that more measures could have been introduced in the draft Bill to encourage people to stand as councillors. One particular measure proposed would be to amend the legislation which bars council officers earning above a certain salary standing for election. Instead, only those officers undertaking roles which require them to give advice to councillors on sensitive issues should be barred from standing.[102] We recommend the Government uses the opportunity of this Bill to remove the bar to standing for elected office currently covering council staff undertaking non-sensitive functions.


74. Minister have made commitments for legislation as soon as Parliamentary time permits on matters including the following:

Mr Perry of the Chartered Institute of Housing told us that both measures would be welcome and the former was long overdue.[104] We have previously recommended that the licensing of private landlords should be a discretionary power to local authorities and linked to housing benefit.[105] If changes to the controls of Houses in Multiple Occupation and licensing of private landlords have not been introduced by Private Members Bills, the final version of this Bill should include such measures. We recommend that the licensing of private landlords be a discretionary power to all local authorities, linked to housing benefit.


75. We received a memorandum from the Central Council of Physical Recreation (CCPR). It explained that at the last Budget, the Chancellor introduced a special tax status for Community Amateur Sports Clubs and

"It is understood that the former Minister for Sport, Kate Hoey, MP, had received written assurances from the then Local Government Minister, Hilary Armstrong, MP, that any Inland revenue tax exemptions for Community Amateur Sports Clubs would be supported by 80% mandatory rate relief." It continued, "The CCPR has calculated that the gross cost of giving mandatory rate relief at 80% to all Community Amateur Sports Clubs would be in the region of £35 million. However as many local authorities already give limited discretionary relief, the net cost would be closer to £20 million. This should be seen against the benefits to social inclusion, health, education and crime provided by voluntary sports clubs."[106]

We recommend that the Government introduces mandatory 80% rate relief to Community Amateur Sports Clubs in the Bill.


76. The Royal Institution of Chartered Surveyors argued that the provisions for the disposal of capital assets contained within the Local Government Act 1972, need to be amended to bring them into line with the Local Government Act 2000.

"One source of revenue for local authorities is the use or disposal of their property assets that are then converted into capital receipts. Local authorities may currently do so under section 123 of the Local Government Act 1972. Under that Act's definition of 'best consideration' local authorities may dispose of the property assets for returns below their market value. This definition should be expanded to incorporate the Local Government Act 2000's definition of best consideration as including the 'social, economic and environmental well-being of the local community.' This important amendment will significantly improve the ability of local authorities to dispose of their property assets where it is to the long-term benefit of their communities."[107]

The Minister promised to look into this.[108] We recommend that the Bill amend Section 123 of the Local Government Act 1972 in relation to disposal of capital assets, to take account of the well-being power introduced in the Local Government Act 2000.

90   Qq330-332 Back

91   Q45 Back

92   Eighth Report of the Environment, Transport and Regional Affairs Committee, May 1999, HC78-I Back

93   Paragraph 2.16, Part 2, Strong Local Leadership Quality Public Services Back

94   Q567 Back

95   Q12 Back

96   Q283 Back

97   Q285 Back

98   Introduction, Chapter 5, Part 1, Strong Local Leadership: Quality Public Services Back

99   LGB25 Back

100   LGA40 Back

101   Qq153-154 Back

102   Qq428-431 Back

103   LGB45(a) Back

104   Qq272-272 Back

105   Recommendation o, Transport, Local Government and the Regions Committee's Sixth Report, Empty Homes, HC240-I, March 2002 Back

106   LGB31 Back

107   LGB19 Back

108   Q655 Back

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