Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by the Association of London Government (LGB 36)


  1.  The Association of London Government welcomes the invitation to submit written evidence to the Committee. It notes that the Committee might also invite witnesses to give oral evidence, perhaps with other groupings of local authorities. The ALG would be happy to respond to any invitation but suggests that the Committee might specify that it wishes to interview elected representatives, rather than officers, of the Associations or their member authorities.

2.  The Association of London Government was formed in April 2000 from a merger of the five borough-funded London wide bodies that remained outside the new Greater London Authority. These were the previous ALG, the Greater London Employers' Association, London Boroughs Grants, the London Housing Unit and the Transport Committee for London. The ALG represents all 32 London boroughs, the Corporation of London, the Metropolitan Police Authority and the London Fire and Emergency Planning Authority, which all pay an annual subscription. It is a statutory joint committee. It is in an ideal position to advise on a range of issues relating to London government and other matters of concern to Londoners. It also works closely with the Local Government Association and with many private, voluntary and public sector bodies. The main functions of the ALG are to: provide a single voice for its member authorities where possible, lobby for adequate resources for the capital, lead on policy formulation and debate on key issues for London, act as the employers' organisation for the boroughs, provide specialist housing advice, allocate grants to voluntary organisations serving more than one borough and provide and manage certain London-wide transport and traffic services.

3.  The Association of London Government is recognised by the Government as a local authority association for the purposes of statutory consultation. However, all London boroughs and the Corporation of London are also members of the Local Government Association. In practice, this means the ALG deals only with those issues which are about London or to which there is a special London dimension. Other matters are left to the Local Government Association. Often the ALG will make its views known through the LGA rather than dealing with the Government or Parliament directly. The Committee will appreciate that there is a degree of subjectivity contained in this decision rule and frequently the ALG's involvement in matters is decided on a case-by-case basis. The remainder of this memorandum of evidence sets out the ALG's present view of the London issues in the Draft Local Government Bill. The Committee should know that the Association will not formally consider the Draft Bill and the ALG's approach to it until 9 July and these views are subject to that formal consideration.


4.  London boroughs will generally welcome the new approach to capital finance contained in the Draft Bill. However, there would seem to be no particular London issue or London dimension to this part of the Draft Bill and the ALG would leave this to the LGA.


5.  Once again the ALG sees no need for a separate London approach to this part of the Bill.


6.  The distribution of central government grant to local government is a major London issue and one in which the Government recognises the ALG as a statutory consultee. The statutory basis for the distribution of central government grant is important and the Association will take a keen interest in this part of the Draft Bill. However, the Committee will know that the Government is well advanced on a review of grant distribution which it plans to implement for the financial year 2003-2004. It is almost certain that the review will be implemented on the existing legal basis. First, the contents of the Government's legislative programme for the next session are uncertain. Second, even if this Bill were to be in the Queen's Speech in 2002, it is unlikely that the primary and secondary legislation would be in place in time to provide the basis of the 2003-04 finance settlement.

7.  The Government has promised extensive consultation over the summer on the options for grant distribution. Those options are due to be published in the first part of July and will include illustrations of the effects of various proposals. It might be that the Committee would wish to consider this matter separately from this inquiry into the Draft Bill.


8.  The ALG is working with the Government, boroughs and other stakeholders to develop Business Improvement Districts in London. However there would appear to be no specific London dimension to this part of the Draft Bill.


9.  There is one London issue in this part of the Bill. The Government's proposal to give small businesses some relief from NDR needs to reflect the generally high rateable values in London. The Draft Bill proposes two cut-off points: for 50 per cent. mandatory relief up to £3,000 rateable value; and mandatory relief on a sliding scale up to £8,000 r.v. The Association wishes to explore whether small businesses in London need higher cut-off points in order to make the scheme effective in London.


10.  The principle of regular valuations is a national issue, although the ALG recognises the need for valuations to be kept up-to-date in order to maintain public confidence in the basis of council tax and to ensure an equitable distribution of the incidence of council tax. However, the ALG has concerns about how London's unique housing market leads to inequitable treatment of council tax payers in London.

11.  The Committee will be aware that council tax values are used for two purposes. The first is readily apparent: council tax values distribute the local tax burden within an authority. The second function is less obvious. The distribution of properties in each tax band in an authority's area is a major determinant of the amount of revenue support grant received by an authority. This is because each authority receives enough RSG to enable it to levy Council Tax for Standard Spending (CTSS) if it spends at its Standard Spending Assessment (SSA). If an authority has a large proportion of its properties in lower bands, the yield of CTSS is low and it therefore receives more grant than an authority with a large proportion of its properties in the higher bands. The present RSG system uses council tax values as a measure of the authority's taxable capacity or ability to pay.

12.  Exhibit 1, below, shows the distribution of properties in London and in all of England. Even based on values at 1 April 1991, London's properties are skewed towards higher bands.

  Source: Council Tax Demands and Precepts 2001-02, CIPFA

13.  It might be argued that differences in house values between London and the rest of the country can be explained by London's higher incomes, that is they are a reasonable proxy for ability to pay. Higher incomes in London are one factor, but Londoners also spend a higher proportion of their incomes on housing costs. In London, housing accounts for 18 per cent of household expenditure, compared with only 15 per cent in the North and Midlands.[1]

14.  The ALG fears that the new valuations in 2005 could show a widening difference in house values between London and the rest of the country. Other things being equal, such a movement would lead to a reduction in RSG for London and a likely resultant increase in council taxes. It would be difficult to explain this to all London council taxpayers. Moreover, it should be noted that 41 per cent of households in London live in rented accommodation, compared with 30 per cent in all of England. London's tenants could see their council tax bills increase because of an increase in the capital value of the property they rent. Unlike owner-occupiers, tenants do not benefit from this capital appreciation.

15.  The ALG hopes that the Draft Bill could provide the means of dealing with some of these problems including different measures of taxable capacity in the grant system and regional council tax banding. Failing that, the ALG would wish to see imaginative use of the Draft Bill's provisions for transitional arrangements in order to mitigate and phase in the effects of the revaluation.

16.  The ALG welcomes the Draft Bill's provisions to abolish council tax benefit subsidy limitation, although there is no peculiar London dimension to this issue. However, the ALG will use the occasion of the Draft Bill to raise again the question of council tax benefit restriction, which limits council tax benefit to that for a band E dwelling. This means poor households in bands F and above are penalised. This affects London differentially because of high property prices.


17.  The ALG broadly welcomes these provisions but sees no special London dimension, except in relation to Clauses 105 to 106, Performance Categories.


18.  The Association will be concerned to ensure that these provisions take proper account of the circumstances facing London boroughs and the contexts of deprivation, diversity and mobility of population within which London boroughs work.

1   Regional Trends 36, 2001, Table 8.11. Back

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