Select Committee on Transport, Local Government and the Regions Memoranda


Memorandum by Sefton Council (LGB 17)

1.  INTRODUCTION

  The draft Local Government Bill covers a broad spectrum of policy areas although it is largely related to financial matters. The inclusion of a number of permissive clauses enabling additional flexibility for local authorities can only enhance local choice and democracy and is to be supported. However, to receive unqualified support the opportunities must be available equally to all authorities and not determined by other factors such as an inequitable resource distribution system, tax base or subjective opinion.

2.  COMMENTS ON THE DRAFT BILL

  Sefton Council will comment more fully on the Bill in accordance with the specified deadline for responses. However, there are a number of areas within the draft Bill for which significant detail will need to be published before a full assessment can be made of the value of the proposals. These include:

    —  Capital Finance—the increased flexibility to borrow outside Government controls is to be welcomed, subject to clarification of the continuing form of external funding support and the replacement for the existing Commutation Adjustment.

    —  The introduction of a merged formula grant appears to be a major change merely to simplify the administrative payment system. The explanatory notes published with the Bill indicates that this new grant "will have no effect on the total amount of Government support, and almost no effect on the amount of support which each authority receives." The implication of this statement is that the formula grant represents more than the sum of the current RSG and NNDR payments.

    —  The transfer of HRA Housing Benefit into the General Fund represents the correction of an obvious anomaly in the Housing ring-fence legislation. However, a transparent and equivalent transfer of subsidy and grant will need to be confirmed to avoid any additional new burden falling on council taxpayers.

  The outstanding issues identified above are all financial. It is Sefton's view that a full evaluation of the proposals in the draft Bill can only be made following the publication of detailed proposals for amending the Revenue Support Grant Methodology and a comprehensive assessment of the impact of those proposals. The Select Committee is urged to consider the impact of the RSG methodology change as part of the Review.

3.  FUNDING ISSUES—SEFTON COUNCIL

  Whilst the draft Bill includes several proposals that are to be welcomed by Local Government, the benefits will be eroded without an equitable RSG mechanism. The remainder of this paper focuses on the key resource problems facing Sigoma authorities in general and Sefton in particular.

  The Audit Commission's draft CPA Corporate Assessment for Sefton states that, in 2002-03, Sefton Council:

    "received £673 of external government funding per head of population compared to a Metropolitan District average of £759 per head. Despite modest spending at £977 per head the Council has relatively high council tax levels compared to the Metropolitan District Band D average."

  The anomalous position that Sefton finds itself in results from the inadequacy of the current RSG mechanism. The weaknesses are well documented but, in Sefton's view, the key areas that need addressing for 2003-04 are:

3.1  Education

    —  the additional costs of educating within deprived areas must be recognised and adequately funded to ensure that areas faced with educational disadvantage have sufficient resources to tackle their local issues;

    —  the Area Cost Adjustment should reflect actual costs incurred in expenditure and not notional costs. The recent paper by Coventry City Council demonstrates that in 2000-01 only 40 per cent of ACA resources allocated to London to fund teachers pay was actually spent on that purpose;

    —  reduce the number of different revenue streams available to schools to promote a clearer understanding of resources provided for the service.

3.2  Personal Social Services

    —  Sefton's area includes Southport, which along with a number of other resort towns, has a disproportionate number of elderly and very elderly residents. This places an additional strain on resources within Social Services. In 1999-2000 the Government changed the measure of the elderly population in the SSA calculation from the total resident elderly population to the elderly population living in private households. This change had been considered and dismissed in 1998-99 but was applied a year later, although no further studies had been commissioned to justify the methodology change. Nine resort authorities, led by Blackpool, commissioned a report on this issue by Rita Hale Associates in 2001. This report estimated that the cost of this unjustified change to the nine resort authorities was approximately £10 million per year, Sefton being the authority that lost the greatest amount—£2.5 million per year. The new SSA methodology must reflect the implication of the age profile of resort authorities and use a more accurate measure for elderly population.

    —  The foster care adjustment in the Children's sub-block, reflecting regional variations in costs, is inappropriate as it duplicates the ACA.

3.3  EPCS

    —  Given the proposal to transfer HRA housing benefit into the General Fund, the current method of funding rent allowances should be reviewed and replaced with a 100 per cent grant. Sefton supports the study by Tameside MBC that proposes this option.

    —  The ACA should not be used to subsidise council tax levels. Resources allocated to reflect additional costs should be spent for that purpose.

3.4  Earmarked resources

    —  In accordance with the stated objectives of the Local Government White Paper, the recent trend towards increasing the number and size of specific grants should be reversed to allow greater discretion on expenditure at a local level.

    —  If, however, specific grants are retained clear indications should be announced at the earliest opportunity regarding the nature of the grant. Authorities should be advised if the grant is a one-off, for a fixed period or will be subsumed into future years settlement before any new expenditure commitments are entered into.

    —  Similarly the Government's recent pressure on local authorities to pass on increases in service SSAs does not allow local circumstances to be taken into account by Council members.

3.5  Floors and Ceilings

    —  One of the purposes of the Government's Spending Reviews (SR) is to support better budget planning. Following the publication of SR2002 the Government should announce floors and ceilings in external funding for the period of the SR.

3.6  Resource Equalisation

  A key element that needs to be addressed in the new SSA system is the equalisation of resources between authorities with different tax bases. Sefton supports the principles of the joint SIGOMA/ANEC report on resource equalisation.

4.  CONCLUSION

  The next few months will see the publication of a plethora of consultation papers, proposals and ultimately legislation affecting Local Government Finance. It is essential that all the changes are considered together to ensure the real impact is assessed and examined. The Select Committee should carefully consider the appropriate time to publish any findings.

A W Yates


 
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