Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by SIGOMA (LGB 20)

  1.  SIGOMA is a special interest group of 48 Municipal authorities located outside London and is a recognised special interest group within the LGA. Its membership comprises all 36 metropolitan districts and, in addition, 12 unitary authorities which meet its membership criteria. The combined population of SIGOMA authorities amounts to over a quarter of the population of England. Member authorities account for over 25 per cent of English local government expenditure and are represented by 148 MP's. A list of Members is included in Appendix A.

  2.  SIGOMA has welcomed the Government's review of the current system of local government finance and has been actively involved in working with the government to address the inequities and inequalities of the current distribution of resources.

  3.  SIGOMA is therefore pleased that the Government has published the draft local Government Bill which will provide the legislative framework required for implementation of a fairer system.

  4.  The following evidence is provided by SIGOMA in sequence with the chapters of the Bill.

  5.  In summary SIGOMA wishes to see a framework for the new system of local government finance that:

    —  takes full account of the current levels of multiple deprivation

    —  deals adequately with the effects of population decline

    —  deals with the "additional" costs of service provision in certain areas on an actual basis

    —  moves away from funding based on past spending patterns

    —  uses specific grants as a last resort

    —  provides adequate support for capital investment

    —  recognises differences between Local Authorities in their ability to raise Council Tax and ensures appropriate equalisation exists to reflect this


  6.  SIGOMA welcomes the replacement of Basic Credit Approvals with a new local prudential regime. Giving authorities the freedom and responsibility to control their own capital spending and associated revenue implications will allow local people to have a greater influence on locally important projects

  7.  Adequate capital investment is crucial for urban regeneration, with an estimated backlog of £10 billion in Education and some £19 billion in Housing (to name but two services). Any new system must ensure that resources are directed to those most in need and that investment is adequately supported through the Revenue Grant System.

  8.  In general terms, any new system needs to support the role of the local authority as community leader in its determination of local priorities. Whilst accepting a National agenda there must be sufficient flexibility to ensure that local priorities are addressed. The individual circumstances of authorities must be capable of being better reflected within a new system.

  9.  Whilst the proposals outlined within the Bill are welcomed the issue of revenue support for such borrowing is crucial, it needs to be targeted, to those most in need.

  10.  SIGOMA also understands the Government's intention to remove the current complex mechanism for taking account of the ability to generate receipts, however such ability needs to be taken into account if authorities with minimal assets to dispose of are not to be unfavourably treated compared to more asset rich authorities. This needs to be dealt with.

  11.  SIGOMA also believes that the provision for Government to set overall limits for local Government and individual authorities must only be exercised in exceptional circumstances if we are to avoid "credit approvals" under another guise.


  12.  SIGOMA authorities have always supported the development and maintenance of appropriate professional standards and believe that the duties set out within the proposed clauses reaffirm current best practice.

  13.  There is concern that provision for Government to determine minimum balances for authorities is unnecessary and does not support local accountability and decision making.


  14.  SIGOMA welcomes the provisions within the Bill for the redetermination of the calculation and distribution of formula grant as this provides the Government with the opportunity to address the inequities of the current distribution. There is apparent general agreement that the current system, based on spending patterns of the early 1990's, bears no relationship to the needs of today.

  15.  At its outset (1990-91) it delivered to SIGOMA authorities a Standard Spending Assessment (SSA) per head some £22 less than the national average. By the end of the Conservative Government this had deteriorated to a full £50 per head less. Whilst acknowledging subsequent minor improvements the gap still stands at some £40 per head. This is despite the relatively high levels of deprivation facing our authorities.

  16.  There is also a demonstrable difference in funding (SSA per head) between the North and Midlands and the South. Even after adjusting for ACA the current gap between London and the Northern and Midland Urban authorities stands at around £2 billion a year, with over 90 per cent of SIGOMA authorities receiving less than the Inner London average.

  17.  In addition there are numerous examples where highly deprived authorities, as recognised through the Index of Multiple deprivation (IMD), perversely receive less funding than other less deprived communities. Such discrepancies need to be resolved under any new system.

  18.  In order to resolve these discrepancies, full recognition needs to be given to the current levels of deprivation that face our authorities today. The existing SSA does not deal with such issues and we need to look toward more up to date and relevant indicators. The Index of Multiple Deprivation 2000 must therefore be considered.

  19.  The current system bases local authority support on population, this has resulted in reducing resources where population is declining despite the fact that some costs are fixed and other costs do not reduce immediately. Any new system must recognise this shortcoming.

  20.  We are all aware of the ACA debate. The very late changes for the 2002-03 Settlement saw a swing of some £74 million away from SIGOMA authorities in the North and Midlands to London and the South East due to the late inclusion of 350 bankers and city workers. Surely this confirms the case for ensuring any future cost adjustment is based on actual costs and is transparent.

  21.  A major concern to our communities is the "liveability" issues. The current system has resulted in this area of service provision taking the brunt of cuts required to ensure delivery of national priorities on Education and Social Services (SSA passporting etc). Any new system must readdress the balance of national and local priorities. Local government funding is bedevilled by Government funding initiatives, with the proportion of specific grants over recent years growing at an unacceptable rate.

  22.  The systems overall inadequacies cannot be addressed without resources and investment. The gap between local authority current needs assessment (SSA) and actual spending amounts to over £3 billion which has to be found locally from Council Tax. The ability for more deprived areas with low tax bases and consequently high gearing to be able to maintain services, has led to higher council taxes in those areas least able to afford them.

  23.  This aspect of the system is as equally important as the assessment of need. What we firmly believe to be the perverse results of the current system have been further exacerbated by the lack of a Council Tax revaluation, and this has further penalised our communities.


  24.  As in the case of the previously suggested supplementary rate SIGOMA agrees in principle with the use of BIDs. Since there will be more than adequate controls to protect businesses, this is, in effect, a voluntary tax.

  25.  However, the inevitable limitations of an acceptable levy mean that in many cases very few resources are likely to be available for new spending, especially after netting-off the cost of the ballot etc that must be held. Outside of the very large, "Business" rate rich authorities this proposal is not very attractive in practice.

  26.  We would wish such resource inequalities not to be overlooked. The ability of "rate rich" authorities to raise significant sums through this mechanism must be taken account of in any revised system if the aim of fairness is to be achieved.


  27.  SIGOMA welcomes the provisions for small business rate relief but believes that further tax incentives/disincentives to encourage/discourage investment into urban areas are necessary.

  28.  The fact that places of religion will no longer need a certificate to claim exemption from rates, will make it more difficult to determine eligibility for certain sects/cults that are not C of E.


  29.  The lack of a revaluation cycle for council tax has had a damaging impact on most SIGOMA member authorities.

  30.  Whereas, higher London and South East employee costs have been more than recognised in the Area Cost Adjustment each year, the greater wealth within those areas that would be recognised by a Council Tax revaluation has been ignored. The current lack of revaluation penalises our Member authorities who lose at least £250 million a year in government grant as a direct result of this omission.

  31.  SIGOMA has therefore welcomed the Governments commitment to a revaluation but considers that 2007 is too long to wait and that a revaluation should be carried out and implemented as soon as possible. Failure to do so needs to be accompanied by adequate compensation for the authorities continuing to suffer the consequences.

  32.  SIGOMA also believes that to avoid the current position being repeated and to remove the need for artificially high Council Taxes outside London and the South East such valuations need to be kept up to date. The proposal within the Bill for the period between revaluations to be no longer than 10 Years is unhelpful and SIGOMA fails to see why the cycle cannot be shortened to four years, at least on a rolling basis.

  33.  SIGOMA is pleased that the Bill contains powers to change the number of valuation bands, however SIGOMA would ask that there should be further investigation into the equity of the Council Tax focusing on both the number of Council Tax bands and the multipliers for each band with powers extended accordingly.

  34.  It cannot be fair that people living in a large multi-million pound mansion should pay a Council Tax Bill which is only three times larger than say a small flat valued at less than £20,000. The regressive nature of the Council tax is illustrated by the fact that Council Tax bills fall as a proportion of property band values. The larger the property the lower proportion that Council Tax is the property value.

  35.  SIGOMA is currently undertaking research in this area and will be happy to discuss its findings with Government in the near future

  36.  Finally, the joint and several liability for council tax will not apply to students living with non-students and could therefore lead to many liability disputes.


  37.  SIGOMA has welcomed the Governments approach to the simplification of the current complex system of financing.

  38.  However there are still concerns that the Government's target of a decent home for all by 2010 will not be achievable, unless sufficient resources are provided to meet the current backlog of repairs.

  39.  SIGOMA maintains that any future funding system must ensure real choice for tenants by providing adequate resources under any option for the future management of our public housing stock.


  40.  Whilst the Bill provides for authorities to charge for discretionary services it is difficult to see how such proposals will benefit our communities. SIGOMA authorities have and continue to suffer from population decline, and as Lord Rogers indicated in his work on the Urban White Paper it is often the more affluent that leave our areas with the more needy being left behind.

  41.  Demand on services therefore increases leaving little resource to establish and maintain such "desirable" services given the that our remaining population are the least likely to be able to afford to pay.


  As is often the case the "devil will be in the detail", and this detail will require further consideration. SIGOMA therefore believes that the Office of the Deputy Prime Minister should apply to these regulations similar criteria to the ones they hope to achieve within the new local government finance system. ie they should be fair, intelligible, transparent, be evaluated in terms of benefits/improvements against costs and in addition wherever possible have been properly piloted and independently reviewed before being rolled out for universal application


SIGOMA Member Authorities

Blackburn with DarwenPlymouth
BurySt. Helens
GatesheadSouth Tyneside
Kingston upon HullStockton on Tees
KirkleesStoke on Trent
Milton KeynesWigan
Newcastle upon TyneWirral
North TynesideWolverhampton

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