Select Committee on Delegated Powers and Deregulation Twelfth Report



COUNCIL TAX REGULATION

The Powers

CLAUSE 29 AND SCHEDULE 1: LIMITATION OF COUNCIL TAX AND PRECEPTS

125.  Clause 29 of the Bill inserts a new Chapter IVA into Part I of the Local Government Finance Act 1992. This new chapter provides for the new reserve powers which replace the existing capping powers set out in Chapter V which is repealed.

126.  Section 52Z provides that the powers available to the Secretary of State in England will be exercised by the National Assembly in respect of Wales.

Schedule 1

SECTION 52B: POWER TO DESIGNATE OR NOMINATE AUTHORITIES

127.  Under section 52B, the Secretary of State will decide if the budget requirement of a local authority 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, taking into account any information he thinks is relevant; any principles applied to authorities must be the same for all authorities within the category. If the Secretary of State does not determine categories then the same set of principles must be used for all authorities.

128.  The determination of principles and categories is not subject to Parliamentary scrutiny. However, if an authority is designated—which is the start of the process that leads to capping—it will be able to challenge the maximum amount set by the Secretary of State for its budget requirement. If a local authority challenges the maximum amount set by the Secretary of State or does not respond, he must lay an order setting out the maximum amount or 'cap' which must be approved by resolution of the House of Commons.

129.  This is similar to the existing capping legislation, whereby the capping criteria are not scrutinised by Parliament, but if an authority is designated and it either challenges or does not respond, an order setting out the cap must be approved by resolution of the House of Commons.

SECTION 52C: ALTERNATIVE NOTIONAL AMOUNTS

130.  Section 52C provides that the Secretary of State may set a notional amount for the budget requirement for an authority. This power may be used to set a notional amount where there has been a change in an authority's 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. A similar power exists under current capping legislation (section 55 of the 1992 Act).

131.  If the Secretary of State does set an alternative notional amount for an authority, he will do so in a report which must be laid before the House of Commons and which is then subject to the affirmative resolution procedure; the report should contain whatever explanation the Secretary of State thinks desirable of the calculation he has made.

SECTION 52D: DESIGNATION OR NOMINATION

132.  Under section 52D, if the Secretary of State has decided under section 52B that the budget requirement is excessive, he may then designate or nominate the authority. The decision whether to designate or nominate may in part depend on the amount by which the budget requirement is excessive. Nomination would be preferable to most authorities as they would not have to rebill their taxpayers and would have time to plan any reductions in expenditure.

133.  The safeguards for this power are contained in the procedures set out in the remainder of this new Chapter.

SECTION 52F: CHALLENGE OF MAXIMUM AMOUNT

134.  Section 52E (designation) sets out the procedure that must be followed if the Secretary of State designates an authority for the year under consideration; it does not provide delegated powers. However, 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 can make an order setting out the maximum amount for the budget requirement. This order must be approved by resolution of the House of Commons. The local authority is then informed of the maximum amount in a notice. Alternatively the Secretary of State may nominate the authority under subsection 52F(11).

135.  This section places limits on what amount the Secretary of State may set as the maximum for the year; it 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.

SECTION 52H: NO CHALLENGE OR ACCEPTANCE

136.  Section 52H provides that, if the local authority neither challenges the maximum amount nor formally accepts 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 will then be informed of the maximum amount in a notice.

SECTIONS 52Q (CHALLENGE OF MAXIMUM AMOUNT) AND 52S (NO CHALLENGE OR ACCEPTANCE)

137.  The Secretary of State may choose to nominate an authority, for which the procedures are set out in section 52L; he can then proceed under either section 52M (future year designation) or section 52N (setting a notional budget requirement). Section 52P sets out the procedure that will be followed if an authority is designated again after it has been designated in a previous year. There are no further delegated powers involved in these procedures.

138.  The safeguards for Parliamentary scrutiny of these procedures are contained in sections 52Q and 52S, which provide that if the local authority does not accept the maximum amount set by the Secretary of State when designating for a following year, he must lay an order setting out the maximum amount. This order is subject to affirmative resolution in the House of Commons.

SECTION 52X: CALCULATIONS TO BE NET OF PRECEPTS

139.  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. This allows the Secretary of State to ensure that local authorities do not simply pass functions to local precepting authorities in order to avoid budgetary controls. An order under this section will be subject to the negative resolution procedure in the House of Commons. This is similar to the approach in subsections 54(6) and (7) in the 1992 Act.

SECTION 52Y: INFORMATION FOR PURPOSES OF CHAPTER IVA

140.  Section 52Y requires local authorities to provide the Secretary of State with their budget requirement and any local precepts seven days after the budget requirement has been set. This information is needed by the Secretary of State to decide whether or not it is excessive. The Secretary of State may also require a local authority to provide other information required for the purpose of deciding whether to exercise his powers under this chapter.

SECTION 52Z: SEPARATE ADMINISTRATION IN ENGLAND AND WALES

141.  Under section 52Z, the National Assembly for Wales will exercise the powers in Wales which in England will be exercised by the Secretary of State. Section 52Z further modifies Chapter IVA of the 1992 Act to provide that Parliamentary procedure will not apply to Assembly Orders under sections 52F, 52H, 52Q, 52S, and 52X above. Instead, the Assembly's subordinate legislative procedures, set out in sections 64-68 of the Government of Wales Act 1998 and its Standing Orders, will apply. The Committee has already considered these procedures in its scrutiny of this Act during its passage through Parliament, concluding that "the proposed mechanism for scrutiny, which, save in cases of urgency, always requires both a cost­benefit appraisal and the affirmative procedure, is suitably rigorous". (18th Report, 1997-98, column 14).

CLAUSE 30: MAJOR PRECEPTING AUTHORITIES: FURTHER REGULATION

142.  Clause 30 relates to the council tax benefit subsidy limitation scheme.

143.  Under this scheme, where an authority's budget requirement is excessive, it must make a contribution to the additional council tax benefit costs that arise. The Local Authorities (Alteration of Requisite Calculations) (England) Regulations 1999 (SI 1999/228) changed the tax-setting equations set out in sections 33 and 44 of the Local Government Finance Act 1992 so that the basic amount of council tax is increased to cover the contribution to the costs of additional council tax benefit where an authority exceeds the guideline. A draft of these Regulations were published at the time of the announcement of the provisional 1999/2000 Local Government Finance Settlement and the scheme debated at that point. The final Regulations were made following the announcement of the final Settlement. They are subject to negative resolution in both Houses; they were prayed against in the House of Commons and a debate took place on 10 March. A copy of the Regulations is attached. The Welsh equivalent are the Local Authorities (Alteration of Requisite Calculations) (Wales) Regulations (SI 1999/296).

144.  In relation to billing authorities, the scheme works through the combined effects of the Requisite Calculations Regulations and directions which relate to transfers between the general and collection funds.

145.  Clause 30 provides that, if the amount calculated by a major precepting authority as its budget requirement is excessive in accordance with criteria published by the Secretary of State, it must make payments to billing authorities to which it issues a precept. In Wales the powers of the Secretary of State will be exercised by the National Assembly for Wales. This provision is necessary to require precepting authorities to pay an amount to billing authorities to compensate for the loss of subsidy resulting from the excessive budget requirement of the preceptor.

146.  The Schedule to the Requisite Calculations Regulations contains the equivalent both of the criteria for excessiveness (paragraph 1(1)) and the calculation of the amount of the payment. It is considered that the criteria of excessiveness under subsection 30(2) need not be set out in a statutory instrument as they will be included in the Requisite Calculations Regulations.

147.  Regulations under subsection 30(5) will set out the calculation of the amount (also in the Requisite Calculations Regulations) as well as the time of payment and other details set out in that subsection. These regulations will be subject to negative procedure.

148.  The Local Authorities (Funds) (England) Regulations 1992 (SI 1992/2428 as amended) contain provisions for payments by a billing authority to a preceptor, including provisions for the timing of payments and for interest. These regulations are made under powers which include section 99 of the Local Government Finance Act 1988, and are subject to negative procedure by virtue of section 143(3). The Department sees the new Regulations as serving a similar purpose, so that similar formalities seem appropriate. The Local Authorities (Precepts) (Wales) Regulations 1995 (SI 1995/2562) have a similar function in Wales. They are made under a different statute, but are also subject to the negative resolution procedure.

MARCH 1999


 
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