House of Lords - Explanatory Note
Local Government Bill - continued          House of Lords

back to previous text

Schedule 6: Minor and consequential amendments: paragraph 77

228.     Paragraph 77 of Schedule 6 amends the Homelessness Act 2002. It clarifies that the requirement to publish certain material produced under that Act applies to the original homelessness strategy prepared under section 1 of the Act, as well as revisions to that material prepared under section 3. It makes clear that the duty to publish only relates to the material prepared under that Act (and not to the whole of any document containing such material). This amendment means that if a local authority decided to meet the requirements of the Homelessness Act 2002 by including its homelessness strategy prepared under that Act in the same document as a housing strategy it is required to have under clause 88, there is no obligation to publish the whole of that document. In practice the local authority may find it desirable to publish the entire document on housing related matters.

Clause 90: Housing Revenue Account subsidy: payment and calculation

229.     Under the Bill, rent rebates will be removed from the Housing Revenue Account (HRA) and will be met by rent rebate subsidy payable under the Social Security Administration Act 1992 (see the amendments made to that Act by Schedule 6 to the Bill). This clause amends sections 79 and 80 of the Local Government and Housing Act 1989 ("the 1989 Act"), in relation to the continued calculation and payment of HRA subsidy in respect of the remaining costs falling on the HRA.

230.     The clause substitutes a new section 79(2) of the 1989 Act. The new subsection confirms that payment of HRA subsidy may be made subject to conditions, including conditions as to the supply of HRA business plans (see clause 89), determined by the Secretary of State or the National Assembly for Wales. The new section 79(2) refers to the "appropriate person". For England this is the Secretary of State and for Wales this is the National Assembly for Wales. See the amendment made by subsection (6) of the clause.

231.     The clause amends section 80 of the 1989 Act so that HRA subsidy may be calculated in such manner as the Secretary of State or the Assembly may determine rather than in accordance with formulae. Such a determination may, among other things, provide that all or part of the amount is to be calculated in accordance with formulae, or that any part which is not so calculated may be calculated by reference, for example, to an assessment of the authority's HRA business plan, the authority's discharge of its housing functions or such other matters as the Secretary of State or the Assembly may determine. This will provide greater flexibility in calculating the amount of HRA subsidy payable to authorities. It will, for example, allow the Secretary of State and the Assembly to target additional subsidy to authorities which provide better services to their tenants, perhaps by establishing arm's length housing management organisations.

232.     The amendments in section 80 of the 1989 Act also provide that calculations may be made on the basis of information received on or before such date as the Secretary of State/the Assembly may specify, and on the basis of assumptions. This ensures that there can be certainty about the amounts of subsidy for a year, and that any delay by authorities in supplying the required information need not delay the subsidy calculations, which could affect authorities' budget setting processes.

Clause 91: Housing Revenue Account subsidy: negative amounts

233.     This clause inserts a new section 80ZA into the Local Government and Housing Act 1989 ("the 1989 Act").

234.     The new section 80ZA provides that where the calculation of HRA subsidy under sections 79 and 80 of the 1989 Act (as amended by clause 90) results in an overall negative amount, the authority concerned shall:

  • pay that amount to the Secretary of State or the Assembly; and

  • charge the costs of doing so to its HRA. The costs will fall to be met from rental and other income in the HRA.

235.     This will ensure that authorities which are able to generate surplus rental income, even though incurring management and maintenance etc expenditure comparable with other authorities, make a contribution towards meeting the costs incurred by authorities which cannot generate sufficient rent income to meet such costs.

236.     This is effectively what happens under the present HRA subsidy arrangements, whereby the surplus is set off against that part of subsidy which is attributable to rent rebates. But the present arrangements are not consistent with the new financial framework for local authority housing (including resource accounting), and are not well understood. That is why rent rebates are being removed from the HRA. When that happens, the current redistributive mechanism will no longer be available.

237.     There is provision as to the timing and manner of such payments (including provision for payment by instalments), and for the Secretary of State and the Assembly to charge interest where any payments are made late, and to charge for any other costs associated with pursuing late payments. The amendment made by the clause to section 141(8) of the Local Government Finance Act 1988 means that any amounts payable by an authority (including interest and other costs) may, in accordance with regulations, be set off by the Secretary of State or the Assembly against specified amounts payable by him/the Assembly to the authority concerned e.g. by way of revenue support grant.

238.     Section 80(2) of the 1989 Act is repealed by subsection (2) of this clause. Section 80(2) provides that, where an authority's HRA subsidy calculation is a negative amount, an equivalent positive amount is to be transferred from their HRA to some other revenue account of the authority, other than the Housing Repairs Account. The effect of this is that currently housing resources (e.g. rents) are used to meet non-housing expenditure for some authorities in England.

Clause 92: Housing Revenue Accounts etc: adaptation of enactments

239.     This clause inserts a new section 87A into the Local Government and Housing Act 1989 ("the 1989 Act).

240.     The new section 87A allows the Secretary of State and the National Assembly for Wales, by order, to amend, repeal or re-enact provisions in Part 6 of the 1989 Act, and make such consequential etc provisions as may be necessary. Any order made by the Secretary of State for England is subject to affirmative resolution of each House of Parliament.

241.     The new section will provide a mechanism whereby, subject in England to Parliament's approval, changes to the HRA may be made as and when required to reflect new circumstances or to improve the financial arrangements for local authority housing. The new section is an extended version of the existing power which enables Schedule 4 to the 1989 Act (which is introduced by Part 6 of that Act) to be amended by order subject only to negative procedure.

Clause 93: Local housing authority houses: rents

242.     Subsection (1) of this clause will limit the effect of section 24(3) of the Housing Act 1985 so that it applies only in relation to Wales (instead of in relation to both England and Wales). Section 24(3) requires authorities, when setting their rents, to have regard to the principle that rents of houses of any class or description should bear broadly the same proportion to private sector rents as the rents of houses of any other class or description. In certain circumstances, the requirements of section 24(3) might make it difficult for authorities to comply in the longer term with the Government's rent restructuring policy in England.

243.     Subsection (2) of the clause allows the National Assembly for Wales to make an order at some time in the future repealing section 24(3) as, after the amendment made by subsection (1) of the clause, section 24(3) will only apply in relation to Wales. Clause 122(1) would allow the Assembly to include in such an order the consequential repeal of section 24(4) of the Housing Act 1985.

Schedule 6: Minor and consequential amendments

Paragraphs 31, 33 to 39 and 58

244.     Paragraph 31 of Schedule 6: This paragraph is intended as a transitional provision, to provide flexibility in deciding how to recover any overpaid HRA subsidy paid for rent rebates. It amends section 80A of the Local Government and Housing Act 1989 ('the 1989 Act'), so that amounts of HRA subsidy overpaid (by the First Secretary of State or National Assembly for Wales) in respect of rent rebates granted to tenants of houses within an authority's Housing Revenue Account ('HRA rent rebates') may be recovered by withholding or reducing rent rebate subsidy payable (by the Secretary of State for Work and Pensions) under section 140A(2) of the Social Security Administration Act 1992. This paragraph enables the Secretary of State for Work and Pensions to recover overpaid subsidy for HRA rent rebates from authorities, even where the original subsidy was paid as part of HRA subsidy. This will be in addition to the powers of the First Secretary of State and Assembly to recover overpaid HRA subsidy in respect of HRA rent rebates by withholding HRA subsidy payable in future in respect of e.g. management and maintenance.

245.     Paragraph 33 of Schedule 6: This paragraph amends Schedule 4 to the Local Government and Housing Act 1989 ("the 1989 Act") which makes provision for the keeping of the Housing Revenue Account. Schedule 4 to the 1989 Act sets out the items to be debited and credited to that account.

246.     Sub-paragraph (4) means that the amount of rent rebates granted for the year to tenants of property in the HRA will no longer be debited to that account. Sub-paragraph (2), read with the repeal of section 140D(2) of the Social Security Administration Act 1992 (in paragraph 38 of Schedule 6), means that the authority will no longer transfer an amount to the HRA from another of its accounts where it has exercised its discretion under section 134(8) of the Social Security Administration Act 1992 to grant a higher rent rebate than would otherwise be granted (e.g. by disregarding war disablement or war widows' pensions in calculating an individual's benefit entitlement).

247.     Sub-paragraph (5) inserts a new debit item 10, Sums directed by the Secretary of State or the National Assembly for Wales. This authorises the giving of directions requiring an authority to carry a specified amount, or an amount calculated in accordance with a prescribed formula, from its Housing Revenue Account to another revenue account (other than its Housing Repairs Account). While the 1989 Act currently provides a power to direct an authority to transfer a sum to its HRA from another revenue account (Item 10 of Part 1 of Schedule 4), there is no direct equivalent authorising directions requiring transfers from the HRA. A separate direction-making power will remove the need to use determinations under Item 8 of Part 2 of Schedule 4 to effect such transfers, which would further complicate what is already a complex determination.

248.     The power to direct the transfer of sums from the HRA to another account may be used where an authority has chosen to increase the rents of dwellings in the HRA above the level at which rent rebate subsidy may be paid in respect of property in the HRA under the Social Security Administration Act 1992. HRA subsidy currently paid by the National Assembly for Wales and the First Secretary of State in respect of rent rebates for tenants of dwellings is subject to a "rent rebate subsidy limitation" policy. This means that where an authority increases its rents above a certain level, it must meet additional benefit costs itself, rather than receiving subsidy for them. It is proposed that rent rebate subsidy limitation will continue to apply when HRA tenants' rent rebates are subsidised by rent rebate subsidy paid under the SSAA 1992 instead of as currently through HRA subsidy. Rent rebate subsidy limitation will operate in future by including provision for a deduction, from the amount of subsidy which would otherwise be paid, in the order under section 140B of the SSAA 1992 setting out how rent rebate subsidy is calculated.

249.     If the authority chooses to set its rents above the limit rent set out in the policy of rent rebate subsidy limitation, then it is considered appropriate that the costs that will not be subsidised should be met by the authority out of its HRA, rather than out of some other account. The extent to which these rebates are unsubsidised would be a consequence of a decision by the authority in its landlord role, and therefore the associated costs should be met by its landlord account, that is, its HRA. A direction under the new debit item 10 inserted by sub-paragraph (5) would allow an appropriate transfer of resources from the HRA to another revenue account in the authority's general fund to which rent rebates would be debited.

250.     Sub-paragraph (3) substitutes a new item 9 for the current Item 9 of Part 1 of Schedule 4 (credits) to allow for amounts under the new Item to be calculated in accordance with a formulae. This brings that Item in line with the new Item 10 of Part 2 of that Schedule (debits), which it mirrors.

251.     Paragraphs 34 to 39 of Schedule 6: These paragraphs make minor and consequential amendments to the Social Security Administration Act 1992 ("the SSAA 1992").

252.     Paragraph 35 of Schedule 6 corrects the reference in section 134(2) of the SSAA 1992 to the subsections in that section which prescribe when housing benefit takes the form of a rent rebate and when it takes the form of a rent allowance. This amendment is deemed to have come into force on 1st April 1997 when the amendment to section 134 under the Housing Act 1996, which inserted new subsections referring to rent rebates and allowances, took effect.

253.     Paragraph 36(a) repeals the second sentence of section 140B(2) of that Act (exclusion of "Housing Revenue Account rebates" paid by housing authorities in England and Wales from the amount of relevant benefit). Paragraph 39 deletes the definition of "Housing Revenue Account rebate" from section 140G of the SSAA 1992 since there will no longer be any such rebates debited to the HRA. The repeal of the second sentence in section 140B(2) and the definition of Housing Revenue Account rebates will ensure that in calculating rent rebate subsidy, the Secretary of State is not prevented from taking into account any rent rebates which had been debited to the HRA in earlier years, e.g. where such rebates had been overpaid, and a deduction needs to be made in respect of the overpayment.

254.     Paragraph 36(b) of Schedule 6 repeals subsection (7) of section 140B of the SSAA 1992. The powers under the other provisions of section 140B to calculate the amount of rent rebate subsidy, rent allowance subsidy and council tax benefit subsidy payable, and in particular to pay additional amounts or deduct amounts from the subsidy which would otherwise be payable, are broad. The Secretary of State may determine such additions and deductions by reference to such matters as he thinks fit, including, for example, the amount of relevant benefit paid by the authority during a previous year, or the rents of dwellings in the HRA (for the purposes of a deduction for rent rebate subsidy limitation in respect of rent rebate subsidy payable for rent rebates to tenants of HRA dwellings). Subsection (7) did not confer any additional power on the Secretary of State, and made the true extent of the Secretary of State's powers unclear.

255.     Paragraph 37 of Schedule 6 inserts a new subsection (1A) into section 140C of the SSAA 1992. Section 140C(1) of the SSAA 1992 allows the Secretary of State to impose conditions, subject to which subsidy will be paid, in respect of claims, records, certificates, audit or otherwise. Conditions can be imposed under section 140C(1) requiring authorities to provide the Secretary of State with information. Where such conditions are imposed, the new subsection (1A) expands the kind of information that can be required. This will enable the Secretary of State to require the authority to provide information necessary for the Secretary of State to carry out any of his functions relating to subsidy. These functions include making an order setting out how subsidy will be calculated (including any rent rebate subsidy limitation deduction), as well as calculating the amount of subsidy payable under an order.

256.     Conditions imposed under subsections (1) and (1A) of section 140C of the SSAA 1992 could require authorities to provide information to the First Secretary of State or to the National Assembly for Wales, as well as to the Secretary of State for Work and Pensions. The First Secretary of State in England and the National Assembly in Wales could continue to collect information as part of monitoring the policy of rent rebate subsidy limitation. They could then pass the information on to the Secretary of State for Work and Pensions along with representations as to the form of rent rebate subsidy limitation formulae. This would be possible as an alternative to requiring authorities to send that information directly to the Secretary of State for Work and Pensions. Information which authorities may be required to supply under this section could include the level of rents set by an authority for any year, the amount of rent rebates granted to tenants of property within the HRA, or information relating to rent restructuring for an authority in England.

257.     Paragraph 58 of Schedule 6 makes a consequential amendment to section 122(4) of the Housing Act 1996, as a result of amendments made by the Social Security Administration (Fraud) Act 1997 to section 140B of the Social Security Administration Act 1992. The amendments made in 1997 resulted in provisions in section 140B being shuffled between its subsections. As a result section 122(4) no longer refers correctly to the subsections of section 140B. The amendments made by paragraph 56 of Schedule 6 mean that readers do not have to rely on section 17(2)(a) of the Interpretation Act 1978 to interpret section 122(4) because section 122(4) will now refer correctly to the subsections of section 140B under which the Secretary of State may include provision in an order for additions to or deductions from subsidy, or deduct subsidy which he considers it would be unreasonable to pay. Paragraph 56 is deemed to have come into force on 1st July 1997 when the amendments to section 140B of the Social Security Administration Act 1992 made by the Social Security Administration (Fraud) Act 1997 came into force.

258.     The amendment in paragraph 38 of Schedule 6 omitting section 140D(2) needs to be read with the repeal of item 5 of Part 1 of Schedule 4 to the Local Government and Housing Act 1989 (see paragraph 33(2) of Schedule 6 to the Bill).

259.     The SSAA 1992 extends to (i.e. forms part of the law of) Scotland. The effect of clause 128 of the Bill is that the amendments will have effect in relation to the SSAA 1992 as operating throughout England, Wales, and Scotland. This means that all the amendments to the SSAA 1992 will also form part of the law of Scotland. It should be noted that sections 140A to 140G of the SSAA 1992 are not devolved matters in Scotland (see paragraph 1(2)(e) of Schedule 4 to the Scotland Act 1998).

PART 8: MISCELLANEOUS AND GENERAL

Clauses 94 to 99: Charging and Trading

Introduction

260.     The clauses provide a new power for best value authorities to charge for discretionary services and enable new trading powers to be conferred on such authorities.

Clause 94: Power to charge for discretionary services

261.     This provides power for best value authorities, as defined in the Local Government Act 1999, to charge for discretionary services. Discretionary services are those services that an authority has the power but not a duty to provide.

262.     An authority may charge where the person who receives the service has agreed to its provision. The power to charge under this provision does not apply where the power to provide the service in question already benefits from a charging power (94(2)(a)) or is subject to an express prohibition from charging (94(2)(b)).

263.     Clauses 94(3) and (4) place a duty on best value authorities to ensure that, taking one year with another, the income from charges for each kind of discretionary service does not exceed the costs of provision.

264.     Clause 94(5) provides that, within the framework set by clauses 94(3) and (4), a best value authority may set the charges as it thinks fit, and may in particular charge only certain people for a service or charge different people different amounts.

265.     In carrying out their functions under clause 94, best value authorities are required to have regard to any guidance that may be issued (94(6)) by the Secretary of State in relation to England and the National Assembly for Wales in relation to Wales.

266.     Clause 94(7) provides that certain prohibitions in other legislation preventing authorities from raising money are specifically disapplied in relation to the exercise of the charging power.

Clause 95: Power to disapply clause 94(1)

267.     This clause allows the Secretary of State, or (in relation to authorities in Wales) the National Assembly for Wales, to make orders disapplying the power to charge in clause 94(1) in relation to particular authorities or descriptions of authority or particular services. Disapplication may be indefinite or for a particular period.

Clauses 96 and 97: Power to trade in function-related activities through a company; Regulation of trading powers

268.     Clause 96(1) provides power for the Secretary of State, or (in relation to authorities in Wales) the National Assembly for Wales, to make an order enabling best value authorities (with the exception of those listed in subsection (7)) to trade in any of their ordinary functions. An order authorising trading may make provision about the persons with whom authorities may trade.

269.     The power may not be used to authorise best value authorities to trade in a statutory service which they are already obliged to provide with a person to whom they are already obliged to provide it, or to use the new powers where there are existing trading powers.

270.     Orders made under the power may relate to all best value authorities or to particular best value authorities or descriptions of best value authority. They may also relate to all activity in relation to a function, particular activities, or descriptions of activity. This will enable the scope of the trading powers to be related to an authority's performance categorisation under the Comprehensive Performance Assessment regime, where appropriate (clauses 100(4) and 101(1) and (2)(e)).

271.     The power to trade conferred by these provisions is only exercisable through a company within the meaning of Part 5 of the Local Government and Housing Act 1989 ("the 1989 Act") (companies in which local authorities have interests). Part 5 of that Act shall for the purpose of these provisions be deemed to apply to a best value authority which is not otherwise a local authority. Furthermore, that application of Part 5 is restricted to companies through which a best value authority operates the power under clause 96(1) and limited to trading activities undertaken by such companies.

272.     Clause 97 provides an order-making power to impose conditions on the exercise of any trading power by a best value authority, including where this is undertaken through a company. Best value authorities are required to have regard to any guidance that may be issued about the exercise of their trading powers.

     Clause 98: Power to modify enactments in connection with charging or trading

273.     This clause confers powers enabling the Secretary of State to modify or exclude the application of any enactment that restricts a best value authority's ability to charge for the provision of a discretionary service or carry out trading in its functions. The clause also permits the Secretary of State to modify or exclude the application of any enactment that confers power on a best value authority to charge for a discretionary service. The effect of excluding such a power will be to substitute for the specific provision in question the general power to charge under clause 94.

274.     An order made under this provision may apply differentially to different authorities and different functions. It may not be used to authorise best value authorities to trade in a statutory service that they are already obliged to provide with a person to whom they are already obliged to provide it.

275.     Orders made under this provision would be subject to the affirmative resolution procedure in both Houses of Parliament.

276.     The clause also makes provision about the parliamentary procedure applicable to orders that amend earlier orders just for the purpose of causing them to apply, or not apply, in relation to particular authorities or authorities of a particular description. Orders amending earlier orders in this manner are to be subject to the negative resolution procedure in both Houses of Parliament.

277.     The powers under this clause will not be exercisable by the National Assembly for Wales (NAW). But the Secretary of State may not make any provision which has effect in Wales without consulting the NAW and may not make provision in relation to legislation made by the NAW without the consent of the NAW.

278.     The NAW may submit its own proposals to the Secretary of State to the effect that any order made under these powers with provisions affecting Wales, should be in accordance with those proposals.

Clause 99: Procedure for orders under clause 98

279.     The clause describes further the affirmative resolution procedure the Secretary of State is to follow in making an order under clause 98. He is required to consult such best value authorities or persons as appear to him to be representative of interests affected by his proposals and to lay before each House of Parliament for 60 days a document explaining his proposals, together with a draft order and details of the consultations that have been conducted including those with the NAW where the proposals relate to best value authorities in Wales. Thereafter, in preparing a draft order, the Secretary of State is required to consider any representations made during the 60 day period during which his proposals have been before the Houses of Parliament. The draft order laid before Parliament for approval must be accompanied by a statement by the Secretary of State, with details of the representations that he has considered and any changes made to his proposals.

 
previous Section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search Page enquiries index

© Parliamentary copyright 2003
Prepared: 13 March 2003