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.
PART 1: CAPITAL
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.
PART 2: FINANCIAL
5. Once again the ALG sees no need for a separate
London approach to this part of the Bill.
PART 3: GRANTS
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.
PART 4: BUSINESS
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.
PART 5: NON-DOMESTIC
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
PART 6: COUNCIL
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
Source: Council Tax Demands and Precepts
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.
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
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.
PARTS 7 AND
8: OTHER PROVISIONS
17. The ALG broadly welcomes these provisions
but sees no special London dimension, except in relation to Clauses
105 to 106, Performance Categories.
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