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
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
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
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
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
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
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
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
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
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
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
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 Darwen||Plymouth
|Bury||St. Helens |
|Kingston upon Hull||Stockton on Tees
|Kirklees||Stoke on Trent
|Newcastle upon Tyne||Wirral