Part 7:
A new approach to local government finance7.1 We are clear that we need a new approach to local government finance. We are also clear on some of the key requirements of this new approach.
7.2 We must continue to ensure that local authorities are adequately funded. Our first two spending reviews have put local government finances on a sounder footing. The new grant distribution systems would allow the Government to consider the adequacy of funding for individual local authorities in a way that is not possible now.
7.3 We need to clarify accountability by drawing clearer demarcation lines between those decisions which are for Government and those which are for local authorities. Only the Government can take responsibility for deciding how much grant authorities receive. In doing so, it is entitled to ensure that national priorities are met and that there are adequate incentives for continuous improvement in support of the duty of Best Value.
7.4 But Government has also become embroiled in decisions that could and should be left to local authorities. The abolition of credit approvals would remove an unnecessary constraint on borrowings. Similarly, there is scope for much greater local authority freedom on fees and charges.
7.5 The new capping powers illustrate how greater financial freedom for local authorities can be combined with proper protection for those who use and pay for local services. Consultation with local people must be an integral feature of the new local government finance system – on council tax increases, on the use of the supplementary local business rate and on the long-term revenue implications of capital investment decisions.
7.6 We can deliver greater predictability and stability for general grant by giving individual local authorities the same three-year settlements that Government departments get. Local authorities, in turn, must be prepared to extend the benefits of greater predictability and stability to other stakeholders. Schools and other budget-holders are entitled to know their budgets set in advance. Taxpayers would welcome more advance warning of council tax increases.
7.7 This green paper sketches out a new and more realistic relationship between central Government, local authorities and other stakeholders. But it also raises a number of questions. In particular:
Reforming the revenue grant system
(1) Under future approaches to grant distribution, what can be done to explain the system and the decisions it produces to authorities and to other stakeholders?
(2) How do we strike the right balance between predictability and stability of funding and the need to take account of changes in local authorities’ circumstances? In particular, how should floors and ceilings be set?
(3) What can local authorities do to extend the benefits of predictability and stability to schools and other budget holders, to community partners and to council taxpayers?
(4) Should we extend the moratorium on SSA formula changes, to allow time to put a new grant distribution system in place?
(5) Should we introduce more judgement into the formulae used to distribute revenue grant?
(6) Should we introduce ‘safety valves’? How should they work?
(7) Should the grant distribution decision take account of local authorities’ own plans?
(8) If plans are taken into account, what more can the Government do to reassure authorities that it will give due weight to national and local priorities?
Capital investment and borrowing
(9) Should we abolish the requirement that local authorities need Government permission to borrow?
(10) Are the safeguards that we have proposed sufficient to protect national and local taxpayers, and to promote private finance deals and partnership working?
(11) How can we ensure that local people are properly consulted about investment plans and understand their long-term financial implications?
(12) How should we allocate revenue grant to support capital investment?
Taxes and charges
(13) Should there be a statutory revaluation cycle for council tax?
(14) How can council tax bills be made clearer?
(15) Do our proposals for implementing the supplementary rate provide adequate safeguards for local business, whilst being reasonably simple to operate?
(16) What are the merits of the specific suggestions for business rate reliefs and for a local tax reinvestment programme? Do they risk making the tax too complicated?
(17) Do our proposals on business rate revaluation secure greater predictability and stability for the stakeholders? Are they fair? Are they workable?
Different services and authorities
(18) Education
- How can we ensure that funding is properly matched to the separate responsibilities of local authorities and schools?
- How can we ensure that the funds allocated by central Government for education are used for that purpose?
- How can we ensure a fair allocation of funding between authorities and between schools in authorities to reflect pupil needs?
(19) Should we have a single local government finance system for all authorities? Or should it be customised for police authorities, fire authorities, parish or district councils?
Further comments
(20) Are there any other measures we should take in pursuit of our aims as given in paragraph 1.3?
Sending us your views
This green paper seeks your views on the Government’s aims and proposals for modernising local government finance in England.
We invite responses by Friday 8 December 2000. Please let us know if you wish your response to remain confidential.
Send written responses to:
Kate Cassidy
LGF1
DTLR
5/F6, Eland House
Bressenden Place
London SW1E 5DU
You can also e-mail electronic responses to:
lgfinance_greenpaper@dtlr.gov.ukFurther copies of this document
can be obtained from:DTLR Free Literature
PO Box 236
Wetherby
West Yorkshire
LS23 7NB
Tel: 0870 1226 236
Fax: 0870 1226 237
Textphone: 0870 120 7405
E-mail: dtlr@twoten.press.net
Published 19 September 2000
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