AGENDA ITEM 5
BOROUGH OF POOLE
CABINET
7thSeptember 2010
CONSULTATION RESPONSES:
The Code of Practice on Local Authority Accounting 2011/12
Local Government Finance Formula Grant Distribution 2011/12
Local Referendums to veto excessive council tax increases
1PURPOSE OF THE REPORT
1.1The purpose of this report is to outline and update Members on a number of consultations that are currently running between both the Government and Local Authorities and CIPFA and Local Authorities.
2DECISION REQUIRED
2.1It is recommended that Cabinet:
a)Give the Head of Finance delegated authority in consultation with the Leader to submit responses on behalf of the Council for the following consultations.
- The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12, response deadline 24th September 2010.
- Local Government Finance Formula Grant Distribution 2011-12 onwards, response deadline 6th October 2010
b)Note the proposal in the Code of Practice consultation and the suggested response to the specific question raised (section 3.2).
c)Agree theresponse to the Government consultation on ‘Local referendums to veto excessive council tax increases’ shown at Annex A.
3BACKGROUND
3.1Consultations Generally
There is no prescriptive requirement that the Council submit a response to any of the three consultations referenced above. Similarly there is no requirement that either the Government or CIPFA have any regard to the responses received.
Responses are not confidential and are a matter of public record. It is therefore an opportunity to record the Authority’s agreement, disagreement or areas where the practicalities give cause for concern.
3.2The Code of Practice on Local Authority Accounting in the UK 2011/12
This consultation mainly deals with technical aspects of accounting that do not actually impact on council tax payers’ funds but deal with the recording of items. In the main it is therefore anticipated that Members will consider it sufficient to delegate responsibility for the formal response by the Authority to the Head of Finance in consultation with the Leader.
There is however one area that may be of interest to Members and is referenced here for awareness and for an opportunity to agree the formal response.
There is a proposal that the existing note on remuneration of officers contained within the accounts is supplemented with the following:
‘Number of exit packages agreed (grouped in rising bands of £20,000 up to £100,000, and bands of £50,000 thereafter), analysed between compulsory and voluntary redundancy costs, pension contributions in respect of added years, ex-gratia payments and other departure costs’.
This requirement, whilst applying for 2011/12 will also be required to show the 2010/11 figures as, when a new requirement is introduced there is an automatic requirement for comparatives to the previous year.
The question is as follows:
Q.Do you agree with the proposal to require the disclosure of information in relation to exit packages? If not, why not? What alternatives would you suggest?
Suggested answer:
A.The Borough of Poole agrees to the disclosure of information in relation to exit packages. As such the disclosure is in accordance with the Council’s open and transparent approach to the delivery of local services.
3.3Local Government Finance Formula Grant Distribution 2011/12
The formula grant distribution system is concerned with the distribution of the grant received from central government known as the Formula Grant (it consists of revenue support grant and the redistribution of business rates).
The Formula Grant Distribution System was last reviewed before the 2008/09 local government finance settlement. This consultation provides options that could be introduced from 2011/12 onwards.
The system is complex and attempts to consider local authorities’ individual circumstances, their needs and their potential to raise resourceslocally, relative to all other councils which provide the same services, by reference to a number of mathematical formulae. The Relative Needs Formulae take account of an authority’s relative need by considering a number of factors which appear to explain variations in the cost of providing services.
The system also takes account of the fact that areas that can raise more income locally require less support from Government to provide services, and looks at authorities’ potential to raise resources through council tax relative to other councils.To ensure stability in the financing of local services, Government then sets a ‘floor’ or lower limit to any authority’s change in their Formula Grant allocation year-on-year.
The consultation document contains options for a number of components of the grant distribution system. These include some of the relative needs formulae, the balance of weight given to relative needs or resource, and possible improvements to the data used in the formulae.
There are sections containing options on each of these issues. Together (where appropriate) with illustrations of how each option would affect individual authorities. The Government believes that the options could be used to update the Formula Grant Distribution System.
The Government does caveat all of this by saying that the components of the new system may not necessarily be drawn from the list that is being consulted on. The Government has also been clear that the Spending Review will require tough decisions at both national and local levels and the proposals in this document do not prejudge the outcome of the Spending Review or other possible options.
Members are asked to delegate authority to the Head of Finance in consultation with the Leader to respond on behalf of Poole.
3.4Local Referendums to Veto excessive Council Tax increases
This consultation ends on the 10th September 2010 with the intention that if local referendums are introduced it is likely to be with effect from April 2012 (that is for the budget 2012/13).(this was per the press release – other commentary suggests 2013/14).
This is a proposal to allow local referendums to veto excessive council tax increases as an alternative to capping by central government. It proposes to replace the ‘capping’ legislation with a mechanism for the local electorate to vote on increases in council tax for any billing or precepting authority that breach a level set by the Government.
The level set by Government will be based upon a set of ‘principles’. These principles will be published at the same time as the provisional local government finance settlement – this means that the council will know the level of council tax increase which is deemed to be acceptable and therefore not requiring a referendum in December of the year preceding the budget year e.g. December 2011 for budget setting 2012/13.
The principles will require any authority planning an increase in excess of the pre-set Government level to prepare a ‘shadow budget’ at the maximum acceptable level. They will then be required, at the same time as the bills are sent to Council taxpayers, to send information setting out the 2 alternative Council Tax levels, together with polling cards, to every registered local elector. The required referendum must take place no later than the first Thursday in May and only one referendum is to be held in circumstances where excessive increases are set by more than one authority in the same geographical area, although there will be a separate vote based on each individual authorities element.
If the proposed rise in council tax were rejected (based on a simple majority approach), the relevant authority will be required to immediately adopt the shadow budget. The billing authority will be able to issue new bills immediately, offer refunds at the end of the year or allow credits against liability in the following year. However as per the existing legislation billing authorities will be required to refund or re-bill any local resident who requests this.
The application of council tax capping under the current regime uses as it base a revised position for the previous year which takes account of changes in functions, finance or structure by the application of what is referred to as ‘alternative notional amounts’ (ANA) reports. For example the government transferring a responsibility from another statutory body or moving funding from a specific grant into the formula grant process.
The new proposals do not see a need for such reports in future as local authorities will be able to explain the impact of any changes in the material they issue to accompany the referendum.
The consultation itself is specifically to seek views on the practicality and technical feasibility of the scheme, particularly from local authority practitioners.
Officers from within Financial Services and Legal and Democratic Services have contributed to the suggested response. There are 11 Questions plus an opportunity to make reference to any other issues. The full consultation is available on the Communities and Local Government website.
The suggested response is at Annex A.
4IMPACT ASSESSMENT
4.1The various consultations are the opportunity for the Local Authority to express any concerns it has over the issues covered within the documents.
There is no specific impact if the Authority does not respond but it is an opportunity to contribute to the debate over issues raised within the documents.
4.2The Government intend to take account of the proposal to allow local referendums to veto excessive council tax increases within the forthcoming Localism Bill to be laid before Parliament in the next Parliamentary session.
5.FINANCIAL IMPLICATIONS
5.1 There financial implications are as outlined within the report.
6LEGAL IMPLICATIONS
6.1There are no legal implications.
7RISK MANAGEMENT IMPLICATIONS
7.1There are no risk management implications.
8EQUALITY IMPLICATIONS
8.1There are no equalities issues.
9CONCLUSION
9.1Responding to the consultations provides the Council will an opportunity to influence Government strategy and policy.
E WILKINSON
CHIEF FINANCE OFFICER & HEAD OF FINANCIAL SERVICES
Contact Officer Adam Richens Head of Accountancy
Telephone: (01202) 63.3399
email:
Background Papers: Consultation paper on ‘Local referendums to veto excessive council tax increases’
Date:18th August 2010