DPRR/12-13/13
LOCAL GOVERNMENT FINANCE BILL
Memorandum by the Department for Communities and Local Government to the Delegated Powers and Regulatory Reform Committee
INTRODUCTION
1. This Memorandum sets out the provisions in the Local Government Finance Bill which confer delegated powers on the Secretary of State; explains why the power has been taken and the nature of, and the reason for the procedure selected.
BACKGROUND
2. The Bill seeks to make changes to the current system of local government finance. The need for a review of local government finance was set out in the Coalition’s Programme for Government, and in the consultation, published in July 2011, entitled ‘The Local Government Resource Review: Proposals for Business Rates Retention’. The Local Government Resource Review considered the need to reduce the current dependence of local authorities on central government funding, in order to strengthen local accountability, and to provide a financial incentive to local authorities to promote business growth in their area. The Bill makes provision for a new non-domestic rates retention scheme for authorities.
3. The Bill also seeks to implement a commitment made by the Government, in the Spending Review 2010, that it would localise support for council tax from the financial year 2013-14, replacing council tax benefit. Each billing authority in England will be required to adopt a council tax reduction scheme for the financial year 2013-14. The scheme will specify the council tax reductions which the billing authority considers should apply in relation to its area for that year.
4.Finally, the Bill makes certain technical changes to the existing council tax regime.
DEVOLUTION
- The Bill extends to England and Wales only. However, the provisions regarding the new non-domestic rates retention scheme, the localisation of council tax benefit and technical changes to council tax only apply to England.
PROVISIONS CONFERRING DELEGATED POWERS
Non-domestic rating
- Clauses 1 – 8: The first eight clauses of the Bill make amendments to primary legislation (the Local Government Finance Act 1988, the Local Government Finance Act 1992, the Local Government Act 2003, and the Greater London Authority Act 1999) and introduce Schedules 1, 2 and 3 to the Bill which make further amendments. Schedule 1 to the Bill amends the Local Government Finance Act 1988, by inserting a new Schedule 7B on local retention of non-domestic rates. Schedule 2 to the Bill amends provisions about revenue support grant in England, and Schedule 3 makes further amendments relating to local retention of non-domestic rates.
- Each of clauses 1 – 8 (see clauses 1(6), 2(2), 3(13), 4(4), and 5(3)) state that the amendments made by it and / or the Schedule it introduces have effect in relation to the financial year beginning with 1 April 2013 and subsequent financial years.
Clauses 1(7), 2(3), 3(14), 4(5) and 5(4):
Powers conferred on: Secretary of State
Powers exercised by: order
Procedure: none
- The above subsections of clauses 1 - 5 enable the Secretary of State by order to amend clauses 1(6), 2(2), 3(13), 4(4), and 5(3) respectively, by substituting a later financial year than the financial year beginning with 1 April 2013.
- These powers are needed to ensure that the amendments made by clauses 1-5, and those made by Schedules 1, 2 and 3 to the Bill, can be commenced appropriately. Subject to Parliamentary approval the Government intends the amendments to have effect in relation to the financial year beginning with 1 April 2013 and subsequent financial years. However, if Royal Assent is received too late to enable this to happen it will be necessary to alter the commencement of the amendments so that they apply in relation to a later financial year.
- Clauses 1(7), 2(3), 3(14), 4(5) and 5(4) of the Bill are commencement provisions. As is usual for powers of commencement, the exercise of these powers is not subject to any Parliamentary procedure.
Council tax
Clause 9: Council tax reduction schemes
- Clause 9 substitutes a new section 13A into the Local Government Finance Act 1992 (“the 1992 Act”). The new section 13A combines the existing power for a billing authority to reduce council tax on a case-by-case basis or by reference to a class of case with a new duty to reduce amounts on the basis of a council tax reduction scheme to be made by the billing authority in England, or in relation to Wales, by a person or body specified by Welsh Ministers in regulations. Clause 9(2) introduces Schedule 4 (amendments relating to council tax reduction schemes) and clause 9(4) provides that each billing authority in England must make a council tax reduction scheme by 31st January 2013; and that the first financial year to which that scheme relates must be the year beginning with 1st April 2013 (“2013-14”).
Subsection (1)(2B):
Powers conferred on: Welsh Ministers
Power exercised by: order
Procedure: affirmative
- This subsection provides the Welsh Ministers with the power to require specified persons or authorities in Wales to make a council tax reduction scheme. Clause 9(1)(2C) introduces Schedule 1B which provides for the matters which the Welsh Ministers can prescribe for within any regulations made under subsection (1)(2B).
- This power is needed to ensure that the Welsh Ministers are able to secure the replacement of the Council Tax Benefit system in Wales.
- The National Assembly for Wales procedure selected for these regulations is the affirmative procedure. The substance of the council tax reduction schemes in Wales is to be introduced by way of subordinate legislation and the affirmative procedure will ensure the substantive proposals for the schemes are subject to the appropriate level of scrutiny, without requiring Parliament to scrutinise the detail of arrangements during the course of the Bill.
Subsection (5):
Power conferred on: Secretary of State
Power exercised by: order
Procedure: none
7. This subsection enables the Secretary of State by order to amend clause 9(4) by substituting a date other than 31st January 2013, a financial year other than that beginning with 1st April 2013, or both.
8. This power is needed to ensure that the provisions concerning council tax reductions schemes can be commenced appropriately. Subject to Parliamentary approval the Government intends to commence council tax reduction schemes in relation to 2013-14. However, if Royal Assent is received too late to enable this to happen it will be necessary to alter the commencement of those schemes so that they apply in relation to a later financial year. The powers in clause 9(5) enable that to happen.
9. Clause 9(5) is a commencement provision. As is usual for powers of commencement, the exercise of the power is not subject to any Parliamentary procedure.
Clause 10: Power to determine further discounts for certain dwellings
10. Clause 10 inserts new sub-sections (4A and 4B) into section 11A of the 1992 Act, giving billing authorities a power to specify the discount on the amount of council tax payable, under section 11(2)(a) of the 1992 Act, for certain dwellings.
11. Section 11A of the 1992 Act already contains a power for the Secretary of State to prescribe classes of dwellings by regulations, and this power will be exercisable also in relation to new subsection (4A). The existing procedure for such regulations is the negative procedure, and no change is made to this.
Clause 11: Power to set higher amount for long-term empty dwellings
12. Clause 11 inserts a new section 11B into the 1992 Act, which enables a billing authority in England, in any financial year, to make a determination that the amount of council tax payable in respect of long-term empty dwellings, may be increased by a percentage of not more than 50 as it may so specify, and that the discount under section 11(2)(a) of the 1992 Act shall not apply to those dwellings. The determination may relate to all chargeable dwellings in a billing authority’s area or to only those in such part of its area as it may specify in the determination.
Sub-section (2) of the new section 11B of the 1992 Act:
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
13. Sub-section (2) enables the Secretary of State to prescribe one or more classes of dwelling in relation to which a billing authority may not make a determination under the new section 11B(1) of the 1992 Act.
14. This power is required to ensure that there is the possibility to prescribe exceptions where matters relating to the dwelling or other circumstances mean that it would not be suitable for an increased council tax payment to be levied in respect of the long-term empty dwelling.
15. The negative procedure is considered appropriate for these regulations, in line with other similar powers in this part of the Act.
Clause 13 - Regulations about powers to require information, offences and penalties
16. Clause 13 inserts new sections 14A to 14D into the Local Government Finance Act 1992.
New Section 14A of the 1992 Act
Power conferred on: Secretary of State and Welsh Ministers
Power exercised by: regulations
Procedure: affirmative
17. New section 14A of the 1992 Act enables the Secretary of State and Welsh Ministers to make regulations providing for persons to exercise powers to require the provision of information and require a person to make arrangements to permit access to their electronic records for prescribed purposes relating to a person’s liability to pay council tax (new section 14A(1) and (7))
18. Provision may also be made in regulations about arrangements for access to a person’s electronic records for purposes relating to a person’s liability to pay council tax when arrangements are entered into otherwise than under a requirement mentioned in section 14A(1)(b) (new section 14A(2))
19. Regulations may include provision about the persons by whom these powers may be exercised and who may enter into these arrangements and may, in particular, provide billing authorities with the power to authorise persons to exercise to these powers or make these arrangements (new section 14A(3)).
20. Regulations made under this new section, may in, particular include provision equivalent to the provisions of the Social Security Administration Act 1992 listed in section 14A(5), with modifications (new section 14A(4)). It is intended that the powers under section 14A will be used to make regulations enabling local authorities to authorise officers to exercise powers equivalent to those that may currently be exercised in relation to council tax benefit under the provisions listed.
New section 14B of the 1992 Act
Power conferred on: Secretary of State and Welsh Ministers
Power exercised by: regulations
Procedure: affirmative
21. New section 14B of the 1992 Act enables the Secretary of State and Welsh Ministers to make regulations providing for the creation of criminal offences in prescribed circumstances.
22. The intention is to create criminal offences equivalent to those that apply in relation to council tax benefit under the Social Security Administration Act 1992. New section 14B(9) therefore provides that the regulations may make provision equivalent to those listed in new section 14B(10) with modifications.
23. New section 14B(2) to (7) set out the penalties that may be applied where an offence has been committed. The penalties can be no greater than is provided for in respect of the equivalent offence in the Social Security Administration Act 1992. Regulations may also include provision about matters such as defences to an offence and procedure and evidence in relation to such offences (see new section 14B(8)).
New section 14C of the 1992 Act
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: affirmative
24. New section 14C of the 1992 Act enables the Secretary of State and Welsh Ministers to make regulations giving billing authorities powers to issue penalties in prescribed circumstances (new section 14C(1) and (2)). The regulations can only provide that a penalty may be imposed as an alternative to criminal proceedings being taken against a person in respect of the act or omission to which the penalty relates or where a person has not yet been charged with an offence in respect of that act or omission (new section 14C(3).
25. Regulations made under this section may, in particular, make provision equivalent to the provisions of the Social Security Administration Act 1992 listed in new section 14C(6), with modifications. The intention is to give authorities the power to impose penalties in circumstances similar to those in which a penalty may be imposed in relation to council tax benefit under these provisions.
26. Council tax benefit is to be abolished and replaced with council tax reduction schemes. The Government therefore wants to ensure investigatory powers for local authorities, offences and relevant penalties to tackle fraud in relation to council tax benefit under social security legislation can be made available to local authorities in relation to council tax. In particular, the Government is concerned that if local authorities have significantly fewer powers to investigate and prosecute fraud in relation to the new reduction schemes than they currently have in relation to council tax benefit, this may result in an increase in fraudulent activity, placing greater financial pressures on authorities.
27. The powers set out in new sections 14A to 14D are therefore intended to ensure local authorities may be given powers equivalent to some of those they may currently exercise in relation to claims for council tax benefit. The Government has, however, decided that rather than simply reintroducing all the existing powers local authorities currently have to tackle council tax benefit fraud, we will work with local authorities to identify those powers and offences they will really need in the future.
28. It is therefore considered appropriate to make provision for the powers that may be exercised by authorities and the creation of criminal offences in regulations. This will allow us to ensure powers given to authorities are appropriate and proportionate and that we avoid creating unnecessary criminal offences.
29. The Regulations will be subject to the affirmative procedure, and will therefore be subject to the appropriate level of Parliamentary scrutiny.
Clause 15: Power for HMRC to supply information for purposes of council tax
30. Clause 15 inserts new paragraphs 15A to 15D into Schedule 2 to the 1992 Act. This provides powers for officials of Her Majesty’s Revenue and Customs (HMRC) to supply information held by HMRC to a qualifying person for prescribed purposes relating to council tax. A qualifying person is a billing authority in England and Wales, a local authority in Scotland or a person authorised to exercise functions on behalf of such an authority or providing services to it relating to council tax.
New paragraph 15A(1): Power for HMRC officials to supply information for prescribed purposes relating to council tax in England
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
31. The Secretary of State may prescribe in regulations the purposes relating to council tax for which information may be supplied to a qualifying person in England by a Revenue and Customs Official under this paragraph (new paragraph 15A(1) of Schedule 2 to and section 116(1) of the 1992 Act). Information supplied under this paragraph for a prescribed purpose may be used for another prescribed purpose relating to council tax and may be supplied to another qualifying person for a prescribed purpose relating to council tax.
32. These powers are required to enable restrictions to be placed on the purposes for which information held by HMRC may be supplied and used by local authorities. It is intended that these powers will be used to ensure that information held by HMRC may only be passed on to local authorities when needed for the efficient administration of council tax.
33. We consider it appropriate to set out the detail of the purposes for which information may be supplied by HMRC in regulations since it is clear on the face of the Bill that information may only be supplied for purposes relating to council tax. The negative procedure is considered appropriate as these are matters of detail. This is also consistent with the procedure for making regulations under similar powers in section 131 of the Welfare Reform Act 2012 which enables the Secretary of State to supply information to local authorities for prescribed purposes relating to council tax.
New paragraph 15B(1): Power for HMRC officials to supply information for prescribed purposes relating to council tax in Wales
Power conferred on: Welsh Ministers
Power exercised by: regulations
Procedure: negative
34. The Welsh Ministers may prescribe in regulations the purposes relating to council tax for which information may be supplied to a qualifying person in Wales by a Revenue and Customs Official under this paragraph (new paragraph 15B(1) and (5) of Schedule 2 to the 1992 Act). The National Assembly for Wales procedure selected for the making of these regulations is the negative resolution procedure. It is considered that the negative resolution procedure is the appropriate form of Assembly scrutiny for the exercise of this power, particularly in light of the fact that new paragraph 15B(6) requires the consent of the Commissioners for Her Majesty’s Revenue and Customs to the making of such regulations.
New paragraph 15C(1): Power for HMRC officials to supply information for prescribed purposes relating to council tax in Scotland
Power conferred on: Scottish Ministers
Power exercised by: regulations
Procedure: negative
35. The Scottish Ministers may prescribe in regulations the purposes relating to council tax for which information may be supplied to a qualifying person in Scotland by a Revenue and Customs Official under this paragraph (new paragraph 15C(1) and (5) of Schedule 2 to the 1992 Act). New paragraph 15C(6) requires the consent of the Commissioners for Her Majesty’s Revenue and Customs to the making of such regulations.
General
Clause 16(1): Power to make transitional provision
Power conferred on: Secretary of State
Power exercised by: order
Procedure: negative
36. Clause 16(1) enables the Secretary of State by order to make such transitory or transitional provision, or savings provisions, as the Secretary of State considers appropriate in connection with the coming into force of any provision of the Bill.
37. This power is necessary to ensure that the necessary arrangements for the transition between different statutory regimes can be made as the new provisions in the Bill are commenced.
38. Orders under this section are subject to the negative resolution procedure because they will be limited to ensuring the transition between the present statutory position and the new provisions in the Bill.
Clause 16(2): Power to make consequential provision
Power conferred on: Secretary of State
Power exercised by: order
Procedure: affirmative and negative (as set out below)