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Paper 7A - 29 May 1998 Meeting 

ASSOCIATION OF HAMPSHIRE AND ISLE OF WIGHT AUTHORITIES

29 May 1998

MODERNISING LOCAL GOVERNMENT FINANCE

Report by the Policy Officer

RECOMMENDATION

That the response by the Chief Financial Officers be adopted by the Association as the joint response from the local authorities, subject to Members' comments.

1. The Government has called for responses to its three consultation papers on local government finance by 1 June. I attended a meeting of the Hampshire and Isle of Wight Chief Financial Officers' Association to discuss the HIOW Action Plan and also to discuss these consultation papers.

2. Individual member authorities have responded in some detail to the Government consultation. The Chief Financial Officers' Association, chaired by the Isle of Wight Treasurer, who is also this Association's Honorary Auditor, provides a succinct overall response which I would commend to this Association. It is set out in the Annex.

NICK GOULDER
Policy Officer

ASSOCIATION OF HAMPSHIRE AND ISLE OF WIGHT LOCAL AUTHORITIES

Response to the Government Consultations on the Future of Local Government Finance

The Association represents Hampshire County Council, the eleven District Councils of Hampshire, Portsmouth City and the Isle of Wight Unitary Authorities. The Association welcomes the Government's intention to revitalise local democracy. The three finance consultation papers represent a modest first step in this direction.

The Association urges the Government to consider the responses to all the "Modernising Local Government" consultation papers in their totality and to frame legislation in the same way, because there are many relationships and dependencies between them. In particular, in having regard to the degree of self determination in financial policies which should be allowed to councils, the accountability which will be provided by "Best Value" should be taken into consideration.

The Association would wish to make very strongly the point that whatever arrangements are eventually put into place for accountability, funding distribution of resources between authorities and "Best Value", the delivery of quality services will always be dependent on an adequate level of total resourcing. The shortfalls experienced in recent years should be addressed as soon as possible.

BUSINESS RATES

The Association supports the LGA's position. We believe that local authorities should have unfettered local discretion to set the non-domestic rate.

COUNCIL TAX

The Association believes that Council Tax does work and is generally accepted as a sound local tax which should not be subjected to any radical change.

However the Association does believe that Council Tax bands should be revised to cover a wider range of capital values. It is also felt that Councils should have discretion to tax second homes at the full rate. The Association believes that a revaluation is necessary in due course in order to allow for any relative shift in values between areas and to avoid the system becoming discredited by being perceived as by being based on outdated and possibly inequitable data.

The Association believes that any reserve capping powers should be used in only the most exceptional circumstances such as in the case of a failing council and should be linked also to "Best Value" criteria.

The Association believes that it is wrong in principle to have elections linked solely to budgets. It believes that altering the present electoral timetable would present no significant benefits but would result in severe impracticalities in relation to timescale and implementation of any budget changes. Furthermore where there are multi-tiered structures in any area, superimposed by precepting authorities there would be a potential blurring of responsibilities and therefore a lack of accountability.

It is the firm view of the Association that Council Tax benefits are, and should remain, a national responsibility.

CAPITAL FINANCE

Capital investment is a key element in service delivery rather than being a separate issue. It should be seen as an integral part of local government finance as a whole and consequently the Association feels that the only barrier to the capacity to invest should be the ability to meet the financial obligations thereby incurred. There are sufficient controls through the regimes of "Best Value", electoral accountability and the exceptional use of reserve capping powers to prevent abuse.

If however some variation of the existing system is to be retained a single pot for the allocation of funding is preferred provided there are sufficient resources within the system to make a single pot a meaningful size.

It is important to ensure that there is a positive incentive to rationalise capital assets. Accordingly there should be no prescriptive requirement to set aside a proportion of capital receipts for debt redemption. It is strongly felt that there is no justification for reducing credit approvals by 250 million in such an event, given the extent of capital needs and the reductions in capital spending which have taken place over recent years. For the same reason the "receipts taken into account" system is felt to be unduly burdensome and should be abolished without a corresponding reduction in credit approvals.

The existing Minimum Revenue Provision arrangements are seen as workable and widely understood. If, however they are to be replaced it should be on the basis of a non prescriptive code covering broad principles and with a general requirement of prudent financial management.

Finally, local accountability and the points made by the Association on capital finance are all consistent with a "level playing field" for all types of capital finance. Accordingly the Private Finance Initiative as a means of service delivery should be able to be adopted by a local authority if it is the most advantageous route in the circumstances of that authority.

29 May 1998

Last update: 08/09/2000
Author: Nick Goulder, Policy Manager

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