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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 09/07/2002
Draft Response from Waverley Borough Council



The following are the comments of Waverley Borough Council on the draft Local Government Bill. These are drawn from the Bill itself, the explanatory notes to the Bill and the text of the White Paper, Strong Local Leadership – Quality Public Services.

Clause 10 (1a[ii]) – Capital Receipts
Providing affordable homes for the residents of Waverley is a key objective of Waverley Borough Council. For many years we have provided affordable homes within the constraints of the local government finance system through local housing associations. This has been extremely challenging given the Government’s capital receipt set-aside rules and the level of local house prices. The average price for all houses in the Borough in December 2000 was 220,317 and this has risen dramatically since that time. With recent price increases, a very modest family home now costs well over 190,000. This is well beyond the reach of teachers, police officers, nurses and other key workers.

In addition to the needs of ‘key workers’, there is a huge need for affordable housing in the Borough:

In March 2002, there are over 1,300 families and single people on the Council’s Housing needs Register
Over 580 households already living in Council or housing association homes are looking to transfer to another home
Each year some 400 households approach the Council as homeless or at risk of becoming homeless and are living in temporary accommodation
At any one time there are 130 households who are homeless and living in temporary accommodation
Over the last year only 370 council properties became available and of these 159, or 49%, were one-bedroom flats which are designated for people over 50 or the retired

To maximise the investment in affordable housing and improvements to the standard of its council houses, the Council focused its financial strategy on achieving a debt-free position. By applying sound financial management, this position was achieved at the start of 2001-02. Being debt free has allowed the Council to allocate 3.2m for 64 new affordable homes in 2001/02 and 2002/03, as well as increasing spending on the essential backlog of repairs on Waverley’s council homes.

In spite of this initial success and the potential to build on this in the future we were advised in the White Paper, Strong Local Leadership of the Government’s intention that debt-free authorities should not be exempt from the requirement to contribute a proportion of their HRA receipts to a re-distributive pool. In the explanatory notes to the draft Bill, it is stated that spending power can be redistributed to authorities in areas with
a greater need for new housing investment. As set out above, there is clearly a significant need for new housing investment in Waverley and it is the Council’s hope that the need for affordable housing is taken into account in the redistribution formula.

Clause 29 (1) – Formula Grant
This proposal, to merge RSG and redistributed NNDR, was not the subject of consultation in the Department of the Environment, Transport and the Regions’ (DETR) Green Paper on Local Government Finance (published September 2000); nor was the idea introduced in the local government white paper – Strong Local Leadership - Quality Public Services (published December 2001).

The proposal made in Clause 29 (1) is justified in the explanatory notes, on the grounds that it will “improve the intelligibility and transparency of the grant system”. It is difficult to see how it will make the grant system simpler. NNDR is already redistributed on a simple and transparent basis (every authority receives the same amount per head of resident population). The basis is so simple that the formula is set out in a few words in Schedule 8, Paragraph 9 of the Local Government Finance Act 1988. In contrast, the formula used to distribute RSG is extremely complex and determined by the Secretary of State. Should RSG and redistributed NNDR be merged, the resulting formula grant will be distributed by a formula likely to be almost as complicated as the existing standard spending assessment (SSA) rather than one as simple as the NNDR formula.

The explanatory notes to the bill refer to the merging of two grant streams. Nothing in the Local Government Finance Act 1988, or subsequent regulations, refers to redistributed NNDR as a grant. Redistributed NNDR is, as its name implies, a redistribution to local authorities of a national pool of business rate income, where before 1989 authorities would have set their own business rate and collected and kept such income locally.

The implementation of the proposal will break any link between what local businesses pay and what local authorities receive. The local government white paper – Strong Local Leadership - Quality Public Services said (in Part II Paragraph 8.4) that there was scope for more work and discussion on the balance between national and local taxes and the impact that this has on local authorities’ autonomy. It was our understanding that this discussion would include the option for business rates to become a locally raised tax again. Implementation of the proposal in Clause 29 (1) pre-empts that discussion.

The explanatory notes to the bill say that this proposal will have “no effect on the total amount of Government support and almost no effect on the amount of support which each authority receives”. Looking at current figures, there are six shire district authorities that would lose financial support if this proposal were already implemented. These authorities all currently have a negative RSG entitlement and therefore receive no RSG, but this has no impact on the amount of redistributed NNDR they receive. Under the proposal made in Clause 29 (1) the six authorities would have their entitlement to redistributed NNDR reduced.

There are several other shire district authorities that currently receive very small and decreasing amounts of RSG; these authorities fear that the proposal made in Clause 29 (1) will further erode their financial support.

Under current legislation all monies raised from NNDR are earmarked for local government and there must be a risk that ending the present arrangement may see some of that money being used for other purposes.

Clause 29 (2) - Formula Grant
There is confusion surrounding the issue of when arrangements for the funding of local authorities will change. This clause is very clear and states that the provisions set out in this chapter would have effect from 1 April 2004. However, local authorities are separately informed that the new formula (which the Secretary of State will use, under powers that would be given by Clause 31, to distribute “formula grant”) will be effective from 1 April 2003.

It is also disappointing that the details of the formula which will be used to determine local authorities’ funding from 1 April 2003 are not yet available and even when they are, there are concerns that there will be no exemplifications against which authorities can evaluate the impact of the proposals on their funding.

Clause 88 and 89 – HRA – Housing Benefit Subsidy
This proposal causes concern about the potential impact on the General Fund. The costs of granting rent rebates to the Council’s tenants will clearly fall on the General Fund so subsidy at any rate less than 100% will impact on the council tax payers. If subsidy is paid at 95% as is generally the case for rent allowances, the council tax payers may have to foot a 400,000 bill. The Council is extremely concerned on this issue and would welcome reassurance that rent rebates, if funded from the General Fund, will be fully funded from the exchequer.