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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 30/09/2003

FINANCE CONSULTATIONS



Summary & Purpose
This report informs members of a series of consultation papers on proposals to change the local government finance system and the Executive is asked to request the Director of Finance to prepare responses in conjunction with the Portfolio Holder.

Quality of Life Implications
Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe Communities
Local Economy
Natural
Resource Use
Pollution
Prevention and Control
Biodiversity
and Nature
Local
Environment
Social
Inclusion
Safe, Healthy
and Active
Communities
Local
Economy
N/A
N/A
N/A
N/A
N/A
N/A
N/A


APPENDIX R
WAVERLEY BOROUGH COUNCIL

EXECUTIVE – 30th SEPTEMBER 2003
_________________________________________________________________________
Title:
FINANCE CONSULTATIONS
[Wards Affected: N/A]
_________________________________________________________________________
Summary and purpose:

This report informs members of a series of consultation papers on proposals to change the local government finance system and the Executive is asked to request the Director of Finance to prepare responses in conjunction with the Portfolio Holder.
_________________________________________________________________________
Quality of life implications – social, environmental & economic (sustainable development):
Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe, Healthy and Active Communities
Local Economy
n/a
n/a
n/a
n/a
n/a
N/a
n/a

E-Government implications:

There are no direct e-government implications.

Resource and legal implications:

The consultation papers will lead to significant changes to the local government finance system which will have resource implications for Waverley. These papers are outlined in this report and the draft Financial Strategy, as considered by the Corporate Overview and Scrutiny Committee, covers the implications to Waverley in more detail.
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Introduction and Background

1. In July 2002, the Executive was first informed of the potential implications on Waverley’s finances of the draft Local Government Bill, in particular in relation to the Government’s intention to ‘pool’ capital receipts. On 18th September 2003, the Local Government Bill became law and most of the changes proposed will be implemented with effect from 1st April 2004.

2. The detail of the proposed changes to the local government finance system was published in a series of consultation papers in August 2003. The impact of these changes is highlighted in the draft Financial Strategy and was discussed at the Finance Seminar on 22nd September and at the Corporate Overview and Scrutiny Committee on 23rd September. Each paper is outlined below.

Balance of Funding Paper

3. The ODPM Steering Group reviewing the balance of funding between local government and central government has invited local authorities to submit a short paper giving views on the issue. Currently, the average balance is 25% from local authorities and 75% from central government. The balance for Waverley is nearer 50/50. The review aims to consider the nature and priority of the issue and the options for change. It is expected that Waverley’s response will be on the same lines as the Council’s previous Town and Country Finance Issues Group (TACFIC) responses.

Capital Finance and Accounting Regulations

4. These regulations radically switch the control of local authority borrowing from central government to individual local authorities. Most of the current restrictions on borrowing will disappear and councils will be free to borrow provided that they can demonstrate that this is affordable, prudent and sustainable. Local authorities must have regard to the CIPFA Prudential Code for Capital Finance when setting and reviewing their affordable borrowing limit.

5. The other key issue in these regulations is the requirement for authorities to pool their housing capital receipts, including those which are debt-free such as Waverley. The Government will redistribute the pooled receipts according to its assessment of housing need. The mechanism for distribution is still unclear. As co-chair of the Capital Receipts Group, Waverley has lobbied the Government on this issue. Despite these efforts, the clause still remains in the Local Government Bill although transitional arrangements were agreed by the Government following the lobbying.

Support for Local Authority Capital Investment

6. Currently, revenue support for borrowing to fund capital expenditure is provided to local authorities through the Revenue Support Grant mechanism and is based on credit approvals issued. Under the new system, credit approvals will be abolished and this consultation paper invites views on whether support for capital investment should continue to be provided in revenue form or by capital grant. This will only be for the short-term, however, as the Government intends to move to a depreciation-based system in the longer-term.

7. As the deadline for response was prior to this meeting, the Director of Finance has responded, favouring capital grants. As discussed at the Finance Seminar, it is believed that this approach is more transparent and accountable as there will be a direct relationship between the grant and the investment made. Currently, the calculation is complicated and lost in the grant formula. This method would clearly show any benefit that Waverley might receive.

Recommendation

It is recommended that the Executive requests the Director of Finance to prepare a response to the consultation papers in conjunction with the Portfolio Holder.
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Background Papers (DoF)
There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.
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CONTACT OFFICER:
Name: Paul Wenham Telephone: 01483 523238
E-mail: pwenham@waverley.gov.uk

comms/executive/03-04/293