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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 13/06/2006
Local Authority Business Growth Incentives (LABGI) Grant



APPENDIX D
Waverley Borough Council

EXECUTIVE – 13TH JUNE 2006

REFERRED FROM THE CORPORATE OVERVIEW AND SCRUTINY COMMITTEE
30TH MAY 2006

Title:
LOCAL AUTHORITY BUSINESS GROWTH INCENTIVES (LABGI) GRANT
[Wards Affected: All]
Summary and purpose:

In the budget report to Council in February 2006, Members were informed of Waverley’s award of Business Growth Incentives grant of 435,000 for the calendar year 2005. Members agreed to pay the money into the Revenue Reserve Fund and requested that officers report back to a future meeting with more details. The Corporate Overview and Scrutiny Committee, at its meeting on 30th May 2006, made observations on this award of grant.

Environmental implications:

There are no direct environmental implications as a result of the recommendation of this report.

Social / community implications:

There are no direct social/community implications as a result of the recommendation of this report. However, the Government recognise that local authorities bear many of the costs of economic development: greater congestion on local transport, impact on the local environment; and also potentially increased costs of other local authority services including housing and community safety.

Local business growth does also have positive implications for the community in terms of increased employment.

E-Government implications:

There are no direct e-Government implications arising from this report.

Resource and legal implications:

There are no direct legal implications as a result of the recommendation of this report. Resource implications are contained throughout the report.

Background

1. In July 2005 the Government announced outline details of its new local authority incentive scheme for business creation. Whilst some detail was given at this stage, it was not possible for local authorities to calculate how much grant they could receive as the valuation figures, which form the basis of the calculation, were not to be made available until February 2006.
2. The Council received an email from the ODPM on 8th February and, later that day, the Government published the final details of the scheme on its website, along with a schedule of the amounts awarded to individual local authorities. The payment was made on 23rd February 2006.

3. The headlines of the announcement are as follows:

- Over 250 authorities in England benefit in 2005-06
- Over 105million granted in 2005-06
- In the three years 2005-06 to 2007-08 inclusive, nearly 1billion will be granted under this scheme

4. More information of the scheme calculation was added to the website on 28th February. The web address is www.local.odpm.gov.uk/finance/labgi.htm.

The Calculation of Waverley’s Grant

5. The following are the key elements of the grant calculation:

The increase in an authority’s rateable value between 31st Dec 2004 and 31st Dec 2005 is calculated by the ODPM from Valuation Office Agency (VOA) rating lists;
Each authority has a ‘floor’ – the target level of rateable value growth that must be reached to gain from LABGI- this ‘floor’ is calculated from a baseline target level of growth minus a national adjustment factor (NAF);
Authorities’ growth baselines were calculated using a National Historic Growth Model which was taken from rateable value figures supplied by the VOA for 1995 to 2003. Each authority was placed in one of eight groups, 1. being authorities with low growth, 8. being authorities with high growth;
A scaling factor is then applied to an authority’s growth in rateable value above the floor to obtain the value of the grant;
There is a ceiling set within the grant calculation which sets the maximum payment an authority can receive in any year – the ceiling is based on a modified form of the Environmental, Protective and Cultural Services (EPCS) part of Formula Spending Share (FSS) from the 2005/06 Local Government Finance Settlement;
In two-tier areas, LABGI grant is shared out according to each tier’s contribution to the modified EPCS FSS (approximately two-thirds to the lower tier level).

6. In particular, Waverley had a positive increase in rateable value over 2005 and, as it was placed in the lowest baseline group, group 1, with a negative ‘floor’ it had an even greater increase in ‘growth above the ‘floor’’. Waverley’s ceiling capped the amount of grant it received in 2005/06 at approximately 435,000.

7. The level of an authority’s grant in 2006/07 will depend on the variables listed above, however its starting rateable value is likely to be re-based depending on whether it grew above or below its floor in 2005. We are awaiting clarification of these variables for 2006. In general, if an authority has no growth above its floor it will receive no LABGI grant. There has been no indication that LABGI grant can be negative.

8. In addition, the Government is conducting a review of the scheme.

Other Surrey Authorities

9. The following list shows the amount of LABGI grant received by Surrey County Council and the Surrey districts for 2005/06:

o Surrey County Council 825k
o Waverley 435k
o Elmbridge 388k
o Surrey Heath 292k
o Tandridge 263k
o Woking 72k
o all other districts NIL

10. The graph at Annexe 1 shows, for 2005, the comparison between Surrey districts’ % growth over the period of the Historic Growth model, their floor % growth and the % increase in their rateable value over 2005. If the % increase in rateable value over 2005 is compared to the floor % growth this will give an indication of the level of grant receivable. In general, a greater % increase in rateable value when compared to the % growth floor will lead to a greater LABGI grant awarded (subject also to the ceiling imposed).

How the Grant can be Spent

11. The grant in 2005-06 is not ring-fenced and is paid under Section 31 of the Local Government Act 2003. According to the Government’s guidance, ‘it can be spent on Councils’ own priorities’. The award of this grant does not have an adverse impact on any other Government grants. Future Years’ Grant 12. There is a chance that the scheme will change for future years. However, with the Government intending to increase the size of the pot, and with an anticipated increase in ceilings for 2006, it is hopeful that Waverley will get some grant in 2006-07 and 2007-08, although the precise amount is uncertain. Waverley’s grant will depend on whether its rateable value changes during 2006, the ceiling capping the level of grant receivable and whether the calculation of grants under the scheme is changed as a result of the Government’s review. Currently, the Government is silent on its plans for this scheme beyond 2007-08.

Conclusions on the 2005-06 Grant

13. Given the uncertainty about the future level of any grant that Waverley may receive, and the known future pressures on Waverley’s budget, it is proposed to keep the 2005-06 grant in the Revenue Reserve Fund and consider as part of the 2007-08 budget process.

Observations of the Corporate Overview and Scrutiny Committee

14. The Committee acknowledged that there had been a lack of government guidance on the details of this incentive scheme and that there was uncertainty about the Council's ability to enhance the likelihood of achieving the funding again. To that end, it was agreed that caution should be taken over how the money should be spent and that it would be prudent to keep the money in the Revenue Reserve Fund, as agreed by the Council in February 2006, for the time being.


Recommendation

It is recommended that the Local Authority Business Growth Incentive Grant for 2005/2006 be kept in the Revenue Reserve Fund, to be considered further as part of the 2007-2008 budget process.

Background Papers (DoF)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.

CONTACT OFFICER:

Name: Paul Wenham Telephone: 01483 523238

E-mail: pwenham@waverley.gov.uk


Comms/exec/2006-07/034