Fourth Standing Committee on Delegated Legislation
Thursday 22 April 2004
[Janet Anderson in the Chair]
Limitation of Council Tax Precepts (Alternative Notional Amounts) Report (England) 2004-05
9.55 am
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope): I beg to move,
That the Committee has considered the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2004-05.
The report that I am presenting for the approval of the House is made under section 52C of the Local Government Finance Act 1992. It specifies alternative notional amounts for the 2003-04 budgets of local authorities that are affected by the fact that combined fire authorities are precepting for the first time in 2004-05. It also sets alternative notional amounts for the combined fire authorities.
The Government use alternative notional amounts—ANAs—when taking decisions about capping local authorities' budgets in 2004-05. Members will recall that the Government have given a clear message to authorities that they will cap excessive increases in council tax in 2004-05 if that proves to be necessary. We received budget information from all local authorities by 18 March, which we are now considering.
When the Secretary of State decides whether to use his capping powers, he must determine a set of principles to decide whether an authority's budget is excessive. Section 52B of the 1992 Act stipulates that one of the principles must be a comparison between an authority's budget requirement for 2004-05—the year under consideration—and the budget requirement for the previous year. Other principles, such as increases in council tax, may also be used.
Hon. Members may be aware that since last year there has been a change in the precepting status of combined fire authorites in England.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): Will the Minister confirm that the concept of the budget requirement for the previous year reflects the spend in the previous year and not the a priori budgeted intentions, which may be different from what the authority actually spent during the year?
Phil Hope: I shall come to that later, but I confirm that the budget requirement is the amount that the authority spends from its formula grant allocation and its council tax. Those two areas are calculated as the budget requirement set down in legislation.
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Mr. Nigel Evans (Ribble Valley) (Con): I am struggling with the interpretation of the word ''excessive''. How does the Minister interpret it? Is it twice the rate of inflation? Without a specific rate, it is like a speeding limit on the motorway; we will book people if they speed excessively without letting them know the exact speeding limit.
Phil Hope: The hon. Gentleman is jumping the gun. We are here not to discuss the capping of local authorities but to establish the ANAs for the previous financial year—2003-04—compared with this year so that we can make like-for-like comparisons. I shall explain all that in a moment. This statutory instrument establishes what those ANAs are specifically for. They are for those authorities in whose area a combined fire authority has been created that now has precepting powers.
Mr. Evans: What is excessive?
Phil Hope: This statutory instrument does not contain such a judgment. Judgments about whether or not a council has been excessive in its budget requirement or council tax will be made if and when we decide to cap such councils. We will have to decide that before the end of this month.
Mr. Hammond: Before the end of this week. [Laughter.]
Phil Hope: This statutory instrument establishes the basis on which the ANAs will be set. [Interruption.] I see that hon. Members may be considering whether they want a debate about the capping of certain councils. That is not a matter for this morning's debate. The decision whether or not to cap councils will have to be taken before the end of this month.
As I was saying, in 2003-04, the budget of a local authority with a combined fire authority in its area included an element for a contribution towards the expenses of that combined fire authority. In 2004-05, it does not. Instead, combined fire authorities have become major precepting authorities, and council tax is collected on their behalf by billing authorities. In taking decisions on capping, the Secretary of State has decided that notional adjustments should be made to the 2003-04 budgets to reflect the functional change brought about by the change in the precepting status of combined fire authorities in England. The point that I am trying to make is that that will allow like-for-like comparisons to be made with the 2004-05 budgets of combined fire authorities—the new bodies—and their constituent local authorities, which previously contributed in proportion to their council tax base.
Mr. Hammond: The Minister referred to the necessity of making adjustments to reflect changes in functions. In the last paragraph of the letter dated 11 December 2003 from the Office of the Deputy Prime Minister to authorities, Meg Green states:
''It is possible that Ministers may wish to make further proposals to calculate alternative notional amounts''
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in respect of non-fire authorities—again, to take account of adjustments in functions. Are the Government making such proposals in respect of areas of activity other than fire?
Phil Hope: The notional amounts in the report are for combined fire authorities, which we have established as precepting authorities. Therefore, the only authorities affected by the report will be combined fire authorities and their constituent authorities. No other authorities will be affected; our judgment is that that is not necessary.
Mr. Eric Martlew (Carlisle) (Lab): This may be nothing to do with my hon. Friend's Department, but can he tell us whether there will be an issue about police authorities?
Phil Hope: Yes. Matters relating to which authorities may be subject to capping are not for debate here. If we are to cap authorities, we must, by law, make an announcement before the end of April. The issue would be debated on the Floor of the House; it is not a matter for today. We are setting alternative notional amounts for combined fire authorities and the constituent authorities that are affected, but not for any other authorities, including police authorities.
Mr. Hammond: I understand perfectly that the report relates only to fire authorities and their constituent authorities, but it refers to the letter issued by the Department on 11 December. The letter refers to the possibility that Ministers may wish to introduce ANAs in respect of other changes of function. I simply ask the Minister to put the issue in context. Are Ministers intending to take similar steps in respect of areas of activity other than fire?
The Chairman: Order. There will be an opportunity for a wider debate on the subject. It may be helpful if we allow the Minister to complete his statement.
Phil Hope: To clarify the point, alternative notional amounts will not be set for authorities other than combined fire authorities and their constituent authorities. The functional change led to a structural change, which is why we are setting ANAs. We will not be setting them for other authorities—that is now absolutely clear.
Mr. Hammond: On a point of order, Ms Anderson. Was your last remark intended to prohibit further interventions during the Minister's statement?
The Chairman: Certainly not, Mr. Hammond. Hon. Members may want to clarify something that the Minister has said. However, there have been rather a lot of interventions, and there will be an opportunity for debate. As I said, it will be helpful to all members of the Committee if we allow the Minister to complete his statement.
Phil Hope: We have already consulted on the proposals, and the legislation requires that a report specifying ANAs be approved by the House. In case there is any doubt, let me make it clear that no authorities gain or lose funding as a result of ANA
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calculations. The report makes no actual adjustment to the level of grant that local authorities receive from central Government; it serves purely to allow a like-for-like comparison to be made between budgets in different years.
We consulted the affected authorities on our proposals between 11 December 2003 and 11 February 2004. Broadly speaking, the Government proposed that ANAs should be derived by a simple calculation. First, the fire authority ANA would be set by taking the budgeted payments of the constituent authorities to the fire authority in 2003-04. Secondly, a commensurate reduction would be made to the constituent authorities' budgets to set their ANAs, using the figures reported by constituent authorities in their budget returns for 2003-04.
We accepted a number of changes as a result of the consultation. First, we would use verifiable figures, where they existed, rather than budgeted ones to reflect actual supplementary payments. That would affect 10 authorities. Secondly, we would increase the ANA for North Yorkshire county council in recognition of the fact that part of its contribution payment was funded from fire pensions reserves. Thirdly, we would increase the ANAs for North Yorkshire county council, York city council and Lancashire county council in recognition of the fact that that part of their contribution payments was funded from a private finance initiative special capital financing grant. Fourthly, we would increase the ANA for Warrington to reflect a correction to the data submitted by the authority and, finally, we would produce an across the board uplift of the ANAs of all combined fire authorities to allow for the need to build up reserves.
An analysis of all the responses has been placed on the ODPM website. The report was sent to all 456 billing and major precepting authorities in England on 25 March, although, as annex A of the report shows, it affects only 89. Annex A specifies the ANAs for each billing authority and combined fire authority. Annex B sets out precisely how the ANAs were calculated.
To sum up, the report is part of the process that must be followed to enable the Secretary of State to compare local authorities' budgets between this year and last year.
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