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central local partnership awayday
16-17 October 2003
CLP (2003) 5b
Local government finance:
LGA Statement
The LGA has expressed its concerns about the impact of:
1. The dip in provision in second year of SR2002 [2004/5].
2. The impact of the school funding guarantee, especially in authorities where grant will only equal the schools' passport increase and no grant is available for other service pressures, thereby transferring these pressures to the council tax.
3. The absence of provision for a number of pressures facing councils, including the schools' workforce agreement in 2004/5.
4. The intention to fund minimum floor grants by reducing grants to other authorities.
The LGA suggests that:
1. The Government takes all possible steps to reduce the proportion of ring-fenced funding so as to provide more local flexibility in managing the pressures of spending and the impact on council tax.
2. The minimum per pupil guarantee be implemented by local councils following consultation with their schools on the basis of the model that best matches the requirement of schools in their area.
The LGA presses that:
1. Sufficient resources are included in the grant settlement to support floor level increases in grant so they are not at the expense of other authorities.
2. The Government should acknowledge that: its figures for the financing of local authority expenditure in 2004-05 (set out in table 6.1 of Public Expenditure Statistical Analyses 2003 - Cm 5901) assume an increase in income from council tax of around 7%, and recognizes and publicly acknowledges that the settlement assumes an average increase in council tax of 7%; and that, while local and central government will work to keep council tax rises as low as possible, pressures on authorities may not be containable without tax increases above 7%.
3. Government notes the disappointment and frustration felt in local government at recent proposals to reintroduce capping and the impact of threats to "good" and "excellent" councils on relationship and trust.
Central Local Partnership - BW Orton Hall Hotel, The Village, Orton Longueville
Thursday 16 and Friday 17 October
Central Government
Deputy Prime Minister - Chair
Rt. Hon. Nick Raynsford MP, Minister of State, Office of the Deputy Prime Minister
Rt. Hon. Keith Hill MP, Minister of State, Office of the Deputy Prime Minister
(Session 2 & 3)
Rt. Hon. Lord Rooker, Minister of State, Office of the Deputy Prime Minister
(Session 2 & 3)
Yvette Cooper MP, Parliamentary Under Secretary, Office of the Deputy Prime Minister
(Session 2 & 3)
Phil Hope MP, Parliamentary Under Secretary, Office of the Deputy Prime Minister (Session 2 & 3)
Rt. Hon. Charles Clarke MP, Secretary of State, Department for Education and Skills (Session 1)
Rt. Hon. Paul Boateng MP, Chief Secretary to the Treasury
Rt. Hon. Alun Michael MP, Minister of State, Department of Environment, Food and Rural Affairs
Hazel Blears MP, Minister of State, Home Office
Dr Stephen Ladyman MP, Parliamentary Under Secretary, Department of Health
Tony McNulty MP, Parliamentary Under Secretary, Department of Transport
Chris Pond MP, Parliamentary Under Secretary, Department for Work and Pensions
Mavis McDonald CB, Permanent Secretary, Office of the Deputy Prime Minister
Peter Kane, Office for Public Service Reform
Alasdair McGowan, Number 10
Neil Kinghan, Director General, Local Government, Office of the Deputy Prime Minister
Bob Linnard, Director Local Government Finance, Office of the Deputy Prime Minister
Phillip Ward, Director, Local Government Performance Unit, Office of the Deputy Prime Minister
Kevin Lloyd, Head of Division, Local Government Legislation Division, Office of the Deputy Prime Minister
Mandy Skinner, Head of Division, Local Government Strategy Unit, Office of the Deputy Prime Minister
Ian McKenzie, Special Adviser, Office of the Deputy Prime Minister
Joan Hammell, Chief Of Staff, Office of the Deputy Prime Minister (Session 2 & 3)
Clare Buckee Deputy Prime Minister's Private Secretary
Anne Hemming, Office of the Deputy Prime Minister
Tracey Foster, Office of the Deputy Prime Minister
Debbie Kafka, Office of the Deputy Prime Minister
From the Local Government Association
Sir Jeremy Beecham
Sir Harry Jones CBE
Ian Swithenbank CBE
Dame Sally Powell DBE
Sir Sandy Bruce-Lockhart
Peter Chalke CBE
Cllr. Nick Skellett
Cllr. Simon Milton
Chris Clarke OBE
Cllr. Ruth Coleman
Cllr Milner Whiteman OBE
Dr Ruth Henig CBE
Sir Brian Briscoe
John Rees
Phil Swann
Sarah Wood
Marie Evernden
Apologies from:
Jacqui Smith MP, Minister of State, Department for Trade and Industry
Richard Carborn, Minister of State, Department for Culture, Media and Sport
Ian McCartney, Labour Party Chair
Session 1
Introduction
The Deputy Prime Minister welcomed the LGA and noted apologies from Ian McCartney, Richard Caborn, [DCA] and Jacqui Smith. Charles Clarke and Paul Boateng had been delayed so the agenda would be taken in a different order.
Fire
The Deputy Prime Minister said that during the past few months ODPM and the LGA had worked closely together to ensure that the modernisation agenda moved forward positively. Both Government and the LGA were working to implementation plans that were closely aligned.
Jeremy Beecham agreed and said that although negotiations were intensive they were going reasonably well and he expected the FBU to accept that the full pay increase would not be paid with effect from 7 November. Media speculation was, however, not helping the process.
Sandy Bruce-Lockhart said that more work would be needed to arrive at a view of the scope to make the necessary efficiency savings.
Nick Raynsford said that most authorities should be able to make savings but agreed that for the transformation of the Fire service to be successful continuing strategic discussion between central and local government would be required. It was proposed that an additional Central Local Partnership Sub Group should be established for this purpose.
Supporting People
The Deputy Prime Minister updated the group on the announcement that Yvette Cooper had made earlier in the day on funding for the Supporting People programme. The main points to note were that:
・There will be a grant allocation of £1.8bn for England for the first year of the programme. Officials will be writing to local authorities individually to confirm allocations for 2003-04;
・This sum represents a significant and rapid increase in expenditure in the sector. Data submitted by authorities last December had put the figure for the Supporting People pot in England at £1.4bn. In all, there are now an estimated 250,000 units of housing support compared to fewer than 100,000 units estimated in 2000.
・An independent review has been set up to gauge how the funding is being utilized. The review will will inform local authority budget allocation decisions for the next financial year. The review would be led by Eugene Sullivan, Head of Public Sector Services at RSM Robson Rhodes.
・Government was fully aware of the importance of early decisions to authorities in planning their budgets for 2004-05, and that is why the review has been asked to report by Christmas. Government recognizes too that authorities have entered into contracts with providers and that the nature and level of these commitments must be taken into account in considering future funding.
Paul Boateng said that it was vital that Government understood how the resources were being spent. There were big increases in costs and large variations in services. The purpose of the review was to achieve a quantifiable and affordable budget. It would need help from local government.
Cllr Sir Jeremy Beecham welcomed the allocations and said that the review was timely. The LGA would wish to be involved.
Cllr Sally Powell said that there had been a very significant change in the estimates for the cost of the programme - there was additional support being given, particularly to people previously in bed and breakfast accommodation and pregnant teenagers.
Finance
Paul Boateng said that SR04 would be tight. Peter Gershon had been asked to undertake an efficiency review. There would be a review of the scope for more devolved decision-making with greater freedom to innovate within a more targeted performance management regime. The Voluntary and Community Sector (VCS) review would build upon the success of the cross cutting review in SR2002. He restated the Government's commitment to local government and to working with the LGA - the CLP was a good starting point for views to be fed into the process. As far as council tax was concerned, the view that there would be a 7% increase that had been attributed to the Treasury was not a forecast or an assumption but simply an extrapolation based on past trends.
Jeremy Beecham said that there had been significant increases in both revenue grant and capital allocations in recent years that were very welcome. He also welcomed the offer to be involved in SR04 but the LGA would need more clarity about how and when. He emphasised the importance of the Shared Priorities as a focus for crosscutting action. Councils faced significant pressures; authorities on floor increases would have to commit their entire grant to pass-porting for schools. Even with ongoing efficiency savings, there were significant pressures - superannuation, waste, licensing etc. Local Authorities were trying to keep Council Tax increases down to 6-7% but this would probably entail reduced expenditure on services and was exacerbated by the effect of ring fencing in reducing flexibility to manage budgets.
The Deputy Prime Minister acknowledged that there were pressures and that prioritising certain services for funding had consequences for others - this made it particularly important to try to limit the extend of additional burdens being placed on authorities.
Sandy Bruce-Lockhart welcomed the increase in resources. However, he felt that the public required a clear explanation as to why expenditure had risen. All Councils wanted to improve efficiency but the increase in council taxes was due to the mismatch between the pressure to spend, particularly on schools, and the overall grant increase. The public needed to understand the effect of policies which led to a situation in which council taxpayers were currently contributing 35% to council expenditure whereas in 1996 this had been about 25%. Similarly politicians needed to appreciate that the public mood had now changed and that there was no appetite for 12-14% increases, as evidenced by a recent MORI poll.
Milner Whiteman identified pressures arising from recycling targets, inadequate fee income from licensing and from searches of the land register which were significantly below the costs faced by councils.
Chris Clarke said that even with an assumed increase in council tax of about 7%, the effect of passporting and the gearing effect meant that the actual increases were much higher - an increase in spend of 2% became an increase in council tax of 8%. The Balance of Funding review as the opportunity to try to address the problem.
Simon Milton expressed concern about the continuing shortfall in fee income experienced by licensing authorities annually across the board. This currently amounted to some £2 million for his authority. If education funding was sacrosanct and it was not possible to increase council tax other services would have to take the strain.
Nick Skellett said that reduced ring fencing would assist councils to manage their budgets.
The Deputy Prime Minister said that he would follow up the issues raised about the effect of the Licensing Act and of the fees for land register searches.
Education
Charles Clarke started by reminding everyone of his July Statement where he had tried to be as open as possible. He emphasised that Central and Local Government needed to work together and identified some significant areas of progress: early announcements and long term settlements, earlier report from the teachers PRB, putting in additional resources to non-school budgets, better quality advice to schools on budget setting.
Charles Clarke hoped to be able to say something on per pupil guarantees during the next couple of weeks. It was acknowledged that the profiles of schools varied greatly and so the guarantee was expressed in per pupil terms with some headroom for LEAs. He intended to make announcements about additional resources to address historical problems for some schools but passporting remained an important principle. He wanted to work with local government in taking all of this forward but expressed concern that some councils had put out statements to schools warning of future difficulty.
Cllr Jeremy Beecham said that local and central government shared an obligation to manage expectations - an unrealistic expectation had built up among head teachers that all their resource needs would be met. He was also keen for there to be some options on the table to allow some flexibility for authorities. In particular, how would changes to the Fair Funding Formula be carried through - and would there be local options for the Pupil Guarantee rather than simply one centrally prescribed approach?
Peter Chalke reiterated that passporting of education funding was exacerbating the effects of other pressures in driving Council Tax increases.
Sandy Bruce-Lockart acknowledged both some of the recent changes would probably be helpful including the headroom allocation but expressed concern about wage costs and other pressures in education, including the LSCs and the effects of redistribution, which currently stood at £34 million in Kent and £37 million in Essex.
Simon Milton asked whether the guarantee would be supported by grant increases (not just provision through FSS) and whether or not the headroom could be spent on non-Education expenditure.
Charles Clarke explained that in changing the fair funding formula he wanted to arrive at a situation that would be clear to schools so he was in favour of offering one option to schools rather than a range. Some of the pressures on school budgets would be less for the coming year e.g. on pensions. Major workforce costs would be felt in 2005/06 and Learning Skills Councils (LSCs) would be working within the same per pupil guarantee. On redistribution, Government understood the pressures. The guarantee would be backed in grant not just FSS. The degree of flexibility on the use of the headroom money was not yet decided.
Nick Skellett said that special educational need costs were a significant pressure.
Charles Clarke acknowledged that SEN was always important but the priority was to stabilise the funding of schools. Where there were rising or falling rolls LEAs should make the judgement as to how the headroom allowances should be used. He recognized that some LEAs had a more discretionary approach whilst others were more formulaic.
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