Finance bulletin: 16 January 2012
Dear colleagues,
Last month saw the publication of the long-awaited Local Government Finance Bill, which sets out the most significant reforms to local authority funding in decades. The LGA has been arguing for a fair and simple funding system that gives councils greater financial autonomy, supports local public services and encourages economic growth. The latest proposals for the business rates retention scheme show that our action has resulted in movement in the right direction as the proceeds of growth are now set to be shared between councils and the Treasury. There has been less movement to address our strong concerns about the viability of the proposals for localising council tax benefit so we are intensifying our case for Government to allow councils to absorb the grant cut in as considered, flexible and cost-effective way as possible. The LGA will continue to press hard on both fronts as the Bill goes through Parliament and we are very keen to hear your views.
I know that as local authorities work to set their 2012-13 budgets, they are keeping an eye on their medium term financial planning as well. With a whole series of funding reforms set to be introduced in 2013, planning ahead has never been more challenging or more important. Our conference on 27 January, "Getting ready for April 2013", is a chance to discuss some of the key issues with your colleagues in the sector and leading thinkers. There is still time to register, but places are going fast.
LGA finance conference: getting ready for April 2013
Cllr Sir Merrick Cockell
Chairman, Local Government Association
Stories
Local Government Finance Bill
On 10 January, the Local Government Finance Bill received its second reading in the House of Commons. The Bill will implement the Government's policies of localising business rates and localising responsibility for council tax reliefs. We will continue to work to ensure that the views of councils continue to be heard as the Bill passes through Parliament.
The Bill's committee stage will begin on Wednesday, 18 January. We expect that the first part of the debate will focus on the business rates section of the bill, followed by a debate on the council tax benefit section on 24 January. The LGA will be proposing amendments to enable the full proceeds of business growth to be retained by local government and to give councils the flexibility they need to introduce changes to council tax support in a fair manner. For more information, keep an eye on our Parliamentary Bulletin page where you will also find more detailed summaries of all the debates mentioned.
In December, the Government also published responses to the original consultations on the Local Government Resource Review and Council Tax Benefit localisation.
Local Government Resource Review
Council Tax Benefit localisation
The LGA is analysing responses to the LGRR consultation and will produce information on this via the Finance Community of Practice in the near future.
Finance CoP (sign-in/registration required).
PFI Consultation
The Autumn Statement underscored the Government's continuing commitment to using private finance to fund the provision of public infrastructure, and on 1 December, the Treasury announced a consultation on reform of the Private Finance Initiative (PFI).
Reform of the Private Finance Initiative (PFI)
This consultation represents an important opportunity to air any criticisms and improvements that can made of PFI from a local authority perspective, and the LGA is working with Local Partnerships to collect evidence from local authorities about their experience with PFI. The response from Local Partnerships will discuss PFI from a technical perspective whereas the LGA's response will deal with the way the Government proposes to continue to regulate the local use of private finance in broader policy terms.
We are very keen to collate as much evidence as possible. If you would like to submit any evidence to contribute to either of these two responses please contact Tom Symons before 27 January 2012. The consultation closes on 10 February.
Icelandic banks
On 9 December, the Glitnir Winding Up Board confirmed that all local authority claims have been recognised as having priority creditor status. We expect a similar announcement from the Landsbanki Winding Up Board shortly. There are a number of technical issues still to be worked out in relation to distributions and we are working closely with both Winding Up Boards to represent member authorities' interests. Creditors who have already been recognised as having priority status received their first distribution from Landsbanki last month and the Board is in a position to pay a similar dividend to local authority creditors once priority status has been applied to them. The Glitnir Board is currently working on its distribution plan.
Community Budgets
On 15 December, the Prime Minister announced that £448 million would be made available to local authorities to fund a national network of Troubled Family coordinators. The Government will offer up to 40 per cent of the cost of helping these families to local authorities on a payment-by-results basis.
On 21 December, the Department for Communities and Local Government (DCLG) also announced the areas selected to take forward the Community Budget whole area and neighbourhood level proposals. Greater Manchester, Cheshire West and Chester, West London and Essex have been selected to draw up proposals for a Community Budget next year. Another ten areas have been selected to take forward the neighbourhood level community budget work. These smaller scale community budgets will give local residents greater control over service design and delivery so they work from a customer point of view.
Equal pay capitalisation
On 10 January, DCLG issued capitalisation directions totalling £200 million to 12 authorities for equal pay settlements in 2011/12. This will be very welcome news for the affected councils. Given the level of spending cuts that still lie ahead to be made in this Spending Review, the LGA will continue to press for local authorities to be allowed the full amount of capitalisation they think they need.
DWP Benefits Consultation
The Department for Work and Pensions (DWP) are currently consulting on amendments to Housing Benefit and Council Tax Benefit regulations to complement changes to the 104 week linking period in employment and support allowance. The LGA will be responding to this consultation and we would be grateful if councils could share their responses with us to ensure our response accurately reflects the views of the sector. Please send your responses to clive.harris@local.gov.uk before 30 January.
Sharing ideas
Approved Investment Strategies
Most authorities will be updating their approved investment strategies for 2012/13, and two recent developments may be of interest to colleagues.
Firstly, the LGA has been involved with the development of the Public Sector Deposit Fund (PSDF), a UK qualifying money market fund managed by CCLA Investment Management Ltd. The Fund's website offers complete and transparent information on the Fund's underlying investments and performance and also details of CCLA's views on the security of bank deposits and copies of detailed reports to the Fund's Advisory Board (chaired by the LGA's Director of Finance and Resources, Stephen Jones). The LGA is itself an investor in the PSDF and has an indirect ownership interest in CCLA through the Local Authorities Mutual Investment Trust.
Public Sector Deposit Fund website
Secondly, a blog focusing on offering investment, funding and risk advice to local authorities has now opened. (Please note – the LGA has no editorial or other involvement with this blog.)
Local Authority Treasury News and Discussion blog
Icelandic Sagas
One of the LGA's greatest achievements of last year was securing millions of pounds for member councils with deposits in the failed Icelandic banks. Stephen Jones, LGA Director of Finance, has spoken to first magazine about his team's work to retrieve £470m that councils thought they had lost forever.
Balancing the budget
Cllr Graham Chapman, Deputy Leader of Nottingham City Council, has shared his thoughts on five questions that councillors should ask their Chief Financial Officers during another tough budget setting cycle.
In the Communities of Practice
Finance Community of Practice
The Finance Community of Practice (CoP) is a private and secure online discussion forum which also hosts a number of important documents that relate to high profile financial matters in local government. The CoP is a great place to discuss important matters of the day with fellow finance professionals in the sector as well as with the Finance Team at the LGA. There are 200 members who are currently discussing topics such as the Resource Review, Council Tax Benefit Relocalisation and Academies Funding Transfer as well as much more. The LGA Finance Team manage the CoP and use it to create discussion, highlight events and place important documents on topics such as 'Understanding your authorities' baseline position in relation to LGRR' and 'CLG's interactive calculator for business rates re-localisation'.
If your role is finance related and you work in local government then please join the LGA Finance CoP today.
Finance CoP (sign-in/registration required)
In the media
Council taxpayers in England losing out on £2.6 billion in services because of Scottish funding formula
Council tax payers in England are losing out on billions of pounds of money for public services because of the unfair way Scotland's funding arrangements are calculated, according to the LGA. In letter to the Telegraph, LGA Chairman Sir Merrick Cockell criticises the formula as "grossly unfair, divisive, and outdated", adding: "The formula was just an over-simplistic way of settling the devolved countries' budgets with a minimum of interdepartmental negotiation and fuss. But now its unfairness and plain illogicality mean it is time to move on. Unlike every other part of the public sector, the Scottish, Welsh and Northern Irish governments get their money automatically."
Osborne to use £140 billion town hall pension pot to boost infrastructure
George Osborne is planning to use the £140 billion council pension fund to pay for new roads, bridges and homes. Local authority chiefs will meet Treasury officials this week to discuss how money held in 780 funds can be used for local projects. Sir Merrick Cockell, Chairman of the LGA said: "I think the timing is right. We can use the collective force of £140 billion to work for both the financial strength of pension funds and for local and national infrastructure needs. But we need to spread the risks and make sure the schemes are viable."
'Hard-up' councils have £11 billion stashed away in cash but they still want to increase taxes
The LGA rebutted claims that local authorities in England were "hoarding" almost £11billion in cash reserves after new figures were released by the Department for Communities and Local Government. Sir Merrick Cockell stressed that councils had to keep reasonable reserves for contingencies. He added: "Local authorities should be prepared to use money that is not earmarked for a specific project to help them cope with difficult financial times. However, capital reserves can only be spent once and cannot be considered a long-term solution to the unprecedented funding reductions councils are currently facing. Councils aren't simply sitting on vast reserves of untapped money. The majority of council reserves are already earmarked for specific purposes like paying for future capital investments, making redundancy payments, paying for insurance and meeting other long-term liabilities." This story also ran in The Telegraph.
Local Government Pensions back on track
National media covered talks on the Local Government Pension Scheme between Treasury Chief Secretary, Danny Alexander, Communities Secretary, Eric Pickles, LGA Chairman, Sir Merrick Cockell and representatives from Unison, Trade Union Congress and the GMB. The LGA media office issued a statement from the Chairman stating that: "The proposals and timescale set out are a sensible and reasonable way of achieving both the short-term financial targets and the long-term reforms set out in Lord Hutton's report on public sector pension schemes."
Events
LGA finance conference: getting ready for April 2013
27 January 2012 | London
Planning for growth – from rhetoric to reality
27 February 2012 | London
LGA annual conference and exhibition
26-28 June 2012 | Birmingham
30 January 2013
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