Local Government (Finance) Bill

Ards Borough Council Submission to Committee Consultation

From: Amanda.Martin@ards-council.gov.uk
Sent: 15 June 2010 10:37
To: +Comm. Environment Public Email
Subject: Consultation on Local Government (Finance) Bill - Committee Stage
Dear Sir/Madam, 

Thank you for consulting with Ards Borough Council on the Local Government (Finance) Bill now that the Committee Stage has commenced. 

The Bill was considered by members at a recent meeting of the Council's Policy & Resources Committee and it was resolved to respond as follows:- 

* The Council again welcomes the proposal to introduce a New Local Government (Finance) Bill which presents an opportunity to modernise the current legislative framework relating to local government finance and Councillors’ remuneration in Northern Ireland. 
* While the proposed legislation, especially in relation to the capital finance system, aims to give greater freedom to Northern Ireland Local Authorities, the Council would urge that this greater freedom is not constrained through the use of regulations. 

It was further resolved to make the following comments on the specific clauses of the Bill.

Clause 1(2) requires a Council to designate an officer of the Council as its Chief Financial Officer.

* The Council notes the intention to separate the roles of Chief Executive and Chief Financial Officer (something which was technically possible under the 1972 Act) particularly in light of the responsibilities placed on the Chief Financial Officer in submitting a report on the robustness of the estimates of the Council (clause 4); reporting to the Council the adequacy of financial reserves (Clause 6); and reviewing the Council’s affordable borrowing limit (Clause 13). 

However the proposed use of the term Chief Financial Officer in this case would cause confusion as it is the local government equivalent of “Accounting Officer” used in the Civil Service – both of which denote the head of the paid service and the person ultimately responsible for the direction of the organisation’s resources.  If left unresolved this could lead to a situation where the Chief Executive could be perceived to be accountable to the Chief Financial Officer something which would not add clarity – especially for the public, and which could potentially lead to organisational paralysis. This is compounded by the fact that the role of the “Chief Financial Officer”, as used in the Bill, is not defined. 

It is also noted that the proposed constitution for councils prepared by the Department of the Environment uses the terms Chief Finance Officer and Head of Financial Services to describe the senior finance role.  As the Department is sponsoring both documents it is suggested that a consistent approach be adopted and that the terms in the proposed constitution are used in the Bill to promote clarity and in large part replicate what exists in other parts of the public service. 

It is noted that the Department proposes to take this forward in the forthcoming Local Government (Re-Organisation) Bill.  In the event that RPA is postponed, the Council understands the Local Government (Finance) Bill will still proceed.  In this eventuality, the Council advocates that, due to the important role of the most senior finance officer, provision should be made in the Local Government (Finance) Bill to separate these roles.

Clause 7 makes provision for reserves specified in regulations under clause 6(1) to be designated controlled reserves, with a required minimum balance at the end of the financial year.  The Chief Financial Officer must report to the Council on the reasons for a controlled reserve not achieving the minimum level, and any action considered necessary to prevent a recurrence in the following year.

* The Council shares the view of Finance Officers that, in the spirit of financial freedom, no reserves should be designated controlled reserves, as is the case in the GB regulations that were derived from the Local Government Act 2003. 

The DOE has advised that initial modelling has indicated that the statutory formula currently used to calculate the resources element of the General Grant is suitable for calculating the rates support grant for the eleven new Councils.  An equality monitoring exercise on the statutory formula is carried out on an annual basis and this continues to show no adverse impact.  The Department has however, conceded that there will be a need to review the key services used in the expenditure components of the formulae whenever Central Government functions are transferred under RPA. 

The DOE has also advised that an EQIA on the Draft Finance Bill is not necessary and the regulations for determining the amount of the rates support grant will be screened for equality impact and will also be subject to consultation.

Clause 22 enables the Department to make regulations about the use of capital receipts.

The Council acknowledges the greater flexibility in the bill for the use of capital receipts and welcomes the removal of the requirement for capital receipts to be applied in the first instance against any money borrowed by the Council for the purposes of acquiring that asset, as sometimes this could result in significant financial penalties for early redemption.

Clause 27 makes provision for the Department to provide a rates support grant to district councils for each financial year.

The Council endorses that the statutory formula for the rates support grant needs to be reviewed post RPA to confirm that it continues to meet its objectives, especially in light of the establishment of new local authorities with new functions and functions that will transfer from central to local government. 

Furthermore, the Council wish to place on record its view that the rates support grant must be adequately resourced.

Clause 34 gives the Department power to make regulations for the establishment of an independent panel to advise the Department on payments to Councillors.

The Council welcomes the establishment of an independent panel to advise the Department on payments to Councillors to bring Northern Ireland into line with the rest of the United Kingdom, where independent panels already exist to consider the level and system of Councillors’ allowances.

Clause 36 allows a district council to make payments for any purpose which in its opinion are in the interests of, and will bring direct benefit to, the council, its district or any part of its district, or the inhabitants of the district or any part of its district.

The Council notes proposals to include the general power of well-being in the forthcoming Local Government (Re-organisation) Bill and that it is considered necessary to retain this provision until such time as that Bill comes into operation.  The Council accepts this but requests in the meantime that the current limits on expenditure for special purposes be reviewed as they are deemed to be too low. 

In conclusion, the Council broadly welcomes the steps taken to modernise the Local Authority legislative framework in this Bill and the introduction of best practice.  In addition, the Council would wish to be consulted with on development of any subsequent regulations that will be drafted. 

I hope that this is of assistance to you. 

Yours faithfully 

Amanda Martin 
Principal Administrative Officer 
Ards Borough Council 
2 Church Street 
Newtownards 
BT23 4AP 
Tel: 02891 824190