Archived decisions

To the Chief Financial Officer:

Combined fire authorities

County Councils in the area of a combined fire authority

Unitary councils in the area of a combined fire authority

MEG GREEN

Divisional Manager

Local Government Finance 3 -

Statistics, Payments and IT

5/H5 Eland House

Bressenden Place

Victoria

London

SW1P 5DU

[email protected]

Web site: www.odpm.gov.uk

11 December 2003

Dear Sir/Madam

ALTERNATIVE NOTIONAL AMOUNTS

In his statement on the provisional local government finance settlement for 2004/05 on 19 November 2003, Nick Raynsford stated that central government recognised that, in areas where there is a combined fire authority, budgets for 2004/05 will not be comparable with those for 2003/04 because the combined fire authority will be a precepting body in its own right for the first time in 2004/05.

He announced that central government would therefore be consulting the fire authorities, and authorities in these areas with education and social services authorities, about the level of earlier years' budgets which we will use for comparison purposes when we come to consider the use of capping powers.

I am writing now to set out the methodology that Ministers are minded to use to calculate the budgets for 2002/03 and 2003/04 that they intend to use for comparison purposes when considering the use of capping powers. In due course, Ministers may make a report specifying alternative notional amounts under section 52C of the Local Government Finance Act 1992.

The proposed methodology involves adjusting the 2002/03 and 2003/04 budget requirements of each combined fire authority (CFA) and each county council or unitary council that currently makes a contribution to a combined fire authority. It does this by, in effect, assuming that CFAs were precepting authorities in 2002/03 and 2003/04, respectively so that:

· each CFA had received its own allocations of revenue support grant and redistributed non-domestic rates, and set its own council tax requirement, rather than receiving payments from its constituent county and unitary councils; and

· each of the affected county and unitary councils set a lower budget requirement that it did in reality, due to its not needing to make a payment to its CFA.

The details of the proposed calculation are set out in Annex A, and Annex B sets out the proposed calculation of the alternative notional amount for each authority using information held by the Department as at 11 December 2003.

You are invited to make representations on the above proposals for calculating alternative notional amounts for combined fire authorities and the county and unitary councils in their areas. In particular, representations are invited on:

· The general methodology;

· The particular figures used in Annex B.

The figures that Ministers are minded to use in the calculation are:

· For county councils and unitary authorities, figures that are consistent with the calculation of budget requirements for 2002/03 and 2003/04, as appropriate, under the Local Government Finance Act 1992 and reported to the Department on the BR2 and RA returns for the appropriate year; and

· For combined fire authorities, amounts notified to the contributing authorities prior to their budget-setting.

The figures given at Annex B are also available on the ODPM website, www.odpm.gov.uk.

Representations should be sent to John Simes, LGF3F, ODPM, Zone 5/H6, Eland House, Bressenden Place, London, SW1E 5DU. They can be sent by post, or faxed to 0207 944 4169, or sent by e-mail to [email protected] in time to be received by 11 February 2004. Any telephone queries should be made to John on 0207 944 4163.

It is possible that Ministers may wish to make further proposals to calculate alternative notional amounts, possibly for all billing and major precepting authorities, to take account of changes between years other than the move to precepting status of combined fire authorities, in which case, a further letter will be sent.

I am copying this letter to Mike Heiser at the Local Government Association and to the Audit Commission.

Yours faithfully,

MEG GREEN

Annex A

Calculation of proposed alternative notional amounts

1. For each of 2002/03 and 2003/04, it is assumed that, had the combined fire authorities (CFAs) then been precepting authorities:

(i) the budget requirement of each CFA would have been equal to the sum of the payments budgeted to be received from its constituent shire county and unitary authorities ('constituent authorities'); and

(ii) the budget requirement of each constituent authority making a payment to a CFA would have been lower than its actual budget requirement by the amount of its budgeted payment to its CFA.

2. The adjustment of base budgets has been calculated as follows for both 2002/03 and 2003/04:

Net Budget Requirement

This column gives the net budget requirement (i.e. excluding any parish precepts). These figures are taken directly from the BR2 return (line 2) for the appropriate year. It is zero for every CFA because they were not required to calculate a budget requirement for either year.

Adjustment

For each CFA, the adjustment equals the total amount that it budgeted to receive from its constituent authorities, and is positive.

For the constituent authorities, the adjustment equals the amount that it budgeted to pay to its CFA, and is negative.

This information is taken from the RA return (line 69) for the appropriate year, or revised figures subsequently reported to the Department.

Proposed Alternative Notional Amount

This column gives the net budget requirement, adjusted as described as above. It is the sum of the Net Budget Requirement and the Adjustment.

(All figures in the calculations are in thousands of pounds).

3. Annex B sets out the proposed calculation of the alternative notional amount for each authority using information held by the Department as at 11 December 2003.