Contact: Paul Carey-Kent, Deputy Treasurer, 01962 847525

1 Introduction

1.1 The Government has issued a consultation paper on proposed changes to the Local Government Finance Settlements for 2003/04 and 2004/05 affecting local authorities' grant entitlement for these years. The changes are due to revisions by the Office of National Statistics to population data used in the 2003/04 and 2004/05 settlements mainly Westminster and Manchester but also 13 other urban authorities outside Hampshire. The deadline for response to the consultation is 10 August 2004.

1.2 This report sets out the principles behind the Government's options for amending the Local Government Finance Settlements for 2003/04 and 2004/05 and summarises the proposed response to the consultation.

2 Background

2.1 Amending Reports are used by the Government to make retrospective changes to Local Government Finance Settlements. They are usually required to address the effect of an error found in data used in the calculation of a local authority's grant entitlement. Typically Amending Reports increase grant for the local authority affected by the error, funded by a minor reduction for all other local authorities.

2.2 On this occasion Amending Reports will be issued for 2003/04 and 2004/05 following revisions made to the mid-2001 population estimate due to errors being found by the Office of National Statistics (ONS) in their 2001 census data. The largest errors were found in Manchester and Westminster but data analysis in a further 13 urban areas (outside Hampshire) revealed additional discrepancies. The ONS have confirmed increases of 104,000 to population figures for these 15 authorities.

2.3 The effect of the changes could be more significant than in previous Amending Reports, although as some of the authorities affected were at the grant floor, the impact overall may be mitigated.

2.4 No exemplifications of the effect of the proposed changes have been issued by the Government. Revised mid-2001 population estimates will not be published by the ONS until September 2004. The Government claims it will not have time to consult on exemplified proposals before the provisional Finance Settlement for 2005/06 is announced in late November 2004. Legislation prevents it from issuing a consultation on a 2003/04 Amending Report any later than this, so the Government has asked local authorities to consider for 2003/04 the principles behind the options for incorporating the revised population figures.

2.5 As the Authority did not receive grant direct from the Government in 2003/04, it is expected that any grant loss for that year would be met by the Constituent Authorities.

2.6 A change to mid-2001 population estimates will also affect mid-2002 population estimates used in the 2004/05 settlement. Whilst it is not possible to say for certain without exemplifications, the Fire Authority is expected to lose grant prior to the application of the floors and ceilings regime in 2004/05 as a result of the Amending Report. As the Authority was at the ceiling in 2004/05 grant loss is unlikely unless the floors and ceilings criteria are amended. The Government has indicated that it may do this.

3 Consultation issues

3.1 The issues raised in the Government's consultation paper are largely technical. The principles behind the proposed response are outlined below.

3.2 As errors by a Government agency, the ONS, have led to the need to revise the population data used in the settlements for 2003/04 and 2004/05, it is suggested that the Government should provide additional grant to compensate Manchester and Westminster and the other local authorities that have lost grant. The funding should not be taken from authorities unaffected by the population errors, such as Hampshire Fire and Rescue Authority, which would be the case if the corrections are achieved through the Amending Reports mechanism. This is particularly important as the Government is unable to exemplify the impact in advance. This would help to preserve the stability and predictability of local authorities' grant allocations, which is one of the Government's aims. To date the Government has refused to compensate the 15 authorities affected by introducing new grant.

3.3 The proposed response states that Hampshire Fire and Rescue Authority believes that it is difficult to express a view without exemplifications. The issues would not arise if the Government put in more money to fund those authorities that have lost out as a result of its error.

4 European Convention on Human Rights and the Human Rights Act 1998

4.1 The proposals within this report are compatible with the provision of the European Convention on Human Rights and considered in the light of the Race relations (Amendment) Act 2000.

5 Recommendation

5.1 It is recommended that Committee authorises the Treasurer to respond to the Government's consultation on Amending Reports for 2003/04 and 2004/05 as set out in this report subject to any comments from the Committee.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

TITLE FILE

Government Consultation on Amending Reports for 2003/04 and 2004/05