Archived decisions

LOCAL GOVERNMENT FINANCE FORMULA GRANT DISTRIBUTION: CONSULTATION PAPER

July 2007

Response Form

The Government would like your views on which of the options presented in the Local Government Finance Formula Grant Distribution consultation paper should go to updating and modifying the grant distribution system. This paper was published on the 17 July 2007, and can be found at the following address http://www.local.communities.gov.uk/finance/0809/sumcon/index.htm

For convenience, this preformatted response form sets out all the questions in the main consultation document. Please click on relevant check boxes to activate the `X'. Space is available after each question if you wish to include any additional comments to support your choice. We also welcome any alternative proposals, and these can be made in the section available at the end.

All responses, whether using this preformatted response form, or otherwise, should reach us by 5pm on 10^th October 2007.

We particularly welcome responses submitted electronically. Please send response by e-mail to [email protected]

If you are not able to respond by e-mail, please send your response to:

Nikki Hinde

Formula Grant Review Team

Communities & Local Government

Zone 5/J2

Eland House

Bressenden Place

London SW1E 5DU

Alternatively, your response may be faxed to 020 7944 2963.

Confidentiality

All information in responses, including personal information, may be subject to publication or disclosure under freedom of information legislation. If a correspondent requests confidentiality, this cannot be guaranteed and will only be possible if considered appropriate under legislation. Any such request should explain why confidentiality is necessary in the box below. An automatic confidentiality disclaimer generated by your IT system will not be considered as such a request unless you specifically include a request, with an explanation, in your e-mail.

I would like my response to remain confidential (please tick)

Please say why

FORMULA GRANT DISTRIBUTION CONSULTATION RESPONSE

CHAPTER 2: Formula Grant And Local Government Restructuring In A Three-Year Settlement

Q1 Do you agree with the fallback mechanism described for calculating settlements in restructured areas during the 3 year settlement?

Any further comments:

This will make sure that there is no collateral impact on the formula grant allocated to un-restructured areas.

CHAPTER 3: Children's and Adult' Personal Social Services

Personal Social Services Formula Damping

Q2 Should the specific formula floor continue for Children's PSS?

Any further comments:

Damping should not be applied to the calculation of the Relative Need Factors for individual services. Any damping to authorities' entitlements should only be applied in the final formula grant calculation. The Personal Social Services Formula Damping should be phased out in full, with effect from 2008/09.

Q3 If yes to Q2, how quickly should the formula floor be phased out?

Q4 Should the specific formula floor continue for Younger Adults' PSS?

Any further comments:

As Q2, damping should not be applied to the calculation of the Relative Need Factors for individual services. Any damping to authorities' entitlements should only be applied in the final formula grant calculation. The Personal Social Services Formula Damping should be phased out in full, with effect from 2008/09.

Q5 If yes to Q4, how quickly should the formula floor be phased out?

Social Services for Older People

Q6 Which option do you prefer for the Low Income Adjustment -

Any further comments:

Option SSE1 is preferred as it is better at explaining local authorities' ability to raise raise income from fees and charges.

CHAPTER 4 - Police

Q7 Do you agree the resource base should be updated (POL1)?

Any further comments:

Not applicable.

Q8 Do you agree that the Additional Rule 2 grants should be rolled into principal formula Police Grant (POL2)?

Any further comments:

Not applicable.

Q9 Do you agree that the Crime Fighting Fund should be rolled into principal formula Police Grant (POL3)?

Any further comments:

Not applicable.

CHAPTER 5 - Fire and Rescue

Q10 Do you agree that the expenditure base used to determine the coefficients should be updated (FIR1)?

Any further comments:

Not applicable, as Hampshire County Council is not a fire authority.

CHAPTER 6 - Highways Maintenance

Q11 Do you agree that the expenditure base used to determine the coefficients should be updated (HM1)?

Any further comments:

Formulae should be based on up-to-date information.

CHAPTER 7 - Environmental, Protective and Cultural Services

Concessionary Fares

Q12 If the money is to be added to Formula Grant, which option for distribution do you prefer -

Any further comments:

Hampshire County Council as an upper tier authority is not responsible for the provision of concessionary fares and yet the County Council would lose grant as a result of all three options according to the exemplifications. This is not logical. Whilst supporting the use of formula grant to distribute Government funding in preference to specific grants, the County Council is unable to support any of the proposed options.

Q13 Do you have any other suggestions for distributing the funding via Formula Grant?

If yes, please specify:

The methodology should direct the additional grant to lower tier authorities only and should not result in reduced grant for individual county councils, police or fire authorities. As an alternative to distributing the concessionary fares funding via formula grant, it could be incorporated within the local area agreement funding stream. If this cannot be achieved in 2008/09, a transitional specific grant could be introduced for 2008/09.

CHAPTER 8 - Capital Finance

Q14 Do you agree with the proposal to freeze the shares of SCE(R) for years prior to 2007-08 to the level used in the 2007-08 Settlement; and that in future, the shares of SCE(R) will not be recalculated to the current year shares in every Settlement?

Any further comments:

A sensible solution.

CHAPTER 9 - Area Cost Adjustment

Q15 Do you agree with the proposal to update the weights given to the rates cost adjustment (ACA1)?

Any further comments:

The County Council supports the use of up-to-date information.

Q16 Do you agree with the proposal to update the weights given to the labour cost adjustment (ACA2)?

Any further comments:

The County Council supports the use of up-to-date information.

Q17 Do you agree that we should revise the geography of the ACA?

Any further comments:

The County Council has written to the Department on a number of occasions requesting that Hampshire should not be aggregated with the Isle of Wight for ACA purposes. The most recent letter from the County Treasurer was to Robert Davies on 19 February 2007. No reply has been received. The County Council continues to urge that Hampshire and the Isle of Wight should be treated separately for ACA purposes.

Q18 Which option for revising the geography of the ACA do you prefer?

Any further comments:

The proposals for Hampshire in the two options are identical. Both divide Hampshire and the Isle of Wight into two ACA areas: North Hampshire (Basingstoke and Deane, Hart, Rushmoor and Winchester) and South Hampshire (East Hampshire, Eastleigh, Fareham, Gosport, Havant, New Forest, Portsmouth, Southampton, Test Valley and the Isle of Wight). The County Council does not object to dividing the Hampshire area in two but the South Hampshire area should not include the Isle of Wight. Hampshire and the Isle of Wight were linked by the Government for ACA purposes in the final revenue grant settlement for 2003/04, without any consultation. There is no justification for this linkage in terms of a shared labour market or comparable labour costs. The cost of providing services in the Isle of Wight, as a small island, may be high but it is clear from the analysis reported to the Settlement Working Group that this is not as a result of labour costs. If the Government wishes to provide additional grant support to the Isle of Wight towards those higher costs, a mechanism should be found which does not require Hampshire to finance that additional grant. Linking Hampshire and the Isle of Wight for ACA does just that: whilst the Isle of Wight's ACA is overstated, Hampshire's ACA is understated relative to labour costs in the county. The Isle of Wight's gain in grant is matched by Hampshire's loss. The proposal to divide Hampshire in two does not deal with this fundamental issue. The Isle of Wight should be separated completely from Hampshire for ACA purposes. If that results in the Isle of Wight receiving an inadequate level of revenue support grant, then a judgmental ACA factor should be introduced for the Isle of Wight similar to the factor already in use for the Isles of Scilly. This would ensure that the cost of providing any additional grant to the Isle of Wight is shared nationally and not borne solely by the taxpayers of Hampshire.

Q19 Do you have any other proposals for revising the geography of the ACA?

If yes, please specify:

As explained in the response to Q18, the Isle of Wight should be treated separately from Hampshire for the purposes of the ACA.

CHAPTER 10 - Taking account of Relative Needs and Resources

Q20 Do you think there should be further judgemental change in the extent to which the system takes account of needs or resource?

Any further comments:

See response to Q21.

Q21 If yes, what change would you suggest?

The Government has not set out its rationale for the existing level of judgemental needs and resource equalisation. Until that basis has been documented and agreed, no further increases in needs and resources equalisation should be implemented. There is no apparent justification for increasing still further the diversion of funding towards authorities that are assessed as being deprived. Instead, the level of needs equalisation should be reduced in 2008/09 and the central allocation block increased. This would reverse the current priority for funding so that from 2008/09 authorities' basic costs are fully met with any residue of grant used to fund deprivation needs, instead of vice versa.

CHAPTER 11 - Tapering Grant Floors Down

Q22 Do you support the approach of reducing the levels of grant floors over the 3 years of the settlement?

Any further comments:

The floor damping arrangements have dominated the distribution of formula grant to such an extent that the underlying formulae have become largely irrelevant for the majority of authorities, whether they are at the floor or are subject to scaling. This is a reflection of the inadequacy of the underlying formulae. Until those formulae have been improved to reflect adequately the costs faced by authorities, the grant floors should not be tapered.

Q23 Do you have other suggestions on the way in which the grant floors system should be operated?

If yes, please specify here

The changes introduced in 2006/07 to the methodology for calculating the grant floor resulted in authorities no longer being fully funded for the cost of servicing loans raised in respect of the Government's 'supported' borrowing aollocations. That position is unsustainable if the Government wishes that the authorities engage in capital investment at the level implied by its borrowing allocations. Either the changes to the floor damping methodology need to be reversed or some other funding solution found to fund authorities' Government supported capital investment programmes in full.

CHAPTER 12 - 100% Quarterly Scans of Benefits Data

Q24 Do you agree that the DLA indicator is based on a three-year average using quarterly rather than annual data (DATA1)?

Any further comments:

Q25 Do you agree that we use quarterly data on income support and claimants of pension credit (DATA2)?

Any further comments:

CHAPTER 13 - Attractiveness of an Area to Day Visitors

Q26 Do you agree that we should replace the day visitors indicator with a population-weighted indicator that takes into account the attractiveness of an area to day visitors (DATA3)?

Any further comments:

The proposed indicator appears to be sensible.

Q27 Do you agree that we should remove the day visitors indicator from the Highways Maintenance formula (DATA4)?

Any further comments:

CHAPTER 14 - Student Exemptions and the Council Tax Base

Q28 Do you agree that we use student exemption numbers from 31 May 2007 to adjust the starting position of the taxbase projections (DATA5)?

Any further comments:

Q29 Do you agree that we use the average of student exemption numbers from 31 May 2007 and mid-September 2007 to adjust the starting position of the taxbase projections (DATA6)?

Any further comments:

OTHER COMMENTS

Q30 Do you have any other comments or alternative proposals?

Please see the covering letter accompanying this response.

Thank you for completing this response form.