Agenda item

            The Committee considered the undernoted report:

 

1.0Relevant Background Information

 

1.1Members will note that the key legislative framework governing local government finances in Northern Ireland is in Part V of the Local Government Act (Northern Ireland) 1972. Although this has been updated by subsequent legislation, the provisions on borrowing and council funds have remained substantially unchanged.

 

1.2Notwithstanding, it has been recognised for some time that this legislation needs to be updated to reflect modern accounting practices and, where appropriate, brought into line with best practice observed by local authorities in GB.

 

1.3Accordingly, in July 2009 the Department of the Environment published ‘The Draft Local Government (Finance) Bill’ consultation document. The closing date for written submissions is 31st October 2009.

 

2.0Key Issues

 

2.1The draft Finance Bill seeks to modernise the current legislative framework relating to local government finance and councillors’ remuneration in Northern Ireland. It sets out the parameters within which a district council may manage its finances and central government may regulate that activity.  The draft Bill aims to modernise the legislative framework for local government finance by introducing the following provisions:

 

·         removing the requirements for district councils to gain departmental approval for borrowings and the application of their funds or any proceeds from the sale of capital assets

 

·         introducing new financial powers including, for example,  the power to invest

 

·         introducing a prudential regime for capital finance

 

·         clarifying the nature of the general grant by replacing the two elements of the grant (i.e. the resources element and the de-rating element) with two separate grants – a rate support grant and a de-rating grant; and

 

·         extending to all government departments the general power which allows the Department of the Environment to pay grants to councils.

 

2.2In relation to updating the legislation regarding councillors’ remuneration, the draft Finance Bill enables the Department to make the following regulations:

 

·         requiring councils to make and publish a scheme of allowances; and

 

·         establishing a remuneration panel to advise the Minister of the Environment on councillors’ allowances.

 

2.3It is important to note that the draft Local Government (Finance) Bill is largely enabling legislation and the detail around the specific provisions referred to above will be outlined in subsequent subordinate legislation (i.e. detailed regulations).  Members will note that no regulations will be made without prior consultation with councils.

 

2.4In reviewing the draft Bill, the following observations should be made in relation to a number of key issues which need to be approached with caution by the Council.  These issues are examined in further detail within the draft Council response to the consultation document attached at Appendix 2.

 

·         Whilst the Finance Bill provides councils with more freedom to operate, it also introduces a level of central control which may not be appropriate and needs to be approached with caution by the Council.

 

·         Much of the Bill is replicating legislation which currently exists in GB.  Whilst it is accepted that the larger and more complex councils that will result from the RPA will need the improved financial arrangements which this Bill introduces, concerns remain whether the level of central control placed upon local authorities in the rest of the UK should apply in equal measure with respect to Northern Ireland.  This is particularly relevant given that the majority of Council funding (approx 74%) comes from the district rate, with Belfast City Council only receiving £4m from the central government general grant in comparison to the £150m annual budget of the Council.

 

·         Some of the powers reserved by the Department, particularly in respect of their right to intervene both in terms of the overall borrowing by councils in Northern Ireland and in respect of what it thinks an individual council can afford appear to run contrary to the efforts of the RPA in providing strong local government.

 

·         Whilst greater controls are being imposed on local authorities, the Bill does not address the role of these external agencies which  impact upon and/or influence the financial processes of councils but which are not directly accountable to local government  for their performance (e.g. Land and Property Services)

 

        Organisational Consequences

 

2.5If adopted, the proposals set out within the draft Finance Bill will potentially result in a number of organisational consequences which the Council will need to address in moving forward.  For example

 

·         the need to revise/update the Council’s Standing Orders and/or financial regulations that enact the provisions of the Bill when it becomes law

 

·         The designation of a Chief Financial Officer

 

·         Greater priority placed on internal Audit procedures

 

·         A need to introduce a prudential borrowing framework

 

·         Potential need for a Treasury Management Strategy

 

3.0Resource Implications

 

      There are no financial or Human Resource implications contained within this report.

 

4.0Recommendations

 

      Members are asked to:

 

1.   note the contents of this report and consider the draft corporate response to the Local Government (Finance) Bill consultation document attached at Appendix 2; and

 

2.   approve the submission of the draft response to the DoE, subject to any revisions proposed by Members, before the 31st October 2009.  The response would be submitted on the basis that it is subject to Council ratification on 2nd November 2009.

 

5.0Documents Attached

 

      Appendix 2           BelfastCity Council Draft Response

 

Appendix 2

 

Consultation on the Local Government (Finance) Bill

 

BelfastCity Council Response

 

1.0INTRODUCTION

 

1.1Belfast City Council welcomes the opportunity to respond to the draft Local Government (Finance) Bill issued for consultation by the Department of the Environment. The Council hope that the comments outlined within this response are constructive in nature and will add value to any revised Bill prepared and the drafting of the future subordinate legislation.

 

1.2The Council has a number of general comments to make in regard to the content of the draft legislation as well as detailed comments on some of the individual clauses set out within the proposed Bill.

 

2.0GENERAL COMMENTS

 

2.1Belfast City Council is supportive of the need to modernise the legislative framework relating to local government finance and councillors’ remuneration in Northern Ireland. Many of the comments set out in this response reflect views previously expressed by the Council as part of its ongoing engagement in the RPA process. 

 

2.2The Council is, however, conscious that much of the detail around the outworking of this legislation will be set out within the subsequent subordinate legislation (regulations) of which there is no detail at the moment.  Therefore, the Council welcomes the stipulation set out within the consultation document that such regulations will not be brought forward without prior consultation with local authorities. 

 

2.3The Council would welcome the opportunity to engage closely with the Department in drafting the regulations under this Bill to ensure that they reflect the needs of local government in Northern Ireland and provide for the provision of a modern and responsive public service by district councils.  

 

2.4The Council would seek clarification on both the process and timescale anticipated for taking forward the drafting of the subordinate regulations to emerge under this Bill.

 

      Title

 

2.5The Council notes that the draft Bill comprises five Parts, two of which in fact relate to expenditure powers.  The Council would suggest that, in terms of nomenclature of the Bill, perhaps the Bill should be styled as the Local Government (Finance and Expenditure) Bill 2009.  This point is all the more relevant in the context of points which are made later on in relation to addressing the expenditure powers of district councils.

 

      Autonomy

 

2.6Belfast City Council welcomes the intention set out within the Bill to give greater freedom to local authorities in Northern Ireland to manage their own financial affairs without having to obtain consent from the Department of the Environment.  A key concern is that in the absence of knowing the detail of the subordinate regulations it is difficult for the Council to gauge the degree of central intervention.  The Council believes such intervention should be the minimum practicable so that the potential freedoms that the Bill would seek to deliver are realised.

 

2.7The Council would be of the view that over-intervention could potentially reduce the degree of freedom afforded to local authorities and would seem to contradict the basic principles of the RPA to create a ‘strong, dynamic and responsive local government’ sector and we would refer to the principles enshrined in the ‘European Charter on Local Self?Government’. The Council would again stress the need for the local government sector to be closely involved in the drafting of these regulations and the Council would welcome the opportunity to work closely with the Department on this.

 

2.8The Council is also concerned that some of the powers reserved by the Department, particularly those in regard to the right to intervene both in terms of the overall borrowing by councils and in respect of affordability thresholds, also appear to undermine the basic principles of the modernisation process.  The Council would seek further clarification on the circumstances under which the Department envisages potentially exercising these powers. 

 

      Role of Central/Local Government Relations

 

2.9Whilst the Council recognises and supports the intention of the Bill to bring the local government financial regime in Northern Ireland in line with England, Scotland and Wales, it would be concerned that the funding of local government in Northern Ireland is different, with the majority of council funding (e.g. approx. 74% in the case of Belfast City Council) being derived from the district rate.

 

2.10   The Council is also concerned that the consultation document does not consider the unique way in which rates are collected in Northern Ireland.  Whilst greater controls are being imposed on local authorities, the Bill does not address the role of external agencies (e.g. Land and Property Services) which impact upon and/or influence the financial processes of councils but are not directly accountable to local government for their performance. The Council believes that controls need to be put in place for these types of relationships to ensure that local authorities are not detrimentally affected by the behaviour or actions of any agencies which are outside their control. 

 

      Borrowing & Expenditure

 

2.11   The Council welcomes the introduction of more flexible arrangements for borrowing as set out in Clauses 11 to 18, including the need to comply with appropriate codes of practice. The Council would also suggest that the powers of borrowing and investment be mirrored by a further provision which creates a general power of expenditure of district councils to carry out their statutory functions.  While the Council acknowledges that the point could be made that this power is already contained in section 17 of the Interpretation Act (NI) 1954, nevertheless, it is submitted that a general power of expenditure could usefully be re-stated in order to make it absolutely clear that district councils have a general power of expenditure, acting in accordance with principles of due diligence etc, in relation to the discharge of their statutory functions.

 

2.12   The Council would further suggest that, for the purposes of that provision, it should be made clear that the statutory functions of a district council include the recruitment and employment of staff and, furthermore, the training and development of Members and employees.

 

2.13   The Council welcomes the proposal to extend to all Departments the general power to pay grants to councils.  However, the Council would seek an assurance that this extends to Joint Committees (in so far as it is relevant).

 

      Members’ Remuneration

 

2.14   The Council welcomes the proposals contained within the draft Bill in relation to the area of Members’ remuneration. In the interests of transparency and openness the Council is fully supportive of the proposed new provision requiring councils to publish a scheme of allowances. Belfast City Council already publishes comprehensive details of payments made to its Members and would view the publication of a scheme of allowances as complementary to this.

 

2.15   The Council welcomes the proposals to establish an Independent Remuneration Panel to advise on councillors’ allowances.  The Council concurs with the view of the Councillor Remuneration Working Group (CRWG) that a single panel for the whole of Northern Ireland is the best option as this enable equitable treatment for all councillors in Northern Ireland. The Council also agrees that members of the panel should be appointed using the public appointments process. However, it is essential that a criterion for selection is that the individual must have appropriate expertise and knowledge of the roles and responsibilities of Elected Members and preferably be familiar with remuneration issues for councillors.

 

2.16   The Council would be in favour of the proposal to repeal Section 38 of the 1972 Act in order to remove some of the restrictions relating to the payment of expenses incurred by councillors in attending meetings and conferences. The proposed new clause 33 would provide much more flexibility to councils to make their own business cases which would help determine whether a particular conference/visit would be concerned with matters which relate to the interests of the district or the inhabitants of that district. The Council would suggest, however, that a further criterion is included pertaining to the advancement of the affairs of local government.

 

3.0Conclusion

 

3.1Belfast City Council reiterates its support for modernising the legislative framework relating to local government finance and councillors’ remuneration in Northern Ireland. However, the absence of detail in key areas and the absence of the accompanying Regulations make it difficult for the Council to undertake an informed assessment of the likely impact of the proposals and the potential consequences for councils and citizens in the future.

 

3.2The Council would like to take this opportunity to advocate the need for a closer working relationship with the Department in taking this Bill forward and on the drafting of the subsequent subordinate legislation.

 

3.3The Council has raised a number of issues in this response and would seek clarification on how the Department intends to incorporate these, and any other comments received from stakeholders, into the final legislation and any accompanying regulations.

 

            The Committee approved the draft response.