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LOCAL GOVERNMENT (MISCELLANEOUS PROVISIONS) BILL

EXPLANATORY AND FINANCIAL MEMORANDUM

    INTRODUCTION

  1. This Explanatory and Financial Memorandum has been prepared by the Department of the Environment in order to assist the reader of the Bill and to help inform debate on it. It does not form part of the Bill and has not been endorsed by the Assembly.
  2. The Memorandum needs to be read in conjunction with the Bill. It does not, and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.

    3. BACKGROUND AND POLICY OBJECTIVES
  3. The main purpose of the Bill is to put in place a new methodology for distribution of the resources element of general grant, payable to district councils. The existing statutory formula is complex and frequently results in wide variations year-on-year, making effective long-term financial planning difficult for councils.
  4. The Bill provides a legislative framework to introduce a new methodology to distribute the resources element of general grant. It makes provision for subordinate legislation, which will contain the detail of the formula and allow for the flexibility of updating relevant data.
  5. The new methodology would address the complex nature of the current formula and would also provide for regular payments to facilitate good financial planning. In addition, it would incorporate into the calculation, factors which take account of relative socio-economic disadvantage between districts, in accordance with New Targeting Social Need (TSN) principles. Two consultation papers detailing the proposals, issued to all interested parties, the second of which incorporated the outcome of an Equality Impact Assessment.
  6. This Bill would also be used to extend the existing powers of district councils to promote the economic development of their areas. It would remove the financial limit placed on councils and would allow them to engage in a broader range of activities, such as the provision of sites for economic development purposes. District councils were consulted on the proposed amendments.
  7. In addition, provisions are made in the Bill to provide powers to district councils to engage (if they so wish) in community safety activity through community safety partnerships. Such partnerships are to be established under a community safety strategy devised by the Secretary of State.

    8. CONSULTATION
  8. Two consultation papers issued on the subject of 'Proposals for a new formula for distribution of the resources element of general grant'.
  9. The first paper, the circulation of which was limited to district councils and other interested parties, outlined a suggested new methodology for distribution of the grant. Following this exercise, many of the comments put forward were taken on board and adjustments were made to preliminary proposals.
  10. In September 2001, on completion of an Equality Impact Assessment, a second consultation paper was circulated widely, to fulfil the Department's statutory requirements under section 75 of the Northern Ireland Act 1998.
  11. In addition to the distribution of the consultation papers, presentations were made to the Assembly's Environment Committee; the National Association of Councillors; and to one district council. A presentation and two workshop sessions were conducted for the Association of Local Government Finance Officers. Meetings with a few individuals, to provide clarification, were also arranged.
  12. Initial consultation with district councils and other interested parties resulted in a total of 22 responses to the paper. Whilst there was broad support for the proposed methodology, valid points were made about the data and weighting factors applied, many of which have since been addressed.
  13. There were 21 responses to the second consultation exercise. The proposal was seen as a major improvement on the present arrangement. It was accepted that adjustments made to base population figures reflected additional needs relating to deprivation and the influx of population but some reservations were expressed about the measures applied to address the sparsity problem. This issue was examined and further adjustment made. Other suggestions may be taken on board as more up-to-date data becomes available. It was recognised that the proposed formula was a simpler calculation and allowed for better financial planning by district councils. It was generally accepted that the proposed methodology meets the objectives of the resources element of general grant.
  14. Amendment of economic development powers of district councils were contained in a Proposal for a Draft Order in Council - The Regeneration and Development (Northern Ireland) Order, which was prepared by the former Department of the Environment for Northern Ireland. District councils were aware of the proposed amendments and were consulted at that time. There was overwhelming support for the proposed extension of economic development powers.
  15. Extensive consultation was undertaken by the Northern Ireland Office (NIO) on community safety in the context of the Criminal Justice Review. All district councils and other interests, such as the Society of Local Authority Chief Executives, (SOLACE) were offered the opportunity to comment. A number of councils responded positively to the NIO proposals and SOLACE, on behalf of all councils, sought statutory powers to engage in community safety activity. No council raised any objections to the NIO proposals. The detailed community safety strategy, devised by the NIO, is also undergoing an extensive consultation process.

    16. OPTIONS CONSIDERED
  16. Proposals for a new methodology for distribution of the grant were agreed by a Steering Group, appointed to take forward the review. The Steering Group consisted of a number of Chief Executives and Finance Officers of district councils; representatives from the Northern Ireland Audit Office; Local Government Audit Office; the Equality Unit, Office of the First Minister and Deputy First Minister; and the Department of the Environment.
  17. In the early stages of the review, models used in Great Britain (GB), with particular focus on the Scottish model, for distribution of grant to local authorities, were examined. Comparison was difficult due to the wider range of services for which GB funding is available. Variations on the GB models were considered and efforts were made to determine the standard cost of 'core services' across district councils here. It was concluded, however, that reliable figures for standard costs were not attainable.
  18. The formula used to distribute the European Union Programme for Peace and Reconciliation package was also tested but it was agreed that it did not meet the objectives of the general grant.
  19. The option selected is a formula designed to measure the wealth of a council against its estimated needs. Wealth is determined by the gross penny rate product of a district council, relative to the Northern Ireland gross penny rate product. Needs are measured by population of a district council, again relative to the total for Northern Ireland. To take account of councils' specific needs (which have been identified as deprivation; the influx of population; and sparsity) population data have been refined. Adjusted population figures then replace base population data in the calculation. Councils whose needs exceed their wealth are entitled to a share of the grant.
  20. Measures, built into the formula, address relative socio-economic disadvantage and adjustments made take account of particular circumstances that impact on the cost of providing certain district council services. This is borne out by the results of the Equality Impact Assessment. The method proposed should be more understandable than the existing formula and arrangements to fix data for a 3-year term should allow councils to budget more satisfactorily.

    21. OVERVIEW
  21. The Bill contains 11 clauses. Clauses 1 to 5 make provision for the payment of grants to district councils; clause 6 confers powers on district councils in relation to economic development; clause 7 confers powers on district councils in relation to community safety; and clauses 8 to 11 contain supplementary provisions.

COMMENTARY ON CLAUSES

Clause 1: The general grant to district councils

Clause 1 describesmakes provision for the general grant.

Subsection (1) empowers the Department to make payments of general grant to district councils each year. The grant is presently made under Article 3 of the Local Government &c. (NI) Order 1972.

Subsection (2) sets out the two distinct elements which make up the general grant. The nature of these elements is as follows:-

Subsection (3) empowers the Department to determine the timing of grant payments. Currently payments are made quarterly, but plans are to make monthly payments, with effect from April 2003.

Clause 2: Determination of the resources element

Subsection (1) provides for the methodology for allocation of the resources element of the grant to district councils, to be determined by regulations. This is a new formula, which aims to achieve a fairer distribution of the funds available.

The purpose of subsections (2)(a) and (2)(b) is to put in place a formula, which is designed to measure the wealth of a council against its estimated needs. Wealth is determined by the gross penny rate product of a district council, relative to the Northern Ireland gross penny rate product. Needs are measured by population of a district council, again relative to the total for Northern Ireland. To take account of councils' specific needs (which have been identified as deprivation; the influx of population; and sparsity) population data have been refined. Adjusted population figures then replace base population data in the calculation. Only those councils whose needs exceed their wealth are entitled to a share of the grant.

Measures, for example, the Noble Employment Index, are built into the formula to address relative socio-economic disadvantage and adjustments are made to take account of particular circumstances that impact on the cost of providing certain district council services.

Subsection (3) clarifies that not all district councils will qualify for the resources element of the grant, but only those whose needs exceed their wealth.

Subsection (4) allows the Department to amend the subordinate legislation, which will contain the detail of the formula. This is to ensure that measures, weightings and all data applied to the formula may be reviewed and up-dated at any time.

Subsection (5) provides for any clarification or refinement relating to the detail of the formula, which may emerge after the new arrangements come into operation.

Subsection (6) puts in place arrangements to amend the regulations and lay them in draft before the Assembly. These regulations are subject to affirmative resolution.

Clause 3: Determination of the derating element

The nature of the derating element is defined in the commentary for clause 1. Rating/derating policy is a matter for the Department of Finance and Personnel. However, the calculation and payment of the derating element of the grant is handled by the Department of the Environment. The formula for calculating the derating element, which is unchanged, is contained in Part II of Schedule 1 to the Local Government &c. (Northern Ireland) Order 1972 (S.I. 1972 No. 1999 (N.I. 22)). This clause is included in this Bill, in order that the formulae for both the resources and the derating elements remain together. The wording of the clause is as before.

Clause 4: Reductions in general grant

Clause 4 enables the Department to make deductions from the amount of general grant payable to a district council, in particular circumstances.

Subsections (1) and (2) empower the Department to take action, where a district council has failed to achieve and maintain a standard of economy, efficiency and effectiveness, in the discharge of its functions. This may relate to, for example, such failings as the misappropriation of funds; excessive expenditure; or non-submission of annual accounts. The Department could reduce grant payable to a district council and submit a report to the Assembly, stating the amount of, and the reason for, the reduction.

This power is currently contained in Article 4(1)(a) of the Local Government &c. (NI) Order 1972. The Department has never exercised this power.

Subsections (3) and (4) provide the Department with a power to make payments to certain bodies, on behalf of district councils, for services rendered. An adjustment is made to an instalment of general grant in the same financial year, to recover this expenditure.

The organisations/bodies to whom this arrangement relates are listed in the Local Government (Specified Bodies) Regulations (Northern Ireland) 2001. If any change to this list is proposed, district councils and other interested parties must be consulted, before these regulations are amended.

The power to defray and recover district council expenditure is currently contained in Article 4(3) of the Local Government &c. (Northern Ireland) Order 1972.

Clause 5: Other grants to councils

Clause 5 provides the Department with a general power to pay grants to district councils. This applies to any grant connected with a function of a council, other than general grant. The Department currently makes payments to district councils in respect of food safety; construction products; and energy efficiency. The power to pay these grants is currently contained in Article 5A of the Local Government &c. (NI) Order 1972.

Clause 6: Powers of district councils in relation to economic development

Clause 6 enables district councils to make payments for promoting the economic development of their districts and to acquire, hold and develop land for the same purpose. Councils are required to consult regularly with the Department of Enterprise, Trade and Investment, on the exercise of their powers.

At present district councils have the power, under Article 28 of the Local Government (Miscellaneous Provisions) (Northern Ireland) Order 1992, to promote the economic development of their areas. In any financial year, a council shall not exceed the product of a rate of 5 pence in the pound on the rateable value of the district, on the activity, subject to the approval of the Department. Clause 6 relaxes the present restrictions placed on district councils, in relation to the promotion of economic development. It also enables councils to engage in a broader range of activities, such as the provision of sites for economic development purposes.

Clause 7: Powers of district councils in relation to community safety

Subsection (1) empowers district councils to engage (if they so wish) in community safety activity within a relevant community safety partnership, as defined in subsection (4).

Subsection (2) empowers the Department of the Environment to confer or impose on district councils any functions aimed at enhancing community safety, which would be additional to or complement any community safety strategy devised by the Secretary of State.

Subsection (3) stipulates that no Order can be made under subsection (2) unless a draft of the Order has been laid before and approved by a resolution of the Assembly.

Subsection (4) defines "community safety partnership", the terms "enhancement of community safety" and "relevant community safety partnership".

Clause 9: Repeals

This section gives effect to the repeals contained in the Schedule to the Bill.

Clause 10: Commencement and savings

It is intended to move to the new methodology for distribution of the resources element of the general grant, at the beginning of the 2003/2004 financial year. The provisions of this Bill should come into operation on Royal Assent, except for sections 6 and 7, and the repeal of Article 28 of the Local Government (Miscellaneous Provisions) (Northern Ireland) Order 1992 (N.I. 6), which should come into operation two months from the date on which this Bill receives Royal Assent, which is the generally recognised minimum.

Clause 11: Short title

This section gives the short title of the Act. This is the title to which the Act will usually be referred.

FINANCIAL EFFECTS OF THE BILL
  1. The requirements of the Bill, insofar as general grant and economic development powers are concerned, will involve no additional public expenditure and will not affect public service manpower. The amount of the resources element of general grant does, however, have a bearing on the level of district rates a council needs to strike to determine its total annual income.
  2. The community safety provision will involve new public expenditure, which is being provided through the NIO.

    3. EFFECTS ON EQUAL OPPORTUNITY
  3. This Bill will not unlawfully, unfairly, or unjustifiably discriminate, directly or indirectly, against specified sections of the community.

    4. HUMAN RIGHTS ISSUES
  4. The provisions of the Bill are compatible with the Convention rights.

    5. EQUALITY IMPACT ASSESSMENT
  5. In accordance with section 75 of the Northern Ireland Act 1998, the Department of the Environment carried out an Equality Impact Assessment on the proposed formula for distribution of the resources element of general grant to district councils. The proposals were proofed for each of the nine equality categories namely, religious belief; political opinion; gender; race; disability; age; marital status; dependants; and sexual orientation. A full assessment was completed to identify whether, within each relevant category, the policy under consideration creates differential impacts between groups.
  6. The methodology used for impact assessment was to consider the proposed formula in isolation from historic allocations. The rationale behind the formula, the use of weighting factors to estimate additional need for expenditure, has been assessed in terms of the councils which gain weighted population as compared to those who lose. The characteristics of the populations of these two groups of councils were then compared.
  7. The results of the assessment are detailed below.
  8. The effect on the sexual orientation group cannot be determined, due to the absence of data.
  9. There is not, nor is there likely to be a differential impact on the equality category of gender.
  10. Within the race category, there are some indications that there is likely to be a differential positive impact on ethnic minorities. However, the sub-Northern Ireland spatial estimates of the numbers of ethnic minorities by district council are not thought reliable enough to determine this with certainty.
  11. There are indications that there is likely to be some differential impact on the equality categories of disability; age; marital status and dependants, in that the councils benefiting from the proposed formula reflect the younger age-structure, with a population over-represented not only by under-16s but also, single people over 15 and households with dependants. In addition, there is a skewing towards areas with more disabled people.
  12. The analysis suggests that there is a differential impact on the equality categories of religious belief and political opinion. The formula tends to favour those district councils with predominantly Catholic and Nationalist communities. Those councils which lose weighted population (whilst still receiving resources grant), have a larger proportion of Protestants and Unionists than Northern Ireland as a whole.
  13. The most significant differential impact of the proposed formula is on the categories of religious belief and political opinion. This result links directly to one of the key objectives of the proposed new methodology, that is, to target areas of greater social need. It is generally accepted that there is a significant correlation between deprivation indicators and religion. The deprivation indicators incorporated in the formula are the Noble indices of income and employment deprivation, which have very recently replaced the Robson indicators and the use of unemployment factors. The correlation coefficient between religion and deprivation at district council level is 0.8, which is statistically significant.
  14. Copies of the Equality Impact Assessment in printed form may be requested from Vivienne Collins, Department of the Environment, Local Government Division, Room 5-36, Clarence Court, 10-18 Adelaide Street, Belfast BT2 8GB, or alternatively can be downloaded from the Internet at the following web address -www.doeni.gov.uk/lgd/generalgrant/consultation.htm
  15. An equality screening exercise on the community safety provisions concluded that community safety activity, as devised by the NIO, should not impact differently on the groups identified under section 75 of the Northern Ireland Act 1998. In engaging in community safety activity, councils are expected to comply with obligations under their individual Equality Schemes.
    16. SUMMARY OF THE REGULATORY APPRAISAL
  16. The provisions of the Bill have no implications in terms of cost to business, as they are connected solely to the public sector. A full Regulatory Impact Appraisal is, therefore, not considered necessary.
    17. SECRETARY OF STATE'S CONSENT
  17. The Bill includes provision which will empower district councils to engage (if they so wish) in community safety activity through community safety partnerships, a reserved matter under paragraph 9(c) of Schedule 3 to the Northern Ireland Act 1998. The Secretary of State has consented under section 8 of the Northern Ireland Act 1998 to the Assembly considering the Bill.
    18. LEGISLATIVE COMPETENCE
  18. At Introduction the Minister of the Environment had made the following statement under section 9 of the Northern Ireland Act 1998:

    "In my view the Local Government (Miscellaneous Provisions) Bill would be within the legislative competence of the Northern Ireland Assembly."