Bath & North East Somerset Council
Cllr Malcolm Hanney, Cabinet Member for Resources
On or after 6th October 2007
Council Response to Consultation Paper on Formula Grant Distribution
EXECUTIVE FORWARD PLAN REFERENCE:
AN OPEN PUBLIC ITEM
List of attachments to this report:
1 THE ISSUE
1.1 Formula Grant, a general central government grant to assist in the funding of local services, is a key determinant of the Council's budget and service planning.
1.2 This report asks Councillor Malcolm Hanney, as the Cabinet Member for Resources to consider and approve the Council's response to the Formula Grant Distribution consultation paper issued by the Department for Communities & Local Government (DCLG) on 17th July 2007.
1.3 Appendix 1 sets out the main issues contained within the consultation and Appendix 2 is the proposed Council response to the consultation. This submission is to be made by 10th October 2007.
The Cabinet member is asked to:
2.1 Approve Appendix 2 as the Council's response to the proposals made in the consultation paper on the Formula Grant Distribution.
3 FINANCIAL IMPLICATIONS
3.1 Most options within the consultation paper are exemplified on the basis of its effect on 2007/08 grant settlement for each local authority before any damping. The exemplifications for Bath & North East Somerset are summarised in Appendix 3. It should be noted that these are not the figures that will appear in the 2008/09 settlement, because of changes in overall funding totals and because certain data such as population will not be available until later this year. The figures are used only as a guide to give an idea of the scale and direction of possible changes in Formula Grant.
3.2 The worst case figure from the exemplifications, which before grant damping, is a loss of grant of £2.8m for 2007/08 from £36.6m to £33.8m.
3.3 If this change is used to update the 2007/08 grant with the damping %age unchanged nationally the loss of grant in 2007/08 of around £0.9m.
3.4 The best case scenario will depend upon the damping arrangements - any gains above the level of the grant floor (the minimum grant expectations) are always scaled back to fund those Councils who would otherwise be below the floor (i.e. would have received less than the minimum grant increase).
3.5 The Concessionary Fares exemplifications have been excluded from these figures as this is extra money and the question here is more about whether the Council's costs exceed funding received through the grant system.
4 THE REPORT
4.1 The Formula Grant Distribution System was last reviewed for the 2006/07 local government finance settlement. Since then there has been a "data freeze" for a period of two years, in order to provide some stability in funding to Local Authorities.
4.2 During the data freeze the government has been working with representatives of local government as part of the Settlement Working Group to consider possible changes to formulae which could be introduced once the freeze had ended. The consultation paper presents options for formula changes that could be introduced from the 2008/09 settlement onwards. Depending on the options implemented the changes could have a significant effect on the grant the Council receives for 2008/09 onwards. The operation of the floor damping mechanism will limit any losses suffered by Local Authorities. The level and operation of the floor and any damping measures for 2008/09 has not been announced yet, and it is unlikely it will be announced until the draft settlement figures are available in November/December.
4.3 This report provides a commentary of the consultation with rationale for the suggested response to each question in Appendix 1. A summary of the proposed response is provided in Appendix 2 and the exemplification details are shown in Appendix 3.
5 RISK MANAGEMENT
5.1 The report author and Cabinet member have fully reviewed the risk assessment related to the issue and recommendations, in compliance with the Council's decision making risk management guidance.
5.2 Clearly, the risk of not responding to the consultation is that the Council's views and local circumstances are not reflected in the DCLG's consideration. However, the Council's response will be one among many received by the DCLG.
5.3 The Council's Medium Term Financial Forecast (presented to the Cabinet in September 2007) as a much reduced level of increase in Formula Grant than has been the case over the last 3 years. While the options for the formula changes contained in the consultation document, of at least equal significance are the overall damping arrangements, given that in 2007/08 the Council "lost" £2.7m of its grant entitlement to fund other Councils minimum guaranteed increases in grant (the floor).
6.1 Information on the rationale of the response for each question is provided in the commentary in Appendix 1.
7 OTHER OPTIONS CONSIDERED
7.1 The options considered are described in Appendix 1.
8.1 Cabinet members; Parish Council; Other B&NES Services; Section 151 Finance Officer; Chief Executive; Monitoring Officer
8.2 A draft version of the proposed response and this report were circulated for comments to all Strategic Directors.
9 ISSUES TO CONSIDER IN REACHING THE DECISION
9.1 Given the importance of Formula Grant in funding local services, the Council's response needs to argue carefully for a formula that fits the local issues and circumstances. It is also important that the Council's rationale is consistent within itself, for example, arguing for all the options that benefit the Council may mean an inconsistent rationale.
10 ADVICE SOUGHT
10.1 The Council's deputy Section 151 Officer (Assistant Director - Support Services (Finance)) has had the opportunity to input to this report and has cleared it for publication.
Gary Adams (01225 477107)
Local Government Finance Formula Grant Distribution - A Consultation Paper:
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