Meeting documents

1 THE ISSUE

1.1 This report sets out the latest position on discussions between the Council and central government on the four key national theme areas for Local PSAs which the Government has announced as part of its Comprehensive Spending Review.

2 RECOMMENDATION

2.1 That the contents of the update report be noted.

2.2 That the Council continues to pursue a Local Public Service Agreement containing the theme areas adopted by the Executive on 29th July 2002

2.3 That any proposals for changes to the scope of crime reduction theme areas which might arise from discussions as a result of central government's "pro-active" approach to PSAs be determined by the relevant portfolio holders

2.4 That a letter be sent to Richard Gibson at the Office of the Deputy Prime Minister (ODPM) (copied to the Local Government Association)

(1) thanking him for the prompt response to the concerns raised in this Council's letter of August 7th 2002, and looking forward to resolving outstanding issues swiftly

(2) expressing surprise at the remarks in his letter dated 8 August with regard to access to UCA funds by this Council as part of the PSA process, pointing out that the approach represents a significant departure from the terms set out in the "New Challenges" document

3 FINANCIAL IMPLICATIONS

3.1 It remains possible that the Government's new approach may require changes in the crime reduction targets this Council puts forward. If so, this will cause some additional effort and expenditure in working up any new targets. However, current progress made towards agreeing other theme areas has reduced significantly the Council's exposure to these risks. All targets contained within the PSA will be progressed through the Service and Financial Plan process where full implications, including revenue consequences, will be considered.

3.2 A particular issue which needs to be addressed, set out in the body of the report (Paras 4.5-4.8), is the amount of Unsupported Credit Approvals (UCAs) to which the Council might expect access as part of the PSA. Any amount negotiated through the PSA (and the formula used to calculate the amount to which this Council is entitled) will have significant implications upon the Council's future capital resources. This could be the amount we will need to borrow within the proposed new powers for capital borrowing through the new "prudential framework", or that we use from other funding mechanisms (e.g. asset sales and the use of existing resources). The Draft Local Government Finance Bill, published in June 2002, contained proposals to allow Councils to borrow within a "prudential framework". It is expected that this system will probably be in 2003.

4 THE REPORT

4.1 On 17 July 2002, Richard Gibson, from the Office of the Deputy Prime Minister, wrote to all Councils in the November-January negotiating "slot" (including this Council) making a number of changes to the Government's approach to developing Local Public Service Agreements. These changes were set out in an update report for the Executive at its meeting of 29^th July. The key changes were:

· a crime reduction target is now to be compulsory, in place of a second social care/health or education target

· the specific targets for transport, crime reduction, health/social care and education are now to be suggested by central government as part of a new "pro-active" approach to PSA development

4.2 In addition, the specific targets contained in the Local Government PSA (from which councils are expected to choose their national targets) have changed from those set out in the original "New Challenges" document. In several cases, the individual changes to targets are technical in nature and will not have a great impact on the PSA's development.

4.3 In response, the Executive resolved on 29th July to write to the Office of the Deputy Prime Minister expressing concern about the late and significantly revised guidance, which still left some major aspects unresolved and which might cause additional effort and delay. Following the expiry of the call-in period, the Council wrote to Mr. Gibson on 7^th August requesting that specific proposals from government departments be forthcoming as a matter of some urgency.

4.4 Following this letter, progress has been rapid. Mr Gibson wrote to the Council on 8th August stating that discussions between officers and government departments have already begun to yield "a meeting of minds in relation to education and social services". Subsequently, discussions have taken place on the education, transport and social services theme areas. A letter received from Richard Gibson of the ODPM on 23^rd August formally confirms this position with regard to social services and transport. It states that the education proposals (which have in fact been discussed informally and are the subject of broad agreement) and the crime reduction proposals (over which the Council has yet to receive contact) "will reach you early in September; progress on them has been slowed by the holiday period". The theme areas agreed broadly follow those determined by the Executive on 29^th July. This progress is to be welcomed. However, for the current PSA negotiation timetable to be met, the Government will need to follow up this response with swift progress on the crime reduction proposals put forward by the Council. A verbal update on any developments in this theme area will be made to the Executive meeting.

4.5 However, one point made in Mr. Gibson's letter dated 8th August requires a response from this authority. He states that it would be unlikely that the Council would receive the full amount of Unsupported Credit Approvals it is currently proposing as part of its PSA (currently £2.3m). The reason he gives for this is that the "the booklet New Challenges said (paragraph 46) that an Unsupported Credit Approval of around £1-3m might be available for an authority of average size. Bath and North East Somerset is around half average size, measured by budget."

4.6 There is an implication in these remarks that Bath & North East Somerset would be able to receive a maximum of £1.5m (half of £3m) in UCAs as part of the PSA process. It is proposed that the Council seeks clarification of these remarks and responds robustly to the assumptions contained within it. It is appropriate to set out the extract from New Challenges in full:

4.7 The Council's currently has £2.3m of UCA proposals "on the table " as part of its PSA development process. Regardless of whether the Council ultimately wishes to make such an application for UCAs (which will depend on a wide rage of factors linked to the its capital strategy and Financial Plan), it regards this as consistent with the criteria set out in the New Challenges document. This sees UCA allocation as being dependent on the persuasiveness of the case rather than the size of the authority, with £3m being allocated for an average size council. The phrase "a little less for smaller authorities" does not imply that UCAs are to be allocated to Councils directly proportionally to their size. Indeed, even using such a measure, the Council is small only when compared to other unitaries and counties: when compared to all authorities, it is well within the average range of councils as judged by budget size.

4.8 If, however, the Council is to be penalised for its relatively small size when compared to other unitaries, then this reflects a change in the approach from that set out in the original prospectus. This issue could have potentially large implications beyond the PSA itself. The PSA approach to UCAs is seen as a "dry run" for the new prudential borrowing framework as set out in the Draft Local Government Bill. It is therefore important that the council protects its future access to capital by ensuring that it has at least the flexibility to argue for UCAs where this would meet the PSA criteria and contribute to local community benefits.