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									City of Westminster

Cabinet                        Date                  Title of Report
                               16 December 2002      Local Government Finance
                                                     Settlement 2003/04
Classification                                       Report of

For General Release                                  Chief Financial Officer
Wards involved                 All


Policy context                 Maintaining an affordable Council Tax and the City
                               Council’s Budget
Financial Summary              The provisional Local Government Finance Settlement
                               will provide formula grant of £216 million in 2003/04. This
                               is a “floor” increase of 3.5% over the comparative level in
                               2002/03.


Officer Contact                Colin Crofts Tel. 020 7641-2309
                               David Gann Tel. 020 7641-2210


1.           Summary

1.1          As expected, the grant settlement for 2003/04 is based on formulae and
             Census data changes which will have serious implications for the Council’s
             budget, particularly in future years. The provisional settlement does not
             adequately reflect Westminster’s spending needs and there is no certainty
             that the Government will continue to set “floor” increases at or above
             inflation.

1.2          On 5 December 2002 the Minister for Local Government and the Regions
             made a statement to the House of Commons about the Local Government
             Finance Settlement for 2003/04. Following the statement, a consultation
             paper was sent to all local authorities and to the Local Authority
             Associations. Responses are required to the consultation paper by 14
             January 2003.

1.3          The Ministerial statement has given provisional details of central
             Government support for local government in 2003/04. If all local authorities
             were to spend at the levels of the Government’s Formula Spend Shares
             (formerly called Standard Spending Assessments), then the Band D Council
             Tax for 2003/04 would be £1,036.06 per property (assuming 100%
             collection).




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1.4          In July 2002, the Government issued the consultation paper “Local
             Government Finance – Formula Grant Distribution”. This consultation
             paper set out the Government’s options for reform of the revenue grant
             distribution system.      The Settlement for 2003/04 is based on the
             Government’s decisions in respect of the new distribution formulae. The
             Government’s new formulae have, potentially, an adverse effect on the City
             Council’s financial position.

1.5          At the end of September 2002, the Office for National Statistics (ONS),
             announced the results of the 2001 Census of Population. The mid-year
             population figure for Westminster was 181,700. The 2000 ONS mid year
             estimate was 244,597. Census based figures are a important component of
             grant distribution formulae and the “loss” of 26% in Westminster’s
             population has had an adverse impact on the City Council’s grant position.

1.6          The system of “floors and ceilings” on grant changes has been retained.
             This system will protect the City Council from the considerable grant losses
             from the 2002/03 position, which would have resulted from the new grant
             distribution formula and from the 2001 Census results.

1.7          The Council’s grant for 2003/04 has provisionally been set at £216.2 million,
             based on the “floor” (or minimum) increase of 3.5%. As a result of the grant
             formulae and Census data changes, the Council’s Formula Spending Share
             has been reduced by £50 million (14.6%) on the comparative figure for
             2002/03. This FSS reduction has very serious implications for grant
             receivable in future years as the Council will continue at the “floor” level with
             no guarantee that the Government will continue to set minimum increases
             at or above inflation. In short, the grant does not reflect the Council’s
             spending needs based on an accurate population figure and new spending
             commitments (such as the cleansing contract relet).

2.           Recommendations

2.1          That the Council continues its campaign for an urgent review and correction
             of the 2001 Census figures for Westminster.

2.2          That the Council seeks to reverse the changes made to the Personal Social
             Services and Environmental, Protective and Cultural Services funding
             formulae.

2.3          That the Council objects to the DfES proposals for passporting education
             funding to schools as these could have serious budget implications for other
             services.

2.4          That the scope for further budget savings and discretionary charges be
             reported to the next Cabinet meeting.




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3.           The National Context and Resource Equalisation

3.1          The Chancellor of the Exchequer announced the results of the
             Government’s third Comprehensive Spending Review on 15 July 2002. The
             Review included public expenditure plans for the next three years (until
             2005/06).   Besides the well-publicised increases in expenditure on
             education and health, limited information on total local authority expenditure
             was also announced.

3.2          The local authority spending plan figures have been adjusted since July
             2002 to reflect changes in authority functions and Government priorities,
             and the Resource Equalisation scheme introduced as part of the Formula
             Grant Review.

3.3          The calculation of an authority’s Formula Grant Allocation before floors and
             ceilings depends on the assumed national total for local authority spending,
             the national total for redistributed non-domestic rates, and the amount
             which Government assumes local authorities can raise from local taxpayers.
             The amount assumed to be raised locally depends on the size of the local
             tax base and the assumed national level for council tax.

3.4          In recent years both the assumed national total for local authority spending
             and the assumed national council tax level have been well below actual
             spending and council tax levels. This mismatch between assumed and
             actual levels has important distributional consequences. Ministers believe it
             is important that the assumptions used in distributing grant should more
             closely reflect actual average levels of council taxes, so as to take greater
             account of authorities’ relative ability to raise council tax. Consequently
             they have decided to increase both the assumed level of local authority
             spending and the assumed national council tax level to bring them broadly
             into line with the amount being spent by local authorities and the national
             average council tax.

3.5          There has been a change in the terminology used to describe different
             aspects of the system for distributing grant to local authorities. These
             changes are described in Annex B.

3.6          The figures set out below give the Assumed Spending Control Totals for
             local government (Table 1) together with an analysis of the year on year
             increases. Total Assumed Spending is the Government’s view of the level
             of local authority spending that they are prepared to support through grant.




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TABLE 1:            Total Assumed Spending Control Totals: 2003/04

                              2002/03     2002/03       2003/04    Change     2003/04   2003/04
                             Unadjusted   Adjusted        TSS      Adjusted   Uplift¹    TAS
                                £m          £m            £m          %         £m        £m

Education                        26,184       26,551      28,528       7.4%         0    28,528
PSS                              11,169       10,925      11,871       8.7%     1,100    12,971
Police                            7,741        7,760       8,249       6.3%       569     8,818
Fire                              1,521        1,521       1,583       4.0%       195     1,778
Highways                          1,955        1,945       1,994       2.6%       -40     1,954
EPCS                              9,212        9,381       9,912       5.7%     2,230    12,142
Capital                           2,224        2,224       2,648      19.1%       -40     2,608
Unallocated                         300          329         456      38.4%         0       456

TOTAL                            60,306       60,635      65,240       7.6%     4,014    69,254

Note:     1.    The amount added for full resource equalisation.


3.7            Table 2 gives details of Formula Spending Control Totals, (formerly called
               Standard Spending Assessment Control Totals) and changes from last
               year. These figures exclude specific grants otherwise they are the same as
               those in Table 1.


TABLE 2:            Change in Formula Spending Control Total 2002/03 to 2003/04

                              2002/03     2002/03       2003/04    Change     2003/04   2003/04
                             Unadjusted   Adjusted       SSA       Adjusted   Uplift¹     FSS
                                £m          £m            £m          %         £m        £m

Education                        22,503       23,484      25,015       6.5%         0    25,015
PSS                               9,231        9,481      10,071       6.2%     1,100    11,171
Police                            3,577        3,577       3,583       0.1%       569     4,152
Fire                              1,521        1,521       1,583       4.0%       195     1,778
Highways                          1,955        1,945       1,994       2.6%       -40     1,954
EPCS                              8,961        8,862       9,339       5.4%     2,230    11,569
Capital                           2,014        2,014       2,308      14.6%       -40     2,268

TOTAL                            49,762       50,883      53,893       5.9%     4,014    57,907

1. The amount added for full resource equalisation.



3.8            The overall increase is higher than that announced in the Spending Review
               in July 2002, reflecting a large number of functional changes, the transfer of
               special, targeted, and ring fenced grants into Formula Spending Share, and
               the Resource Equalisation Scheme.




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4.        The Level of Aggregate External Finance to Local Government 2003/04

4.1          The Government’s actual support for local government is called Aggregate
             External Finance (AEF). This is made up of the amount of non-domestic
             rates distributed to local authorities (NNDR), Revenue Support Grant
             (RSG), and other Revenue Grants.

4.2          The level of net AEF distributed to local authorities in England for 2003/04
             is to be £51.235 billion. Last year the amount was £47.393 billion. The
             change in cash terms is £3.842 billion, or 8.1%, which is more than the
             current rate of inflation (2.1%). The planned increase in Aggregate External
             Finance is broadly in line with the planned increase in Formula Spend
             Shares over the next three years.


5.        Breakdown of Government Support for Local Government

             The distributable amount of non-domestic rates for 2003/04 is £15.600
             billion, a decrease of 6.2% on last year’s figure of £16.626 billion. Revenue
             Support Grant (RSG) is to be increased by 15.3% from £21.052 billion to
             £24.266 billion. Specific and special grants are increased by 16.4% from
             £9.752 billion to £11.347 billion. The Government have adjusted the
             2002/03 figures to reflect changes made after the actual 2002/03
             Settlement. These figures are also given in Table 3.

TABLE 3             Breakdown of Aggregate External Finance 2002/03 and 2003/04

                                    Settlement    Settlement       2003/04      Change
                                     2002/03       2002/03       Provisional   Adjustment
                                                  Adjustment     Settlement     2002/03
                                                                               to 2003/04
                                     £ billion      £ billion     £ billion        %

Distributable Amount of NDR              16.626         16.626       15.600          -6.2
Revenue Support Grant                    19.931         21.052       24.266          15.3
Special/Specific Grants                  10.829          9.752       11.347          16.4
Damping Grants/                           0.007          0.007        0.007           0.0
City of London Offset
Aggregate External Finance               47.393         47.437       51.220            8.0


6.        Central Government Support for Inner London 2003/04

6.1          Formula Grant is to be distributed to enable broadly the same Council Tax,
             now known as the Assumed National Council Tax (SANCTS) to be set for
             dwellings listed in the same valuation band in each area. The table below
             sets out the appropriate shares of SANCTS for all classes of authority in
             Inner London. The figures are not strictly comparable to those of 2002/03
             because of the Resource Equalisation Scheme.              If the Resource
             Equalisation had been in place in 2002/03 the Assumed National Council
             Tax would have been £959. The increase on this adjusted basis is 8%.
             (The year on year increase before resource equalisation is 34.7%).

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TABLE 4             Share of Assumed National Council Tax (SANCTS)


                                         Band D              Band D     Band D
                                         2002/03            2002/03     2003/04
                                                            Adjusted
                                                £              £           £

       Inner London Boroughs                    685.16         854.26      908.98
       GLA:
       Police Services                              57.63       71.85          87.98
       Non-Police Services                          26.37       32.89          39.10

       Total                                    769.16         959.00     1,036.06

6.2          If all councils spend at the level of their FSS’s and assuming a 100%
             collection rate then Council Tax bills for England would be £1,036.06 at
             Band D.


7.        Formula Grant Review

7.1          In July the Office of the Deputy Prime Minister issued the consultation paper
             “Local Government Finance – Formula Grant Distribution”. This set out the
             Government’s proposals and options for the new revenue grant distribution
             mechanism to be introduced for the financial year 2003/04. The City
             Council in its response to the Government’s consultation paper stated that it
             was essential that the new system of grant distribution be underpinned by
             formulae that were technically robust and based on the objective analysis of
             underlying need. Further, the City Council stated that there should be
             plausible evidence based on the link between the formula indicators and the
             weights placed upon them and that the use of Ministerial judgement should
             be kept to a minimum.

7.2          It appears evident from the Minister’s Statement that the objective to re-
             allocate resources and the apparent pursuit of simplicity has overridden the
             importance of fairness and of technical considerations in the new revenue
             grant formulae.

7.3          The changes to the grant distribution formulae are set out below.

              Education

                  It is proposed to use a variant of option EDU3, including Working
                  Families Tax Credit but with funding for half rather than all unmet needs
                  and with 10 rather than 30 LEAs in the threshold. There is a new block
                  for Youth and Community Services. A floor at 3.2% and a ceiling at
                  7.0% has dampened the changes in allocations per pupil compared to
                  2002/03 on a like-for-like basis.


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              Children’s Social Services

                  It is proposed to implement a variant of Option SSC3. This introduces a
                  new foster care adjustment based on research by the Thomas Coram
                  Research Unit at the Institute of Education. Since consultation on the
                  Formula Grant Review, the social class variable has been changed so
                  that it is based on the Government’s new classification of social class.

              Elderly Social Services

                  It is proposed to implement a variant of option SSE2. This is a combined
                  formula for domiciliary and residential care based on research by the
                  University of Kent. There have been slight changes to the weightings
                  since consultation on the Formula Grant Review as a result of the free
                  nursing care transfer. The technical robustness of the low income
                  adjustment has also been improved, and is now based on older people
                  in rented accommodation, and those not living in couples and who are
                  not the head of household.

              Young Adults Social Services

                  It is proposed to implement option SSO1. This is a simplified formula
                  that uses three indicators of deprivation: income support, single adults
                  living away from their families, and public sector rented flats. There
                  have been slight changes to the weightings since consultation on the
                  Formula Grant Review as a result of the free nursing care transfer.

              Police

                  The 2003/04 Police formula is largely based on option POL2. It updates
                  the activity analysis and removes the establishment factor from the
                  formula. However, the rural policing fund remains as a special grant.

              Fire

                  It is proposed to implement a variant of FIR2. The formula now
                  comprises a basic amount per head of population with top-ups for
                  deprivation, ‘A’ risk (high property risks); coastline, fire safety, area cost,
                  and pensions.

              Highways Maintenance

                  It is proposed that the 2003/04 highway maintenance formula will be
                  based on option HM1 but has been updated to reflect the spending base
                  to 2000/01 spending.       It contains factors for usage and winter
                  maintenance. Usage is based on traffic flows (with the option HM1
                  100:1 weighting on HGVs and buses) and net daytime population per
                  km (i.e. resident population plus net in-commuters plus visitors per km).
                  Winter maintenance is based on both predicted gritting days and snow
                  lying days.



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              Environmental Protection and Cultural Services (EPCS)

                  It is proposed to adopt a variant of EPC3, though with different weights
                  attached to the indicators. The Concurrent Services adjustment has
                  been removed and the adjustment for London Buses and the GLA is
                  now made proportional to FSS. Housing Benefit Administration has
                  been moved wholly to DWP grant and there is a minor change of Flood
                  Defence.

              Capital Financing

                  The structure of the capital financing block, and the indicators used,
                  remain as in previous years. The only change to this block is that from
                  2003/04 it is proposed to base all interest rate information on 12 month
                  averages. For 2003/04 support for new and existing PFI projects will
                  continue to be provided via a separate grant.

              Area Cost Adjustment (ACA)

                  It is proposed to implement a variant of option ACA2. The New
                  Earnings Survey has been used instead of the Labour Force Survey.
                  The London Boroughs of Merton, Kingston upon Thames, and Sutton
                  have been moved into a West/North West/South West grouping of Outer
                  London boroughs. The Survey and Berkshire fringe areas have been
                  distinguished from the Buckinghamshire and Hertfordshire fringe areas.
                  And the threshold has been lowered so that the ACA is extended to
                  additional authorities in the West Midlands, Greater Manchester,
                  Cheshire, Merseyside and West Yorkshire areas.

              Fixed Costs

                  It is proposed to implement option FC1. This provides £300,000 to
                  every authority that receives EPCS FSS. Police and Fire authorities
                  have not been included as there is much less variation in size for these
                  classes of authority.

              Population

                  It is not proposed to implement any of the options on population change.
                  The Government had suggested that they would recognise the
                  additional and contrasting pressures faced by local authorities
                  experiencing either population decline or rapid population growth.


7.4          The Office of the Deputy Prime Minister has not currently made available
             information on the impact of formula changes. It is therefore impossible, at
             present, to quantify the impact of the formula changes on Westminster’s
             Formula Spending Share.




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8.        Impact of the 2001 Census of Population

8.1          The Government has used the 2001 Census figure for Westminster in the
             new Formula Grant. This has had a considerable impact on Westminster
             Formula Spend Share allocation. The mid year population estimate, based
             on the 2001 Census, for Westminster is 181,700 compared with the 2000
             figure of 244,600. This is a loss of 62,900, or 25.7%.

8.2          The Office for National Statistics (ONS) population figure for Westminster is
             clearly an underestimate. If the ONS figure were correct, Westminster’s
             population would have declined by 7,000 in the last 20 years, which
             contradicts all the available evidence.       Analysis of the number of
             households on the Council Tax Register and the Electoral Register
             suggests that Westminster’s population is about 231,000.

8.3          The City Council is presently challenging the ONS population estimate for
             Westminster. The Government should consider the implications for future
             Local Government Finance Settlements of using data from the 2001
             Census and make appropriate adjustments for Westminster.

8.4          As for the formula changes, the Government has not provided information
             on the impact of data changes. The Association of London Government
             has requested from the ODPM tables that show the impact of methodology,
             data and control total movements. The information is still awaited.

9.        Revenue Grants

9.1          The Government has carried out a review of special, targeted and ring
             fenced grants. For the current financial year, these grants amount to 12.4%
             of all Government revenue grants to local authorities. In 2003/04 ring
             fenced grants will begin to fall and on current plans is set to be under 10%
             in 2005/06.

9.2          The Government has decided to end a number of grants through changing
             them to other forms of grant, rolling them back into formula grant, or by
             abolishing them altogether. Ring fenced grants are those which must be
             used for the purposes as defined by Government. Formula Grant, (formerly
             Standard Spending Assessments/Revenue Support Grant), is distributed
             according to the new general formulae. Specific Formula Grant is to be
             distributed outside the general formula, as a specific or special grant, but
             with no general conditions attached by the Government as to how it might
             be spent.




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9.3          The proposed changes for 2003/04 are as follows:

              Education

                  Nursery Education Grant will be absorbed into Formula Grant
                  Class Size Grant will be rolled into Formula Grant
                  Standards Fund: NQT Induction; Performance Management; School
                  Inclusion, will end from 2003/04
                  Standards Fund: Excellence in Cities, the current ring fenced grant is to
                  be replaced by a specific formula in 2003/04.

              Personal Social Services

                  Preserved Rights Grant is to become a Specific Formula Grant
                  Promoting Independence which is currently a ring-fenced grant is to be
                  absorbed into Formula Grant.
                  Residential Allowance will be rolled into Formula Grant
                  Free Nursing care is to be taken out of Formula Grant.

              Environmental, Protective and Cultural Services

                  Fridges Disposal Grant, which is currently a specific grant will be
                  transferred to Formula Grant.

              Capital Financing

                  An element for the PFI special grant is to be taken out of Formula Grant.


9.4          Again the ODPM have not provided information at local authority level of the
             impact of these changes. However, Westminster’s Total External Support
             figure for 2002/03 of £205.117 million has been rebased by £3.760 million
             to £208.787 million because of transfer and control total changes.


10.       Floors and Ceilings, and Damping Grants

10.1         The First Secretary of State again intends to apply a floor and ceiling on
             formula grant increases to all receiving authorities.

10.2         The floors and ceilings system will operate in the same general way as for
             2002/03:

              Floors and ceilings will apply to the annual increase over the actual grant
               received in 2002/03, adjusted as necessary for transfers of responsibility
               and funding so as to give a like for like comparison;




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              The 2002/03 baseline will also be adjusted for increased capital
               investment;

              Floors and ceilings will again be operated for three separate groups.
               There will be no cross-subsidisation of the floors and ceilings between
               the groups of authorities; and

              The part of the cost of each floor that is not met by the ceiling will be met
               by scaling back the increase above the floor of each authority between
               the floor and the ceiling.

             The Secretary of State proposes to make two changes for 2003/04. The
             adjusted grant amounts for 2002/03 have been calculated by adding or
             subtracting from the 2002/03 grant amounts the difference between actual
             2002/03 SSA and adjusted 2002/03 SSA.

             In addition, the adjustment for increased capital investment has been
             calculated by reference to recent credit approvals, rather than by reference
             to net changes in the formula share for debt charges.

             For authorities with education and social services responsibilities, the floor
             is 3.5% increase and the ceiling 8%. For Police and Fire authorities and the
             Greater London Authority (GLA) the floor is 3% and the ceiling is 4.9%. For
             district councils the floor is 3% and the ceiling is 12.5%.

10.3         Westminster’s grant increase has been set at the Government’s “floor” level
             of 3.5%. This means that the Council will receive £31.758 million from the
             “floors pool”. If no floor had been set, the Council would have lost grant of
             £31.758 million in cash terms.

10.4         There was no Government announcement about the level of “floor and
             ceilings” for future years.


11.       Formula Spending Share and Central Government Support for
          Westminster

11.1         Annex A sets out the Standard Spending Assessments (SSA) for 2002/03
             and the Formula Spending Share (FSS) for 2003/04. The two are not
             comparable because of the grant distribution formula changes set out in
             paragraph 7.3. However, the Office of the Deputy Prime Minister has
             provided a comparator. Column 2 gives the FSS comparator for 2002/03.
             This column gives the 2002/03 Settlement information, but uprated for
             Resource Equalisation and adjusted for changes in local authority function
             and grant transfers.




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11.2         The difference between column 2 and 3 of Annex A illustrates the impact of
             grant distribution formula changes and data changes. Westminster’s losses
             or gains because of formula and census data change are as follows:-

              Education plus £7.2 million, or plus 9.4%
              Personal Social Services minus £24.3 million, or minus 25.1%
              Highway Maintenance plus £5.8 million, or plus 61.6%
              Environmental, Cultural and Protective Services minus £40.2 million, or
               minus 26.7%
              Capital financing plus £1.3 million, or plus 12.4%
              Total minus £50.2 million, or minus 14.6%


11.3         The 2003/04 Central Government Support is made up of two elements;
             income from non-domestic rates and Revenue Support Grant. Revenue
             Support Grant includes Westminster’s “floor” payment of £31.758 million.
             The Westminster level of central government support for 2003/04, together
             with that for the 2002/03 Settlement is set out in Table 5. Without the “floor”
             payment, Westminster’s Total External Support would have been £184.430
             million. Westminster’s grant increase is at the “floor” level of 3.5%.


TABLE 5             Breakdown of Central Government Support for the City Council


                                      2002/03     2002/03      2003/04      Change        Change
                                       Actual     Adjusted   Provisional   Unadjusted     Adjusted
                                      £ million               £ million       £%             %

 Non-Domestic Rates                     72.456      72.456      53.194       -26.6             -26.6
 Revenue Support Grant                 132.661     136.421     162.994       +22.9             +19.5


 TOTAL EXTERNAL SUPPORT                205.117     208.877     216.188        +5.4              +3.5




12.       Passporting of Education Funding for Schools

12.1         The DfES expects local education authorities to passport their increase in
             the total schools FSS directly to schools. The cash increase in funding
             required to meet the passporting criteria has been calculated by the DfES
             as £8.96m or nearly 13% more than the Council’s schools budget for
             2002/03. This is £1.6m higher than our entire grant increase for all of our
             services. The DfES proposals penalise authorities, like Westminster, which
             spend above their Education FSS as the Council would only need to
             increase its school budget by £3.3m or 4.7% to meet the FSS figure (from
             £70.8m to £74.1m).




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12.2         The Secretary of State for Education has new reserve powers from 2003/04
             to require LEAs to passport their increases in schools funding. This power
             will only be applied in exceptional cases and the Secretary of State will
             consider the following circumstances when deciding whether to exercise his
             reserve power:

             a)       The authority’s overall level of schools budget in relation to its schools
                      formula spending share plus relevant specific formula grant
                      (Westminster is spending 8% above its Education SSA in 2002/03);

             b)       The extent to which the authority has failed to pass on the increase in
                      schools funding (Westminster has one of the highest passporting
                      requirements in the country in cash per pupil terms);

             c)       Whether the authority faces particular pressures from other services;
                      and

             d)       The performance of an authority’s schools.


12.3         It is recommended that the Council raises objections to the DfES proposals
             for reserve powers as the use of these could have serious implications for
             other service budgets.

13.          National Non-Domestic Rates

             The Government proposes to increase the national non-domestic rate from
             43.7 pence in the pound this year to 44.4 pence in the pound in 2003/04.
             This increase of 1.6% is in line with the increase in the September Retail
             Price Index (RPI).


14.       The Greater London Authority

             At the time of preparing this report, it was not possible to predict the level of
             GLA precept for 2003/04. The GLA’s draft Budget is to be published on 13
             December 2002. There will be a consultation period of one month. Early
             indications are that the precept increase could be in excess of 20%. Last
             year the GLA precept was £173.88 at Band D. However, if the GLA were to
             spend at its Formula Spending Share level, then the precept for police
             services would be £87.98 and that for non-police services, including the fire
             service, would be £39.10. The total precept for the GLA would thus be
             £127.08. If the Greater London Authority were to spend at FSS level, then
             the Precept would be as set out in Table 6.




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TABLE 6             Notional GLA Precept for Assumed National Council Tax


                                                 Precept at FSS level
                                                 2002/03     2003/04
                                                    £           £

                GLA Precept:
                  Police Services                     57.63        87.98
                  Non-police services¹                26.38        39.10

                TOTAL PRECEPTS                        84.01       127.08


              Note: 1. the London Fire and Emergency Planning Service is included in the non-police
               element of the GLA.




15.       Budget Strategy

15.1          The Cabinet considered proposals for expenditure growth, savings and
              additional income at its meeting on 18 November. It was agreed that these
              should be provisionally adopted for preparation of the 2003/04 draft
              Estimates, subject to a further review of the budget strategy in the light of
              the grant settlement.

15.2          The provisional grant settlement represents an increase of 3.5% over the
              equivalent amount for 2002/03. Although this “floor” increase is above the
              general level of inflation, the real concern is that the Formula Spending
              Share is a reduction of £50 million (14.6%) on the comparative figure for
              2002/03. This means that the Council will remain at the “floor” level for
              future years and there is no guarantee that increases will continue at or
              above inflation. Thus, the 2003/04 protection against the full adverse
              effects of the grant review and changes in Census data may only be for the
              short-term. The Council will continue to lobby rigorously for a review and
              uplift of the Census data as the current FSS does not properly reflect
              Westminster’s spending needs.

15.3          Future grant uncertainties – together with the need to fund growth
              commitments such as the cleansing contract relet – means that there will be
              continuing pressure to identify budget savings and generate additional
              income. As part of the financial remit set in July 2002, the Cabinet
              requested that a reserve list of possible savings totalling £5 million be
              prepared for consideration in the light of the overall financial position
              following the announcement of the grant settlement.




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15.4         It is proposed to report to the next Cabinet meeting on 20 January on the
             scope for further savings and discretionary charges in the light of any new
             freedoms and flexibilities arising from the outcome of the Comprehensive
             Performance Assessment. This will also include a review of the Parking
             Places Reserve Account to reflect revenue and capital commitments and
             the need to maintain a working balance.

16.          Ward Member Comments

             As this report relates to all Wards, no Ward Member consultation was
             required.

17.          Proposed Reasons for Decisions

17.1         The provisional grant settlement for 2003/04 has been set at the “floor” (or
             minimum) increase of 3.5%. However, the impact of formulae and data
             changes is that Westminster loses £50 million of its Formula Spending
             Share (previously known as Standard Spending Assessment). As a result,
             the Council will remain at the “floor” levels for future years with the
             consequential pressures to identify further budget savings and generate
             additional income.

17.2         For these reasons, it is recommended that the Council lobby for changes in
             the proposed grant formulae and the 2001 Census to better reflect
             Westminster’s spending needs.



If you have any queries about this report, please contact Colin Crofts on extension
2309 or e-mail ccrofts@westminster.co.uk, David Gann on extension 2210 or e-mail
dgann@westminster.co.uk




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             LOCAL GOVERNMENT (ACCESS TO INFORMATION) ACT 1985
                          BACKGROUND PAPERS

The documents referred to in compiling this report are as follows:


1.           Local Authority Finance Settlement 2002/03 – 5 December 2002

             A consultation paper and supporting annexes:

              Annex 1 – a list of specific grants within aggregate external finance and
               key statistics;

              Annex 2 – a draft of the Local Government Finance Report 2002/03;

              Annex 3 – a table of total SSA, RSG, NNDR and Principal Formula
               Police Grant;

              Annex 4 – a table of income from CTSS;

              Annex 5 – a table of major service SSAs.


2.           Local Authority Social Services Letter – Letter to the Chief Executive
             dated 5 December 2002

3.           A Consultation Paper – “Local Government Finance – Formula Grant
             Distribution” – July 2002.

4.           Supporting Urban Communities. Response to the consultation paper
             on the review of the Revenue Support Grant Distribution System -
             Westminster City Council 27 September 2002.

5.           Evaluation of Accuracy and Reliability of 2001 Census – Westminster
             City Council – November 2002.

6.           Report of Chief Financial Officer to Cabinet on 18.11.02 – Budget
             Strategy.

7.           Report of Chief Financial Officer to Cabinet on 15.7.02 – Financial
             Remit.

8.           Letter from the Department of Education & Skills to all Chief Education
             Officers dated 6th December 2002 – School Funding 2003/04.




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