Headlines: September 20th, 2000

Greater flexibility for councils to borrow, more transparent education funding and new opportunities for business to invest in local communities are among the options set out in a new green paper on modernising local government finance. The green paper follows long-term lobbying by local government for greater freedom and flexibility in their finance choices.Local Government Minister Hilary Armstrong says that turning the paper into legislation would bring an end to the situation where councils have to get permission from central government every time they want to borrow to fund capital investment. It will also give back to councils some leverage over the business community. No longer responsible for setting the business rate, there is the opportunity to raise a supplementary business rate, in consultation with the business community. This would be linked to additional business services for the business community.

Perhaps the biggest change and addressing the local government community’s biggest fear, the green paper suggests a continuing role for councils in education. There had been suggestions that councils, who currently top slice a portion of funding allocated to schools for central service provision, might be cut out of the chain altogether. The green paper suggests separate budgeting so that councils will be allocated money for conduct their duties, and schools receive allocations unaffected by top-slicing. The proposals suggest fixed amounts of money per pupil with financial top-ups for areas suffering from deprivation and where it is more difficult to recruit and retain teaching staff.

The Local Government Association (LGA) is relieved to have retained a legitimate and funded role in schools, and is particularly eager to progress simplification of the capital finance system. It has called for the Government to turn into speedy legislation plans for a supplementary business rate.

Copies of the green paper and its annexes can be downloaded from DETR’s website at www.local.detr.gov .