Fears that finance green paper will tread safe path

14 Sep 00
Local authorities have voiced fears that next week's Finance green paper will be nothing more than a damp squib with vague proposals designed to smooth tensions until after the General Election.

15 September 2000

The long-awaited document has already been affectionately dubbed the 'green, green paper' and is not expected to suggest any radical changes to the local government finance system.

Slight tweaks to the grant distribution formula are expected, with options for a statistical funding formula (along the lines of the current Standard Spending Assessment) plus an additional pot of money called a 'safety valve'.

The formula would provide most of the grant but hard-up local authorities would be able to bid for parts of the 'safety valve' fund. It is understood that this option is designed to ease tensions between rural and urban authorities. Both claim that the current funding formula discriminates against them.

The paper is also expected to propose switching to plan-based funding, with local authorities submitting funding bids to officials at the Department of the Environment, Transport and the Regions. But councils are universally expected to oppose this plan, as it would place their finances in the hands of civil servants.

'Local government will unite against any move towards plan-based funding,' said Gordon Keymer, leader of the Conservative group on the Local Government Association. 'This would not only erode local accountability, but putting together annual funding bids would simply add to our costs and bureaucracy,' he told Public Finance.

The government is expected to back down on threats to introduce direct funding to schools, although it will tentatively float the idea as a test of opinion.

According to sources, Chancellor Gordon Brown has reined in the Department for Education's idea to ring-fence school funding. He has argued that there are already difficulties funding a few hundred local education authorities and moving towards financing thousands of individual schools would not be practical.

Also expected in the green paper is a supplementary business rate, allowing councils to add an extra 5% on business rates and proposals on capital finance to relax restrictions on borrowing.

But contentious issues, such as the use of area cost adjustments and an overhaul of the allocation and funding system, will almost certainly be left alone until after the next General Election.

Officials at the LGA confirmed that it would be 'some time' before any radical reforms are discussed.

The Liberal Democrats at the LGA said the paper was in danger of falling flat if the government continued to shy away from giving authorities more control over their finances. The Conservatives said they expected the paper to read like a handbook of 'all you need to know about finance'.


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