Local government finance review to '‘happen next year', says Pickles

14 Sep 10
The government will review local government finance 'this time next year', Local Government Secretary Eric Pickles told an influential group of MPs this week.
By Jaimie Kaffash

14 September 2010

The government will review local government finance ‘this time next year’, Local Government Secretary Eric Pickles told an influential group of MPs this week.

Pickles appeared before the local government select committee yesterday alongside housing minister Grant Shapps and decentralisation minister Greg Clark. It was the first meeting of the committee in this Parliament and under the chair of Clive Betts.

Pickles told the MPs that the review of local government finance – first announced in the coalition agreement in May – will begin in a year’s time. This will be after the Localism Bill has gone through Parliament and after the funding available for local government will have been made clear in next month’s Spending Review.

He said that most of the finance review will replicate the work of Sir Michael Lyons’ 2007 report on the subject.

‘It isn’t that Sir Michael Lyons missed out on anything major,’ Pickles said. ‘We need to look at borrowing, prudential borrowing, charges, trading and by then there will be the General Power of Competence, which will make things a lot easier. We will be repeating about 95% of Lyons, because it was an excellent report. Then it will be up to us to make a political decision.’

But he ruled out the possibility of a local income tax, one of the options suggested by Lyons.

The ministers were also questioned about the decision to abolish the Audit Commission. Pickles said there was still a need for a rigorous auditing function and that public interest reports, which highlight particular deficiencies in a local authority’s finances, will be a requirement.

The committee suggested that the abolition of the commission’s Comprehensive Area Assessment inspection regime will make it harder for the ‘armchair auditors’ – championed by Pickles – to operate. But the secretary of state said that there are enough organisations that will continue to produce easy-to-digest comparative figures, including the Local Government Improvement and Development agency and the Association for Public Service Excellence. 

Pickles last week told Parliament that the Audit Commission’s local government value-for-money research functions would now be undertaken by the National Audit Office, an announcement that was criticisedby Betts. Pickles said he had discussed this in advance of the announcement with the head of the NAO, Amyas Morse, and will this week meet Margaret Hodge, the chair of the Public Accounts Committee, which considers NAO reports.

The local government secretary added that these functions were also carried out by CIPFA and the LGID, and did not justify the £50m running costs of the commission.

Pickles also suggested that the future of Total Place – which he said he supported, but wanted to become more radical – would be discussed in the Spending Review. He said that the Local Government Association’s estimate of the £4.5bn savings to be made by the co-ordinated local funding project was ‘not far off our own estimates’.  

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