DPRR/12-13/13
LOCAL GOVERNMENT FINANCE BILL
Memorandum by the Department for Communities and Local
Government to the Delegated Powers and Regulatory Reform
Committee
INTRODUCTION
1.
This Memorandum sets out the provisions in the Local Government Finance
Bill which confer delegated powers on the Secretary of State; explains why the
power has been taken and the nature of, and the reason for the procedure selected.
BACKGROUND
2.
The Bill seeks to make changes to the current system of local government
finance. The need for a review of local government finance was set out in the
Coalition’s Programme for Government, and in the consultation, published in July
2011, entitled ‘The Local Government Resource Review: Proposals for Business
Rates Retention’. The Local Government Resource Review considered the need to
reduce the current dependence of local authorities on central government funding, in
order to strengthen local accountability, and to provide a financial incentive to local
authorities to promote business growth in their area. The Bill makes provision for a
new non-domestic rates retention scheme for authorities.
3.
The Bill also seeks to implement a commitment made by the Government, in
the Spending Review 2010, that it would localise support for council tax from the
financial year 2013-14, replacing council tax benefit. Each billing authority in
England will be required to adopt a council tax reduction scheme for the financial
year 2013-14. The scheme will specify the council tax reductions which the
billing authority considers should apply in relation to its area for that year.
4.
Finally, the Bill makes certain technical changes to the existing council tax
regime.
DEVOLUTION
5.
The Bill extends to England and Wales only. However, the provisions
regarding the new non-domestic rates retention scheme, the localisation of council
tax benefit and technical changes to council tax only apply to England.
PROVISIONS CONFERRING DELEGATED POWERS
Non-domestic rating
6.
Clauses 1 – 8: The first eight clauses of the Bill make amendments to primary
legislation (the Local Government Finance Act 1988, the Local Government
Finance Act 1992, the Local Government Act 2003, and the Greater London
Authority Act 1999) and introduce Schedules 1, 2 and 3 to the Bill which make
further amendments. Schedule 1 to the Bill amends the Local Government
Finance Act 1988, by inserting a new Schedule 7B on local retention of nondomestic rates. Schedule 2 to the Bill amends provisions about revenue support
grant in England, and Schedule 3 makes further amendments relating to local
retention of non-domestic rates.
7.
Each of clauses 1 – 8 (see clauses 1(6), 2(2), 3(13), 4(4), and 5(3)) state that
the amendments made by it and / or the Schedule it introduces have effect in
relation to the financial year beginning with 1 April 2013 and subsequent financial
years.
Clauses 1(7), 2(3), 3(14), 4(5) and 5(4):
Powers conferred on: Secretary of State
Powers exercised by: order
Procedure: none
8.
The above subsections of clauses 1 - 5 enable the Secretary of State by order
to amend clauses 1(6), 2(2), 3(13), 4(4), and 5(3) respectively, by substituting a
later financial year than the financial year beginning with 1 April 2013.
9.
These powers are needed to ensure that the amendments made by clauses 1-5,
and those made by Schedules 1, 2 and 3 to the Bill, can be commenced
appropriately. Subject to Parliamentary approval the Government intends the
amendments to have effect in relation to the financial year beginning with 1 April
2013 and subsequent financial years. However, if Royal Assent is received too
late to enable this to happen it will be necessary to alter the commencement of the
amendments so that they apply in relation to a later financial year.
10.
Clauses 1(7), 2(3), 3(14), 4(5) and 5(4) of the Bill are commencement
provisions. As is usual for powers of commencement, the exercise of these powers
is not subject to any Parliamentary procedure.
Council tax
Clause 9: Council tax reduction schemes
11.
Clause 9 substitutes a new section 13A into the Local Government Finance
Act 1992 (“the 1992 Act”). The new section 13A combines the existing power for
a billing authority to reduce council tax on a case-by-case basis or by reference to
a class of case with a new duty to reduce amounts on the basis of a council tax
reduction scheme to be made by the billing authority in England, or in relation to
Wales, by a person or body specified by Welsh Ministers in regulations. Clause
9(2) introduces Schedule 4 (amendments relating to council tax reduction
schemes) and clause 9(4) provides that each billing authority in England must
make a council tax reduction scheme by 31st January 2013; and that the first
financial year to which that scheme relates must be the year beginning with 1st
April 2013 (“2013-14”).
Subsection (1)(2B):
Powers conferred on: Welsh Ministers
Power exercised by: order
Procedure: affirmative
12.
This subsection provides the Welsh Ministers with the power to require
specified persons or authorities in Wales to make a council tax reduction scheme.
Clause 9(1)(2C) introduces Schedule 1B which provides for the matters which the
Welsh Ministers can prescribe for within any regulations made under subsection
(1)(2B).
13.
This power is needed to ensure that the Welsh Ministers are able to secure the
replacement of the Council Tax Benefit system in Wales.
14.
The National Assembly for Wales procedure selected for these regulations is
the affirmative procedure. The substance of the council tax reduction schemes in
Wales is to be introduced by way of subordinate legislation and the affirmative
procedure will ensure the substantive proposals for the schemes are subject to the
appropriate level of scrutiny, without requiring Parliament to scrutinise the detail
of arrangements during the course of the Bill.
Subsection (5):
Power conferred on: Secretary of State
Power exercised by: order
Procedure: none
7.
This subsection enables the Secretary of State by order to amend clause 9(4)
by substituting a date other than 31st January 2013, a financial year other than that
beginning with 1st April 2013, or both.
8.
This power is needed to ensure that the provisions concerning council tax
reductions schemes can be commenced appropriately. Subject to Parliamentary
approval the Government intends to commence council tax reduction schemes in
relation to 2013-14. However, if Royal Assent is received too late to enable this
to happen it will be necessary to alter the commencement of those schemes so that
they apply in relation to a later financial year. The powers in clause 9(5) enable
that to happen.
9.
Clause 9(5) is a commencement provision. As is usual for powers of
commencement, the exercise of the power is not subject to any Parliamentary
procedure.
Clause 10: Power to determine further discounts for certain dwellings
10.
Clause 10 inserts new sub-sections (4A and 4B) into section 11A of the 1992
Act, giving billing authorities a power to specify the discount on the amount of
council tax payable, under section 11(2)(a) of the 1992 Act, for certain dwellings.
11.
Section 11A of the 1992 Act already contains a power for the Secretary of
State to prescribe classes of dwellings by regulations, and this power will be
exercisable also in relation to new subsection (4A). The existing procedure for
such regulations is the negative procedure, and no change is made to this.
Clause 11: Power to set higher amount for long-term empty dwellings
12.
Clause 11 inserts a new section 11B into the 1992 Act, which enables a billing
authority in England, in any financial year, to make a determination that the
amount of council tax payable in respect of long-term empty dwellings, may be
increased by a percentage of not more than 50 as it may so specify, and that the
discount under section 11(2)(a) of the 1992 Act shall not apply to those dwellings.
The determination may relate to all chargeable dwellings in a billing authority’s
area or to only those in such part of its area as it may specify in the determination.
Sub-section (2) of the new section 11B of the 1992 Act:
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
13.
Sub-section (2) enables the Secretary of State to prescribe one or more classes
of dwelling in relation to which a billing authority may not make a determination
under the new section 11B(1) of the 1992 Act.
14.
This power is required to ensure that there is the possibility to prescribe
exceptions where matters relating to the dwelling or other circumstances mean
that it would not be suitable for an increased council tax payment to be levied in
respect of the long-term empty dwelling.
15.
The negative procedure is considered appropriate for these regulations, in line
with other similar powers in this part of the Act.
Clause 13 - Regulations about powers to require information, offences and
penalties
16.
Clause 13 inserts new sections 14A to 14D into the Local Government
Finance Act 1992.
New Section 14A of the 1992 Act
Power conferred on: Secretary of State and Welsh Ministers
Power exercised by: regulations
Procedure: affirmative
17.
New section 14A of the 1992 Act enables the Secretary of State and Welsh
Ministers to make regulations providing for persons to exercise powers to require
the provision of information and require a person to make arrangements to permit
access to their electronic records for prescribed purposes relating to a person’s
liability to pay council tax (new section 14A(1) and (7))
18.
Provision may also be made in regulations about arrangements for access to a
person’s electronic records for purposes relating to a person’s liability to pay
council tax when arrangements are entered into otherwise than under a
requirement mentioned in section 14A(1)(b) (new section 14A(2))
19.
Regulations may include provision about the persons by whom these powers
may be exercised and who may enter into these arrangements and may, in
particular, provide billing authorities with the power to authorise persons to
exercise to these powers or make these arrangements (new section 14A(3)).
20.
Regulations made under this new section, may in, particular include provision
equivalent to the provisions of the Social Security Administration Act 1992 listed
in section 14A(5), with modifications (new section 14A(4)). It is intended that the
powers under section 14A will be used to make regulations enabling local
authorities to authorise officers to exercise powers equivalent to those that may
currently be exercised in relation to council tax benefit under the provisions listed.
New section 14B of the 1992 Act
Power conferred on: Secretary of State and Welsh Ministers
Power exercised by: regulations
Procedure: affirmative
21.
New section 14B of the 1992 Act enables the Secretary of State and Welsh
Ministers to make regulations providing for the creation of criminal offences in
prescribed circumstances.
22.
The intention is to create criminal offences equivalent to those that apply in
relation to council tax benefit under the Social Security Administration Act 1992.
New section 14B(9) therefore provides that the regulations may make provision
equivalent to those listed in new section 14B(10) with modifications.
23.
New section 14B(2) to (7) set out the penalties that may be applied where an
offence has been committed. The penalties can be no greater than is provided for
in respect of the equivalent offence in the Social Security Administration Act
1992. Regulations may also include provision about matters such as defences to
an offence and procedure and evidence in relation to such offences (see new
section 14B(8)).
New section 14C of the 1992 Act
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: affirmative
24. New section 14C of the 1992 Act enables the Secretary of State and Welsh
Ministers to make regulations giving billing authorities powers to issue penalties
in prescribed circumstances (new section 14C(1) and (2)). The regulations can
only provide that a penalty may be imposed as an alternative to criminal
proceedings being taken against a person in respect of the act or omission to
which the penalty relates or where a person has not yet been charged with an
offence in respect of that act or omission (new section 14C(3).
25. Regulations made under this section may, in particular, make provision
equivalent to the provisions of the Social Security Administration Act 1992 listed
in new section 14C(6), with modifications. The intention is to give authorities the
power to impose penalties in circumstances similar to those in which a penalty
may be imposed in relation to council tax benefit under these provisions.
26. Council tax benefit is to be abolished and replaced with council tax reduction
schemes. The Government therefore wants to ensure investigatory powers for
local authorities, offences and relevant penalties to tackle fraud in relation to
council tax benefit under social security legislation can be made available to local
authorities in relation to council tax. In particular, the Government is concerned
that if local authorities have significantly fewer powers to investigate and
prosecute fraud in relation to the new reduction schemes than they currently have
in relation to council tax benefit, this may result in an increase in fraudulent
activity, placing greater financial pressures on authorities.
27. The powers set out in new sections 14A to 14D are therefore intended to ensure
local authorities may be given powers equivalent to some of those they may
currently exercise in relation to claims for council tax benefit. The Government
has, however, decided that rather than simply reintroducing all the existing powers
local authorities currently have to tackle council tax benefit fraud, we will work
with local authorities to identify those powers and offences they will really need
in the future.
28. It is therefore considered appropriate to make provision for the powers that may
be exercised by authorities and the creation of criminal offences in regulations.
This will allow us to ensure powers given to authorities are appropriate and
proportionate and that we avoid creating unnecessary criminal offences.
29. The Regulations will be subject to the affirmative procedure, and will therefore
be subject to the appropriate level of Parliamentary scrutiny.
Clause 15: Power for HMRC to supply information for purposes of council tax
30. Clause 15 inserts new paragraphs 15A to 15D into Schedule 2 to the 1992 Act.
This provides powers for officials of Her Majesty’s Revenue and Customs
(HMRC) to supply information held by HMRC to a qualifying person for
prescribed purposes relating to council tax. A qualifying person is a billing
authority in England and Wales, a local authority in Scotland or a person
authorised to exercise functions on behalf of such an authority or providing
services to it relating to council tax.
New paragraph 15A(1): Power for HMRC officials to supply information for
prescribed purposes relating to council tax in England
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
31. The Secretary of State may prescribe in regulations the purposes relating to
council tax for which information may be supplied to a qualifying person in
England by a Revenue and Customs Official under this paragraph (new paragraph
15A(1) of Schedule 2 to and section 116(1) of the 1992 Act). Information
supplied under this paragraph for a prescribed purpose may be used for another
prescribed purpose relating to council tax and may be supplied to another
qualifying person for a prescribed purpose relating to council tax.
32. These powers are required to enable restrictions to be placed on the purposes for
which information held by HMRC may be supplied and used by local authorities.
It is intended that these powers will be used to ensure that information held by
HMRC may only be passed on to local authorities when needed for the efficient
administration of council tax.
33.
We consider it appropriate to set out the detail of the purposes for which
information may be supplied by HMRC in regulations since it is clear on the face
of the Bill that information may only be supplied for purposes relating to council
tax. The negative procedure is considered appropriate as these are matters of
detail. This is also consistent with the procedure for making regulations under
similar powers in section 131 of the Welfare Reform Act 2012 which enables the
Secretary of State to supply information to local authorities for prescribed
purposes relating to council tax.
New paragraph 15B(1): Power for HMRC officials to supply information for
prescribed purposes relating to council tax in Wales
Power conferred on: Welsh Ministers
Power exercised by: regulations
Procedure: negative
34.
The Welsh Ministers may prescribe in regulations the purposes relating to
council tax for which information may be supplied to a qualifying person in Wales
by a Revenue and Customs Official under this paragraph (new paragraph 15B(1)
and (5) of Schedule 2 to the 1992 Act).
The National Assembly for Wales
procedure selected for the making of these regulations is the negative
resolution procedure. It is considered that the negative resolution procedure is the
appropriate form of Assembly scrutiny for the exercise of this power, particularly
in light of the fact that new paragraph 15B(6) requires the consent of the
Commissioners for Her Majesty’s Revenue and Customs to the making of such
regulations.
New paragraph 15C(1): Power for HMRC officials to supply information for
prescribed purposes relating to council tax in Scotland
Power conferred on: Scottish Ministers
Power exercised by: regulations
Procedure: negative
35.
The Scottish Ministers may prescribe in regulations the purposes relating to
council tax for which information may be supplied to a qualifying person in
Scotland by a Revenue and Customs Official under this paragraph (new paragraph
15C(1) and (5) of Schedule 2 to the 1992 Act). New paragraph 15C(6) requires
the consent of the Commissioners for Her Majesty’s Revenue and Customs to the
making of such regulations.
General
Clause 16(1): Power to make transitional provision
Power conferred on: Secretary of State
Power exercised by: order
Procedure: negative
36.
37.
Clause 16(1) enables the Secretary of State by order to make such transitory or
transitional provision, or savings provisions, as the Secretary of State considers
appropriate in connection with the coming into force of any provision of the Bill.
This
power
is
necessary
to
ensure
that
the
necessary
arrangements for the transition between different statutory regimes
can be made as the new provisions in the Bill are commenced.
38.
Orders under this section are subject to the negative resolution
procedure because they will be limited to ensuring the transition
between the present statutory position and the new provisions in
the Bill.
Clause 16(2): Power to make consequential provision
Power conferred on: Secretary of State
Power exercised by: order
Procedure: affirmative and negative (as set out below)
39.
Clause 16(2) enables the Secretary of State by order to make
such
consequential
provision,
including
provision
amending,
repealing or revoking any legislation passed or made before, or in
the same Session as, the Bill, as the Secretary of State considers
appropriate in connection with any provision of the Bill.
40.
This power is necessary to ensure that the necessary changes
can be made to existing legislation to take account of the new
provisions.
41.
Orders which amend or repeal an Act are subject to the
affirmative
resolution
procedure
changes to primary legislation.
because
they
will
be
making
Any other orders are subject to the
negative resolution procedure as they are technical in nature.
Schedule 1 – Local retention of non-domestic rates
42.
Schedule 1 amends the Local Government Finance Act 1988 (“the 1988 Act”),
by inserting a new Schedule 7B on local retention of non-domestic rates. The
references to parts and paragraph numbers below are references to the parts and
paragraphs of the new Schedule 7B.
Schedule 7B: Non-domestic rates retention
Part 2: Determination of the central and local share
Paragraph 5: Local government finance reports
Paragraph 5(2):
Power conferred on: Secretary of State
Procedure: report approved by resolution of the House of Commons
43.
Under paragraph 5 the Secretary of State must prepare a local government
finance report, each chargeable financial year, which will specify the basis of
calculation on which the Secretary of State intends to calculate which relevant
authorities will be required to make payments to the Secretary of State under this
Part and which relevant authorities will receive payments from the Secretary of
State, and on which the Secretary of State will calculate the amount of those
payments.
44.
Part V of the Local Government Finance Act 1988 contains the existing
provision for a local government finance report, as part of the provisions on
Revenue Support Grant. This Bill will make changes to the Revenue Support
Grant process so that it is payable on a discretionary basis, and, in the
Government’s view, it would now be more logical to make provision for the local
government finance report within the new provisions on the rate retention system,
as the new system will require a report for every chargeable financial year. The
report will continue to form the cornerstone of the annual local government
finance settlement.
45.
Under paragraph 5(2) the Secretary of State must lay, or make arrangements
for laying, the local government finance report before the House of Commons.
This procedure will replicate the existing procedure currently prescribed under
section 78A(4) of the Local Government Finance Act 1988 for the local
government finance report, which is currently only subject to approval by the
House of Commons only.
Part 3: Payments to the Secretary of State in respect of the central share
Paragraph 6: Regulations about payments to the Secretary of State in respect of the
central share
Paragraph 6:
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
46.
Paragraph 6 gives the Secretary of State the power, by regulations, to make
provision to determine the meaning of “non-domestic rating income” for the
payments to be made by billing authorities in England to the Secretary of State in
respect of the central share.
47.
Under the new provisions in Schedule 7B, the Secretary of State will
determine the percentages which will form the central share and local share for
each billing authority in England. Billing authorities are then required to make a
payment to the Secretary of State of an amount equal to the central share of the
billing authority’s non-domestic rating income. This power is required in order to
permit the Secretary of State to determine what income will be considered as nondomestic rating income for the purposes of that payment.
48.
The Parliamentary procedure selected for these powers is the negative
procedure. It is the Government’s view that the negative resolution procedure
provides the most appropriate form of Parliamentary scrutiny for the exercise of
this power because the matter is technical in nature.
Paragraph 7: Regulations about administrative arrangements in respect of the
central share
Paragraph 7:
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
49.
Paragraph 7 gives the Secretary of State the power, by regulations, to make
provision about the administration of payments under paragraph 6.
50.
This power is required to enable the Secretary of State to make provision
about administrative matters, including the time and manner in which payments
are to be made and for payments after the end of the year to enable reconciliation
of the amounts.
51.
The Parliamentary procedure selected for these powers is the negative
procedure. This will provide the appropriate level of scrutiny as these regulations
will be dealing with administrative matters only.
Part 4: Payments by billing authorities to major precepting authorities
Paragraph 8: Regulations about payments
Paragraph 8(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: affirmative
52.
Paragraph 8(1) gives the Secretary of State the power by regulations to make
provision to require the making of payments for a chargeable financial year by a
billing authority to a major precepting authority and to make provision for the
amount of the payment to be made by a billing authority to be such proportion of
the local share of its non-domestic rating income as is specified in or determined
in accordance with the regulations. The billing authority is not required to make a
payment for a year until after the local government finance report for the year has
been approved by the House of Commons.
53.
This power is required to enable major precepting authorities to be funded
from within the rates retention system and to allow them to benefit from growth in
local non-domestic rates. The regulations will make provision for what income
will be considered as “non-domestic rating income” for the purposes of the
payments; the apportionment of non-domestic rating income between billing
authorities and the relevant major precepting authorities in the same area; and
which billing authorities will make payments and which major precepting
authorities will receive payments.
54.
The Parliamentary procedure selected for these powers is the affirmative
procedure. This will provide the appropriate level of scrutiny for financial
provisions.
Paragraph 9: Regulations about administrative arrangements
Paragraph 9(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
55.
Paragraph 9(1) gives the Secretary of State the power by regulations to make
provision about the administration of payments required to be made by regulations
under paragraph 8.
56.
This power is required to enable the Secretary of State to specify what
information must be supplied by billing authorities to major precepting
authorities, the audit of such information and the timing of payments made under
the regulations provided for in paragraph 8.
57.
The Parliamentary procedure selected for these powers is the negative
procedure. This will provide the appropriate level of scrutiny as these regulations
will be dealing with administrative matters only.
Part 5: Principal payments in connection with local retention of non-domestic rates
Paragraph 13: Amending reports
Paragraph 13(4):
Power conferred on: Secretary of State
Procedure: report approved by resolution of the House of Commons
58.
Paragraph 13(1) makes provision for the Secretary of State, after a local
government finance report has been made, at any time before the end of the
chargeable financial year following the chargeable financial year to which the
report relates, to make in relation to the report one or more amending reports.
Under paragraph 13(4) the Secretary of State must lay, or make arrangements for
laying, the report before the House of Commons.
59.
This provision replicates the existing provision in Part V of the Local
Government Finance Act 1988. The power is limited by paragraph 13(6) which
states that where an amending report under paragraph 8 has been approved by
resolution of the House of Commons, the Secretary of State may not make a
subsequent amending report under paragraph 13 in relation to the same local
government finance report.
60.
This procedure will replicate the existing procedure currently prescribed under
sections 84A to 84C of the Local Government Finance Act 1988 for the local
government finance report, which is currently only subject to approval by the
House of Commons only.
Part 7: Levy payments, safety net payments and distribution of remaining balance
Paragraph 20: Regulations about calculation of levy payments
Paragraph 20(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: affirmative
61.
Paragraph 20(1) gives the Secretary of State the power by regulations to make
provision for calculating whether a relevant authority in England is required to
make a levy payment to the Secretary of State for a chargeable financial year, and
if so, the amount of the levy payment.
62.
Under the new rate retention system, relevant authorities will be required to
pay a levy on growth in non-domestic rating income that is considered to be
disproportionate, in order to manage the possibility that some authorities,
primarily those with large rate bases relative to their spending needs, will see
significant increases in income from relatively modest increases in their nondomestic rates. The levy amount will be returned to local authorities over time,
through the operation of the safety net, which is intended to protect authorities that
see significant negative volatility in their non-domestic rating income, or through
other general distribution through the local government finance report.
63.
It is our view that it is appropriate to make provision for the level of nondomestic rates growth beyond which a levy will be payable and the amount of that
levy in subordinate legislation as central Government will wish to continue to
consult with relevant authorities on the operation of the levy. The regulations will
also be detailed and technical. In addition, flexibility regarding the levy payment
is likely to be required as the method for calculating it may need to be changed in
future years, and this can be better achieved through secondary rather than
primary legislation.
64.
The Parliamentary procedure selected for these powers is the affirmative
procedure. This will provide for the necessary scrutiny of provisions regarding a
financial levy.
Paragraph 23: Regulations about calculation of safety net payments
Paragraph 23(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: affirmative
65.
Paragraph 23(1) gives the Secretary of State the power by regulations to make
provision for calculating whether the Secretary of State is required to make a
safety net payment to a relevant authority in England for a chargeable financial
year, and if so, the amount of the payment. Calculations are made after the end of
a chargeable financial year.
66.
The safety net is intended to protect authorities that see significant negative
volatility, so a sudden decline, in their non-domestic rating income, by making a
payment to them in the circumstances which will be set out in the regulations. It
is our view that it is appropriate to make provision for these matters in subordinate
legislation as central Government will wish to continue to consult with relevant
authorities on the operation of the safety net. The regulations will also be detailed
and technical. In addition, flexibility regarding the safety net payment is likely to
be required as the method for calculating it may need to be changed in future
years, and this can more conveniently be achieved through secondary than
primary legislation.
67.
The Parliamentary procedure selected for these powers is the affirmative
procedure. This will provide the appropriate level of scrutiny for financial
provisions.
Paragraph 26: Regulations about payments on account
Paragraph 26(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
68.
Paragraph 26(1) gives the Secretary of State the power by regulations to make
provision for a relevant authority in England to request the Secretary of State to
make a calculation before the end of a chargeable financial year (an “in-year
calculation”), whether the Secretary of State is likely to be required to make a
safety net payment (under paragraph 25) to the authority for the chargeable
financial year, and if so, the amount of the payment. The Secretary of State, under
paragraph 26(1), is also given the power by regulations to make provision about
the time and the manner in which such a request must be made; the information
that must be provided in connection with the request; and the circumstances in
which the Secretary of State may or must make an in-year calculation in response
to a request. The Secretary of State may also make provision by regulations about
the making of an in-year calculation, including for the Secretary of State to make
the calculation by reference to estimates of any of the amounts mentioned in
paragraph 23(3).
69.
The safety net is required, as set out above, to protect authorities that see
significant negative volatility in their non-domestic rating income. A power to
make regulations for in year calculations is required as central Government will
wish to continue to consult with relevant authorities as to whether the safety net
will operate during the financial year in which the volatility is experienced by an
authority, and how it might operate in that scenario. The regulations will also be
detailed and technical. In addition, flexibility regarding the safety net payment is
likely to be required as the method for calculating it may need to be changed in
future years, and this can more conveniently be achieved through secondary than
primary legislation.
70.
The Parliamentary procedure selected for these powers is the negative
procedure. This will provide the appropriate level of scrutiny, as the regulations
will only be regarding technical matters relating to provision for a relevant
authority to request the Secretary of State to make an in-year calculation. The
regulations about the actual calculation of safety net payments will be subject to
the affirmative procedure as discussed above.
Paragraph 28: Distribution of remaining balance
Paragraph 28(2):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: affirmative
71.
Under paragraph 28(1) the Secretary of State may determine that the whole or
part of any remaining balance on the levy account for a year is to be distributed
among one or more relevant authority. Paragraph 28(2) gives the Secretary of State
the power by regulations to set the basis of any such distribution, and the Secretary of
State must distribute any such payments in accordance with the regulations.
72.
Authorities will be required to make a levy payment to the Secretary of State,
as set out above, on growth in non-domestic rating income that is considered to be
disproportionate. The levy amount will be used to fund safety net payments to
authorities experiencing a disproportionate decline in their non-domestic rating
income. The Government’s intention is that the levy and safety net will be set at such
levels as to ensure that in most years the levy income will cover the demands of the
safety net. However, if there is any surplus on the levy account, after meeting safety
net payments, this will be returned to local government before the end of the year.
73.
The power to set the basis of distribution by regulations is required to ensure
that authorities have clarity about how any surplus will be distributed, and so that
payments are applied consistently. The regulations will be detailed and technical.
The power to make this provision in secondary legislation will provide flexibility
should the basis of distribution need to be altered in the future taking account of
changing needs and priorities for local government.
74.
The Parliamentary procedure selected for these powers is the affirmative
procedure. This will provide the appropriate level of scrutiny for financial provisions.
Part 8: Transitional protection payments
Paragraphs 30: Regulations about deemed and actual rating income
Paragraph 30(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
75.
Paragraph 30(1) gives the Secretary of State the power by regulations to make
provision for calculating, in relation to a billing authority and a chargeable
financial year, the authority’s ‘deemed rating income’ and the authority’s ‘actual
rating income’. A billing authority’s “deemed rating income” is essentially the
amount that would be payable to the authority if there were no transitional relief
scheme in place under section 57A of the 1988 Act (transitional relief following
compilation of local rating list). The effect of transitional relief schemes (which
Government is required to put in place for each five year valuation period) is to
phase in increases and reductions in ratepayers’ bills resulting from each five
yearly revaluation on non-domestic properties. As a result, in the majority of cases
a billing authority’s actual rating income will be more or less than it would have
been absent the transitional relief scheme.
76.
This power to make regulations is required to ensure that the effect of the
transitional relief scheme on every billing authority’s rating income for each
chargeable financial year can be calculated to enable payments to be made (as
necessary) in accordance with provision contained in regulations made under
paragraph 31(1).
77.
It is the Government’s view that the negative resolution procedure provides
the most appropriate form of Parliamentary scrutiny for the exercise of this power
because the matter is technical in nature.
Paragraph 31: Regulations about transitional protection payments
Paragraph 31(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
78.
Paragraph 31(1) gives the Secretary of State the power by regulations to make
provision for the making of a transitional protection payment for a chargeable
financial year by the Secretary of State to a billing authority or by a billing
authority to the Secretary of State. The amount of any transitional protection
payment will be the amount by which the authority’s ‘actual rating income’ either
exceeds or falls below its ‘deemed rating income’ (as calculated under provision
contained in regulations under paragraph 30(1)).
79.
This power is required to ensure that billing authorities do not lose or gain
under the non-domestic rates retention scheme simply as a result of the
transitional relief scheme under section 57A of the 1988 Act.
80.
Transitional protection payments are only one, fairly minor technical element
of the new system, and, therefore, we consider it appropriate to make provision for
the process in subordinate legislation rather than on the face of the Bill.
81.
The power is regarding technical matters and it is therefore appropriate that it
should be subject to the negative statutory instrument procedure.
Part 10: Designations of areas and classes of hereditament
Paragraph 37: Designation of areas
Paragraph 37(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
82.
Paragraph 37(1) gives the Secretary of State the power by regulations to
designate areas in England and to provide in those regulations that the rating
income in respect of the area (or a prescribed proportion of that income) is to be
disregarded from any of the calculations under Schedule 7B listed in subparagraph (1)(d) as specified in the regulations. The regulations may specify the
number of years for which the designation has effect; and the effect of subparagraphs (9) and (10) is that, where the designation does specify a time period,
the Secretary of State may not revoke the order during that period or amend it so
as to reduce the amount of rating income to be disregarded or the period for which
the designation is to have effect, or to alter the boundaries of the designated area.
83.
This power is required to enable the Secretary of State to provide authorities
with certainty about the amount of rating income in respect of designated areas
that they will retain and the period for which they will retain it.
84.
The power is regarding technical matters and it is therefore appropriate that it
should be subject to the negative statutory instrument procedure.
Paragraph 38: Designation of classes of hereditament
Paragraph 38(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
85.
Paragraph 38(1) gives the Secretary of State the power by regulations to
designate classes of hereditaments and to provide in those regulations that the
rating income in respect of that class of hereditaments (or a prescribed proportion
of that income) is to be disregarded from any of the calculations under Schedule
7B listed in sub-paragraph (1)(d) as specified in the regulations.
86.
This power is required to enable the Secretary of State to provide authorities
with some certainty about the amount of rating income in respect of particular
classes of hereditament that will be disregarded from the relevant calculations
each year.
87.
The power is regarding technical matters and it is therefore appropriate that it
should be subject to the negative statutory instrument procedure.
Part 11: Supplementary
Paragraph 40: Calculations and supply of information by relevant authorities
Paragraph 40(1):
Powers conferred on: Secretary of State
Powers exercised by: directions
Parliamentary procedure: none
88.
Paragraph 40(1) empowers the Secretary of State, for the purpose of any
provision of or made under Schedule 7B, to direct a billing or major precepting
authority in England to make calculations, or to supply information to the
Secretary of State, in accordance with the direction.
89.
This power is required to ensure that the Secretary of State has the appropriate
information to make calculations for the purposes of the rate retention system.
The power of direction making is appropriate as flexibility will be required to
ensure that the Secretary of State has the necessary information and reflects the
current position.
Schedule 4: Amendments relating to council tax reduction schemes
Part 1: Schedule to be inserted into the 1992 Act
90.
Part 1 of Schedule 4 amends the 1992 Act, by inserting a new Schedule 1A
(council tax reduction schemes). A number of the provisions in that Schedule
contain delegated powers. The references to paragraph numbers below are
references to paragraphs in the new Schedule.
Schedule 1A - Part 1: Council tax reduction schemes
Paragraph 2: Matters to be included in schemes
Paragraph 2(8) to (10):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
91.
Paragraph 2(8) enables the Secretary of State to prescribe requirements for
council tax reduction schemes other than those already included in paragraph 2(1)
to (7). Paragraph 2(9) makes provision for matters which may, in particular, be
included in regulations under paragraph 2(8). Paragraph 2(10) makes clear that
regulations under paragraph 2(8) may contain requirements for billing authorities’
local schemes equivalent to provisions of, or provisions which could be made
under, specified existing social security legislation (with such modifications as the
Secretary of State thinks fit).
92.
Paragraph 2(1) to (7) include the key requirements which the Government
expects will apply to a council tax reduction scheme. Additional requirements will
be necessary to deliver the Government’s policy in relation to pensioners, where it
has committed to recreating as far as possible the council tax benefit system which
is currently provided for in and under the Social Security Contributions and
Benefits Act 1992 and the Social Security Administration Act 1992.
93.
In particular, the Government intends to use the powers in paragraph 2(9)(b)
and (c) and (10) to ensure that certain classes of person (for example, pensioners)
are entitled to minimum levels of reduction in relation to England as a whole.
These provisions have not been included on the face of the Bill, since these are
likely to contain a significant degree of detail which, in relation to council tax
benefit, is currently largely provided for in regulations. In addition the nature and
content of these requirements (for example, where a cash amount is specified) are
likely to need updating periodically.
94.
We consider it is appropriate for the regulations to be subject to the usual
negative resolution procedure, since key requirements for council tax reduction
schemes generally are on the face of the Bill and those requirements will,
therefore, be debated by Parliament. The regulations under this power will largely
recreate existing regulations under the Social Security Contributions and Benefits
Act 1992 and the Social Security Administration Act 1992, which have been in
operation in various forms for a number of years, and which themselves are
subject to the negative resolution procedure.
95.
Further, it is likely that some regulations will need to be updated from time to
time, for example, to update cash values, and we do not consider it would be a
good use of Parliamentary time to require a debate each and every time the powers
in paragraph 2(8) to (10) are exercised. In our view the usual negative resolution
procedure is sufficient to enable Parliament to debate the content of any
regulations made under those powers where that is considered (for whatever
reason) to be appropriate or necessary.
Paragraph 3: Preparation of a scheme
Paragraph 3(4) and (5):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
96.
Paragraph 3(4) enables the Secretary of State to make regulations about the
procedure for preparing a scheme. Paragraph 3(5) makes provision for matters
which may, in particular, be included in regulations under paragraph 3(4).
97.
The key procedural requirements for making a scheme are set out in paragraph
3(1). In particular, before a billing authority makes a council tax reduction
scheme, it must consult its major precepting authorities, publish a draft scheme
and consult such persons as it considers are likely to have an interest in the
operation of the scheme.
98.
It may be necessary to make additional provision about the detailed procedure
to be followed before a scheme is made by a billing authority. The powers in
paragraph 3(4) and (5) enable such requirements to be made.
99.
We consider that it is appropriate for the regulations to be subject to the usual
negative resolution procedure, since the key procedural requirements for council
tax reduction schemes are on the face of the Bill and will, therefore, have been
debated by Parliament. We also do not think it would be a good use of
Parliamentary time to require these more detailed requirements to be debated each
and every time they are made.
Paragraph 4: Default scheme
Paragraph 4(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
100. Paragraph 4(1) imposes a duty on the Secretary of State to make regulations
prescribing the default scheme and sub-paragraphs (3) and (4) contain additional
provision about the default scheme. The default scheme will take effect in respect
of dwellings situated in a billing authority’s area if the authority fails to make a
scheme on or before 31st January 2013.
101. We consider that it is appropriate for the regulations to be subject to the usual
negative resolution procedure, since the key procedural requirements for council
tax reduction schemes are on the face of the Bill and will, therefore, have been
debated by Parliament. We also do not think it would be a good use of
Parliamentary time to require the detailed requirements of a default scheme to be
debated given that we only expect a default scheme to have to take effect in rare
circumstances.
Paragraph 5: Revisions to and replacement of scheme
Paragraph 5(3):
Power conferred on: Secretary of State
Power exercised by: order
Procedure: negative
102. Paragraph 5(1) provides that for each financial year each billing authority
must consider whether to revise its scheme or to replace it with another scheme.
Any such revision or replacement scheme must be made no later than 31st January
in the financial year preceding that for which it is to have effect (paragraph 5(2)).
This date has been chosen to align with other dates relevant to the annual local
government finance cycle. For example, the council tax base of a billing authority
or a major precepting authority for a financial year must also be calculated no later
than 31st January in the preceding financial year and it will not be possible to
make those calculations until the billing authority’s scheme is finalised for a year.
103. Paragraph 5(3) enables the Secretary of State by order to amend paragraph
5(2) by substituting a date other than 31st January in the preceding financial year.
This power is required to ensure that, if other key dates in the annual local
government finance cycle change, the date for making revisions and replacement
schemes can also be changed.
104. Although the date in paragraph 5(2) is stated in primary legislation, the
purposes for which the power in paragraph 5(3) are needed are administrative and
technical. We, therefore, consider that it is appropriate for the regulations to be
subject to the usual negative resolution procedure and that it would not be a good
use of Parliamentary time to require regulations amending paragraph 5(2) to be
debated.
Paragraph 9: Transitional provision
Paragraph 9(1):
Power conferred on: Secretary of State
Power exercised by: regulations
Procedure: negative
105. Paragraph 9(1) enables the Secretary of State to make such transitional
provision regarding the commencement of council tax reduction schemes as the
Secretary of State thinks fit. In particular, paragraph 9(2) enables those
regulations to include provision that a person who is or was in receipt of council
tax benefit, or who has made a claim for council tax benefit, is to be treated as
having made an application for a reduction under a scheme.
106. The power in paragraph 9(1) is a standard transitional power which will be
exercised in such a way as to ensure as smooth and orderly a transition as possible
from council tax benefit to council tax reduction schemes. The power in
paragraph 9(2) has been included so regulations can ensure that applications for a
reduction will not be required from any recipient of council tax benefit or anyone
who has made a claim for that benefit.
107. Since these are standard transitional provisions we consider it is appropriate
for them to be subject to the usual negative resolution procedure.