FINANCIAL POLICY PANEL
8 FEBRUARY 2005
ITEM 4
CONSULTATION PAPER ON THREE YEAR REVENUE AND CAPITAL
SETTLEMENTS
Report of the:
Director of Finance
Contact:
John Turnbull
Urgent Decision?(yes/no)
No
If yes, reason urgent decision required:
Annexes/Appendices (attached):
Annexe 1: Annexe A to the Consultation Paper –
summary of questions.
Other available papers (not attached):
ODPM Consultation Paper “Three-year Revenue
and Capital Settlements” dated December 2004
This report introduces the latest finance consultation paper from the ODPM on three
year grant settlements
Notes
RECOMMENDATION S
That the Panel:(1)
Notes the receipt of the consultation paper on three year
grant settlements;
(2)
Agrees that the consultation response is prepared by the
Director of Finance and submitted by the Chairman,
following receipt of comments from Panel members..
1. Implications for Community Strategy, the Council’s Key Corporate Objectives and
the Committee’s Key Service Priorities
1.1. None for the purpose of this report
2. Introduction
2.1. The ODPM issued a consultation paper in December on three year revenue and
capital finance settlements
2.2. The deadline for response is 11 March 2005.
3. Objectives of the Consultation Paper
3.1. The ODPM’s stated objectives are:
Page 1 of 3
There should be greater certainty in funding for local services delivered by local,
police and fire and rescue authorities. Authorities should know earlier than they
do now how much funding they will receive from Government and should have as
much certainty as possible about funding for the second and third years of the
Spending Review period.
D:\106749269.doc
FINANCIAL POLICY PANEL
8 FEBRUARY 2005
ITEM 4

Authorities should use this greater certainty to considerably strengthen their
financial management, especially forward planning and using resources more
efficiently. A longer financial horizon will give authorities more clarity about
what is affordable and provide a firmer basis for making decisions about
priorities.

Organisations and projects that rely on authorities for funding should also benefit
and authorities should introduce their own multi-year approach to funding. It
would be beneficial for organisations other than Government that fund local
authorities, for example Regional Development Agencies, also to provide threeyear funding certainty to authorities.

There should be better management of risks at the local level, leading to greater
stability in council tax. Keeping budget and council tax increases to a reasonable
level will remain essential and authorities should be expected to mirror greater
stability in funding with greater stability in both of these.

Increasing flexibility, autonomy and accountability at the local level. Giving
authorities funding certainty over three years will offer them greater freedom to
plan, and give council tax payers greater certainty on future levels of council tax.
3.2. The consultation paper raises questions on the operation the proposed system in
relation to the following :
The formula grant settlement

Specific revenue grants

Capital Allocations

Three year budget and council tax information
3.3. A copy of the 38 page consultation paper has been placed in the Members’ room.
Copies can also be accessed on-line on the ODPM website at the following address
http://www.odpm.gov.uk .
3.4. The questions asked in the consultation paper are summarised at Annexe A to the
consultation paper and have been included at Annexe 1 to this report for ease of
reference.
4. Proposals
4.1. The Director of Finance is discussing the questions raised in this paper with relevant
finance advisory bodies (LGA finance and the IPF Finance Advisory Network) so that
the potential impact on the Council can be assessed before responding.
4.2. Some of the issues that are causing concern on the current annual process and that the
Council would want to be addressed in any outcome from consultation are outlined
below.
4.3. Changes to the grant formula have left the Council ‘protected’ by grant floors so that
there should not be revenue support grant loss. This reflects a situation where central
government has reassessed our grant entitlement at a lower level than we previously
Page 2 of 3
D:\106749269.doc
FINANCIAL POLICY PANEL
8 FEBRUARY 2005
ITEM 4
received. In practice, formula grant changes, such as. the recent change on housing
and council tax benefit subsidy, have not resulted in the Council being fully protected
by the grant floor.
4.4. The Council is currently receiving less capital funding support than others in relation
to some of its expenditure on statutory investment:4.4.1. On disabled facilities grants the capital reimbursement was previously 60% of
all expenditure with the Council meeting the cost of the remaining 40%.
Central Government grant is now cash limited and the significant increase in
entitlement to mandatory DFG payments has not been reflected in the latest
cash allocations, possibly because the allocations are based on historic levels
of expenditure rather than current and projected costs.
4.4.2. On contaminated land capital costs the government is planning to reimburse
notional debt charges through the revenue support grant formula. As identified
above, this will increase our grant entitlement calculation but will not result in
any real contribution to costs because the actual revenue support grant is only
increased at the floor (or minimum increase) for District Councils.
4.5. Finally, on the three-year budget and council tax information the paper discusses
controls to restrict departure from three-year budget plans. Whilst the Council has
been pro-active in preparing three (and four) year budget forecasts and publishing
these, the impact of enforcement of those plans is one that the Council is likely to find
unacceptable. Council Tax currently contributes some £4m per annum of the
Council’s turnover of around £30 million. This ‘gearing’ combined with recent
changes in the grant formula have put significant pressures on district council budgets
with increasing use of working balances and other reserves, in particular to manage
unforeseen loss of income or increased expenditure. Further government-imposed
constraints on council tax will result in less flexibility for Councils and will have an
adverse impact on service and financial management unless a successful outcome to
the ‘Balance of Funding’ review is achieved.
5. Proposal
5.1. The deadline for consultation responses is unfortunately just before the next meeting
of the Panel which is on 15 March 2005. To ensure this deadline is met it is proposed
that: 5.1.1. the Director of Finance prepares a draft response and circulates it to Panel
members for their comments;
5.1.2. A response is then submitted by the Chairman;
5.1.3. A copy of the response is sent to all Panel members.
6. Financial and Manpower Implications
6.1. None for the purpose of this item.
WARD(S) Affected: All
Page 3 of 3
D:\106749269.doc