I declare an interest as a member of North Down Borough Council.
I welcome the Bill. It provides an opportunity to modernise the financial framework under which local government operates and should have been introduced years ago. In my 30 years as a local councillor, I have always felt frustrated by delays of important projects as they await departmental approval.
The Bill will give greater freedom to local authorities to manage their financial affairs without having to obtain consent from the Department. In principle, the legislation will give greater freedom to local councils, but I am still concerned that that freedom can be constrained through the use of central government regulations. I welcome the Minister’s assurance that such regulations will be used in exceptional circumstances only.
Although I welcome the principle of the Bill, I share some of the concerns that were set out in the north Down and Ards transition committee’s paper. In particular, it is concerned about the proposals for the disposal of council land and property. The Local Government Act (Northern Ireland) 1972 requires all disposals for less than best price to be approved by the Department. That legislation should be amended in accordance with the equivalent legislation in Great Britain, and section 96 should be repealed and replaced with an enabling power to make regulations. That would detail the purpose and limitations that apply to disposals of land at less than best price.
Clause 7 allows the Department to specify any reserve as a controlled reserve, if it so wishes. That is not compatible with the objective of giving local authorities freedom to manage their own financial affairs. It is the view of the Committee that other funds established under clause 9(1) should not be subject to any departmental control and should, therefore, not be designated as controlled reserves in accordance withclause 7.
I welcome the removal of the requirement to obtain departmental approval to borrow money and the inclusion of a power to borrow for any purpose. Trade creditors should be excluded from the definition of a credit arrangement because trade creditors are part of the working capital requirement and are not long-term debt. It is unclear whether clause 17(3)(b) removes trade creditors from credit arrangements and, therefore, from the determination of the affordable borrowing limit.
There are also concerns that longer-term liabilities such as the provision for the closure and aftercare costs of landfill sites are to be included in credit arrangements. In fact, clause 17 is confusing, and it is unclear what liabilities are to be considered credit arrangements. Furthermore, there is no definition of what constitutes a prescribed liability in accordance with clause 17(3). The legislation should be amended to provide clarity and to remove any doubt as to what constitutes a credit arrangement and, in particular, a qualifying liability.
It appears that the new provisions no longer require capital receipts to be applied in the first instance against any money borrowed by the council for the purpose of acquiring that asset. I welcome that. However, clause22 implies that, by regulation, the Department may require the capital receipt to be used to meet other debts and liabilities. That is contrary to the legislation’s principle of giving local authorities greater freedom to manage their own financial affairs and is another example of how such freedom can be constrained by departmental regulation. Departmental control in that area is unnecessary, and clause 22 should be removed.
Part 2 of the Bill is entitled “Grants to Councils”. I have concerns about the rate support grant. In particular, it appears that the formula that is currently used for the allocation of the resources grant will apply to the allocation of the rate support grant. That formula should be reviewed, because the present distribution under the resources grant does not accurately reflect the needs of the various council areas. That review would be essential in the unlikely event that we proceed with the RPA, especially in light of the establishment of new local authorities with new functions and functions that will transfer from central government to local government. However, given the PricewaterhouseCoopers report, which identifies costs of over £100 million and alleged savings over the next 25 years that are totally speculative, I cannot see any case for proceeding with the RPA, particularly at a time when we have to make cuts to other essential services such as health.
I welcome the clarification on payments to councillors and the proposed legislation to facilitate the establishment of an independent remuneration panel. Those measures will end the unseemly disputes over what councillors are entitled to in allowances.
On the whole, I welcome the Bill. It will modernise local government finance and make our councils more efficient. However, some of the freedom that the Bill provides is limited by departmental regulations. That should be reconsidered, particularly at Committee Stage.