Section 34: Best value grant: parishes

55.     Section 34 applies to England. It permits the payment by the Secretary of State of grant to best value authorities which, under subsection (1), are defined as any parish council (sometime known as a "town council"), or parish meeting, subject to the best value duties set out in sections 3 to 6 of the Local Government Act 1999. By virtue of the Local Government Best Value (Exemption)(England) Order (SI 2000/339), currently only 41 parish or town councils satisfy this criterion.

Section 35: Best value grant: Communities

56.     Section 35 applies to Wales. It permits the payment of Government grant to best value authorities which, under subsection (1), are defined as any community council subject to the best value duties set out in sections 3 to 6 of the Local Government Act 1999. By virtue of the Local Government Best Value (Exemption)(Wales) Order 2000 (SI 2000/1029), currently no councils meet this criterion.

57.     The rest of the section has a similar structure to that of section 34 (for England, as described above). The main differences are that: the grant is made by the National Assembly for Wales, rather than the Secretary of State; no Treasury consent is required, as the Assembly sets its own budget; there is no equivalent to subsection (9) of section 34 because parish meetings do not exist in Wales.

Section 36: Grants in connection with designation for service excellence

58.     This power will enable grant to be paid to best value authorities subject to any of the best value duties in sections 3 to 6 of the Local Government Act 1999, in relation to expenses they have incurred in applying for the award of a designation based on excellence in the provision of services. Where a best value authority subject to any of the relevant duties is awarded such designation the power will also enable grant to be paid as a reward for such designation and in relation to expenses incurred or to be incurred by the authority in disseminating information about best practices.

59.     In England this power could be used to pay grant to best value authorities subject to the relevant duties that apply for or are awarded beacon status under the Government's Beacon Council Scheme. Beacon council grants are currently paid by the Secretary of State under the wide general Special Grant making power in section 88B of the Local Government Finance Act 1988.

Section 37: Emergency financial assistance to combined fire authorities

60.     The purpose of this section is to include Combined Fire Authorities (CFAs) in the list of local authorities in section 155 of the Local Government and Housing Act 1989. This will enable the Secretary of State to pay grant to CFAs in their own right. At present Bellwin grant can only be paid to a CFA's constituent authorities, which finance the CFA in proportion to their council tax bases.

Sections 38 and 39: Loans by Public Works Loan Commissioners, Payments towards local authority indebtedness

61.     The purpose of these sections is to facilitate the transfer of council housing to registered social landlords. Where a local authority transfers the ownership of its social housing to a registered social landlord, it receives a capital receipt. Section 11 of the Act states that the Secretary of State may make provision, by regulations, about the use of capital receipts. Provision is made in regulations (The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003), currently in draft. Under regulation 19 of the draft regulations, (which covers the use of all non-housing receipts and any housing receipts not pooled under regulation 11), receipts may be used to pay for any kind of capital expenditure, or, as the authority prefers, may be used to repay the principal of an amount borrowed or to meet liabilities under credit arrangements.

62.     As a condition of consenting to the transfer, the Department requires authorities to use an amount of provision for credit liabilities equivalent to the reserved part of the housing transfer receipt to repay that part of its debt that is notionally attributable to the housing transferred.

63.     It is usual for authorities' debts to be with the Public Works Loan Board, although authorities may have other debts, e.g. with private banks.

64.     Normally, the reserved part of the receipt from the disposal of the housing is greater than (and therefore notionally sufficient to repay) the attributable housing debt. In areas of poor housing conditions and low rent the obligation to improve the stock to a decent standard can depress the value of the housing stock and the capital receipt the local authority will receive.

65.     Where the net capital receipt is less than the local authority's housing attributable debt, the Department will agree with the local authority that on the condition that the authority extinguishes debt with the Public Works Loan Commissioners ('PWLC') to the level of its net reserved capital receipt, the Department will make a payment to extinguish the remaining housing attributable debt. The Department's payment is dependent on the local authority's payment having been made. The Department's payment is known as an 'overhanging debt payment'.

66.     The payments to the PWLC are currently made in reliance on the Appropriation Acts. So far there have been ten payments made in respect of housing transfers in Burnley, Coventry, Calderdale, Blackburn with Darwen, Redcar and Cleveland, St Helen's and Knowsley, Carlisle, Bradford and Walsall.

67.     The Appropriation Acts do not, however, provide an appropriate mechanism for continuing payments. No mechanism has been put in place for payments made in Wales to date.

Section 38: Loans by Public Works Loan Commissioners (PWLC)

68.     Section 38 will enable the Secretary of State or the National Assembly for Wales to repay (in whole or in part) PWLC debts of certain local authorities in England and Wales who have housing functions. The debts to be repaid could include the amount of 'overhanging debt' by which the notional housing debt with the PWLC exceeds the reserved receipt from the housing transfer.

69.     The types of local authorities whose debts may be repaid under section 38 are listed in subsection (5) of that section. They are the types of authority with housing functions: district councils, county councils for areas for which there are no district councils, London borough councils, the Common Council of the City of London, and the Council of the Isles of Scilly. In relation to Wales, they are a county council or a county borough council.

70.     Section 38 allows the PWLC to determine the amount that the Secretary of State or the National Assembly for Wales must pay to extinguish a debt, or by which a payment by the Secretary of State or the National Assembly for Wales reduces a debt.

71.     Section 38 allows the PWLC to refuse to accept a payment which the Secretary of State or the National Assembly for Wales proposes to make.

72.     In some cases, where loans at fixed interest rates are repaid, a premium may be charged on early repayment. This could be included by the PWLC as part of the amount required to extinguish a debt under section 38.

73.     These provisions will have no added public expenditure or manpower implications in England or Wales. A more general power has hitherto been used to make these payments in England. No such payments have as yet been made in Wales.

Section 39: Payments towards local authority indebtedness

74.     It is also possible that in future, authorities with non-PWLC housing debts may wish to transfer housing in circumstances where the receipt from the transfer would be less than their housing debt, so that there will be an element of non-PWLC overhanging debt.

75.     Section 39 will enable the Secretary of State and the National Assembly for Wales to make payments to local authorities to enable them to repay their non-PWLC debts. The types of authorities who may receive such payments are defined in section 39, and are the same as those whose PWLC debts may be repaid under section 38.

76.     Under section 39, the Secretary of State or the National Assembly for Wales may specify how payments made to a local authority under this section are to be applied by the authority, and may specify which debt or debts are to be reduced or extinguished.

77.     Any premium payable on the early repayment of such loans may be included as part of the amount paid under section 39 by the Secretary of State or the National Assembly for Wales to the authorities to extinguish their non-PWLC debts.

Section 40 and Schedule 2: Local government finance reports: Wales

78.     The National Assembly for Wales gave a commitment in its policy statement 'Freedom and Responsibility in Local Government' (March 2001) to continuously look for ways to improve the timetable according to which information regarding the final revenue settlement for local government is published.

79.     Currently, the earliest date which can be achieved for the publication of the Local Government Finance Report in Wales is early January with National Assembly plenary debate in mid January. A key factor in this is the availability of information from the Home Office which is not available in provisional form from England until early December. Even with this timetable, final information as to the funding of police authorities is usually not available until late January and therefore an amending report has to be prepared. This is less than satisfactory for both principal councils and precepting authorities in Wales.

80.     Section 40 and Schedule 2 allow separate determinations to be made so that the report for principal authorities, specified bodies and precepting bodies (other than police authorities) in Wales can be produced in mid-December and a single final report for police authorities in Wales can be produced at the end of January. This will achieve the Welsh Assembly policy objective for principal councils and provide greater certainty and stability for police authorities.

81.     Section 40 and Schedule 2 operate by inserting a new Chapter 3 (revenue support grant: Wales) into Part 5 (grants) of the Local Government Finance Act 1988. They also amend Part 3 of Schedule 8 to that Act, which provides for the distribution of non-domestic rates to be dealt with in local government finance reports. They need to be read with the amendments made by paragraphs 5, 12 to 17 and 22 of Schedule 7 to the Act. In particular, those amendments divide the existing provisions of Part 5 of the 1988 Act into Chapters, with the existing provisions about revenue support grant and local government finance reports (sections 78 to 84C) becoming a Chapter 2 that is to apply to England only. The new Chapter 3 makes provision for Wales that, except for differences introduced at the time of devolution and the new power to make two local government finance reports for a year, is substantially the same as the existing provisions that have become Chapter 2.

PART 4: BUSINESS IMPROVEMENT DISTRICTS

Introduction

82.     The White Paper Strong Local Leadership - Quality Public Services (December 2001) gave details of Business Improvement Districts (BIDs) involving local authorities and their local businesses. Under a BID, additional services or improvements of benefit to the local community will be funded by a levy, raised from non-domestic ratepayers. However, for a BID to be established a majority of those who would be liable to pay the levy must first vote in favour. This Part of the Act contains the provisions underlying the BIDs policy.

Section 41: Arrangements with respect to business improvement districts

83.     Section 41 enables a billing authority, that is a local authority which collects non-domestic rates, to make arrangements for a BID in its area, specifying the projects to be carried out under the BID, funded from a levy on specified ratepayers.

Section 42: Joint arrangements

84.     Section 42 confers on the Secretary of State or National Assembly for Wales the power to prescribe rules governing BIDs which cross billing authority boundaries, allowing authorities to have joint BIDs.

Section 43: Additional contributions and action

85.     Section 43 (read with section 58) allows the billing authority, and the county councils and parish councils (in England) or the community councils (in Wales), among others to contribute to BID funds.

Section 45: The BID levy

86.     Section 45 provides that a BID levy can only be raised while BID arrangements are in force, and provides that the levy is to be calculated in accordance with the arrangements. The BID levy is not limited to being calculated on the basis of rateable value. This section also allows a BID levy to be different for different cases, which means relief(s) could be provided from the BID levy. (These reliefs would not necessarily be of the same nature or level as reliefs already given in respect of rates for empty properties etc).

Section 46: Liability for BID levy

87.     Section 46 provides that BID arrangements must specify who is liable for the BID levy, and that a person's liability is to be determined in accordance with the arrangements.

Section 47: BID Revenue Account

88.     Section 47 provides that a billing authority which has made BID arrangements must keep a separate account for the BID levy revenue, i.e. the revenue is ring-fenced and may only be used for BID purposes.

Section 48: Administration of BID levy etc

89.     Section 48 provides that the Secretary of State or National Assembly for Wales may make regulations governing the imposition, administration, collection, recovery and application of BID levy.

Section 49: BID proposals

90.     Section 49 provides that BID arrangements are not to come into force unless proposals for them are approved by a ballot of the ratepayers who are to be liable for the BID levy, and empowers the Secretary of State or the National Assembly for Wales to make regulations governing the drawing up of BID proposals and the content of the proposals.

Section 50: Approval in ballot

91.     Section 50 provides for the requirements which must be satisfied in a ballot to secure the approval of a BID. There will be a two-part vote. A majority of those voting must vote in favour, and the total rateable value of the properties of those voting for must be more than that of those voting against.

Section 51: Power of veto

92.     Section 51 provides that the circumstances in which the billing authority may veto a BID proposal which has been approved in a ballot may be prescribed by the Secretary of State or National Assembly for Wales. The Secretary of State or Assembly may also prescribe the matters which the billing authority must consider before it may veto a BID proposal.

Section 52: Appeal against veto

93.     Section 52 provides for an appeal to the Secretary of State or National Assembly for Wales against a billing authority's veto of a BID proposal which has been approved in a ballot.

Section 53: Commencement of BID arrangements

94.     Section 53 provides that when proposals for a BID have been approved in a ballot, the billing authority must draw up arrangements reflecting those proposals. It also provides that those arrangements will come into force on the day provided for in the proposals, except where the Secretary of State or National Assembly for Wales has allowed an appeal against a billing authority's veto, in which case the arrangements will take effect on such day as the Secretary of State or Assembly determines (which shall not be a day earlier than the one in the proposals).

Section 54: Duration of BID arrangements etc

95.     Section 54 provides that BID arrangements can have effect at most for five years, unless their renewal is approved by a ballot of the ratepayers liable for the levy. It also empowers the Secretary of State or National Assembly for Wales to make regulations governing the alteration and termination of BID arrangements.

Section 55: Regulations about ballots

96.     Section 55 empowers the Secretary of State or National Assembly for Wales to make regulations governing ballots on BIDs, such as the time which must pass between a BID proposal being made and the ballot being held and for the recovery of the costs of a ballot from persons.

Section 56: Power to make further provision

97.     Section 56 empowers the Secretary of State or National Assembly for Wales to make supplementary, incidental or consequential amendments in relation to BIDs.

Section 57: Crown application

98.     Section 57 provides that this Part of the Act applies to the Crown.

Section 58: Wales

99.     Section 58 provides that the role of the Secretary of State in relation to BIDs will in Wales be exercised by the National Assembly for Wales.

Section 59: Interpretation

100.     Section 59 provides definitions of terms used in this Part of the Act, including 'non-domestic ratepayer', which is defined as someone liable to pay rates on a property shown in a local rating list for an area.

PART 5: NON-DOMESTIC RATES

Section 60: Submission of proposed rating lists

101.     Under sections 43(4) and 54(4) of the Local Government Finance Act 1988 the rate bill of a property is its rateable value multiplied by the national rate multiplier.

102.     Every five years on 1 April all properties are re-valued by the valuation officers. Under the current legislation - sections 41(5) and 52(5) of the 1988 Act - the rating lists have to be published in draft 3 months before they come into force on 1 April. To give ratepayers more time to plan ahead to accommodate changes in their rateable values this section requires publication 6 months before.

Section 61: Small business relief

103.     Research published by the Government shows rates to be an especially heavy burden for small businesses, accounting for a significantly higher proportion of operating profits than in the case of larger businesses. This section will allow a reduction in the rate bills of small businesses, funded in England (see section 64) by a supplement on the bills of other ratepayers.

104.     Section 61 amends section 43 of the Local Government Finance Act 1988 so that where specified conditions are met the rate bill for a property will be reduced by an amount prescribed by the Secretary of State, as respects England, and National Assembly for Wales, as respects Wales.

105.     The section confers on the Secretary of State, and as the case may be, the National Assembly for Wales the power to prescribe the details of the scheme. This power will be used to implement the scheme as set out in the White Paper Strong Local Leadership - Quality Public Services (December 2001). In England, mandatory rate relief will be available at 50% for properties up to £3,000 rateable value, and will then decline on a sliding scale as rateable value increases reaching no relief at £8,000 rateable value. In England, to qualify for relief a business will have to apply to the local authority declaring that it only occupies the one property for which it is claiming relief.

106.     Section 61(7) provides that billing authorities in Wales may grant discretionary relief to top up the mandatory small business relief scheme in Wales.

Section 62: Calculation of non-domestic rating multiplier

107.     Funding small business relief in England: Schedule 7 to the Local Government Finance Act 1988 sets out the rules for calculating the national rating multiplier. Section 62 provides for two multipliers instead of, as now, one. The two will be:

• a small business non-domestic rating multiplier, and

• a non-domestic rating multiplier.

In Wales, the current position remains unchanged - there will only be one multiplier, the non-domestic rating multiplier.

108.     In England, for any year in which a small business rate relief scheme is run under section 61 the second multiplier, the non-domestic rating multiplier, will be set at a higher level than the small business non-domestic rating multiplier. The second multiplier will be increased so as to produce an addition to rate yield equal to the rate yield lost through small business relief. In the case of the City of London special provision is made. The City currently has the power to set a multiplier for its area either higher or lower than the national multiplier (paragraph 9 of Schedule 7 to the Local Government Finance Act 1988). Section 62(11) provides that the small business non-domestic rating multiplier for the City will be the same proportion of the City's multiplier as the national small business multiplier is of the national multiplier.

109.     Offsetting losses in yield from appeals - England and Wales: there are special rules in paragraph 4 of Schedule 7 to the Local Government Finance Act 1988 on the calculation of a multiplier in the year of a revaluation. Under the 1988 Act, all non-domestic properties are revalued every five years starting in 1990. The purpose of such revaluations is not to change the yield from rates in real terms, but to redistribute the rate burden in line with movements in the property market since the last revaluation. If there is a significant increase in total rateable value at a revaluation then the multiplier must be reduced. If there is a significant decrease in value the multiplier must be increased. Thus in a revaluation year the calculation of the multiplier includes an adjustment to offset changes in the total rateable value between 31 March, the last day of the old list, and 1 April, the first day of the new lists. However the value for 1 April is subject to 'erosion', through subsequent successful appeals by ratepayers for reductions in rateable values having retrospective effect from 1 April (generating refunds to ratepayers in respect of rates paid from that date). Therefore the Secretary of State, as respects England, and National Assembly for Wales, as respects Wales, is required to estimate what will be shown for 1 April once the effect of successful appeals has been allowed for. It is this estimate which is then taken as the value for 1 April when making the adjustment to the multiplier to offset the effect of the revaluation.

110.     This estimate is difficult to make. Accordingly section 62 allows adjustments in the multipliers for subsequent years to compensate for any error in estimation at the revaluation.

Section 63: Rural settlement lists etc

111.     This section repeals for Wales the mandatory and discretionary rate relief in the rural rate relief scheme (which is established by provisions in sections 42A, 43(6B) and 47(3A) of the Local Government Finance Act 1992) through amending the existing provisions so that they apply to England only. The repeals will be brought into force by commencement order made by the National Assembly for Wales.

Section 64: Rate relief for community amateur sports clubs

112.     This section amends sections 43, 45, 47, 48 and 67 of the Local Government Finance Act 1988. Sections 43, 45, 47 and 48 of the 1988 Act provide mandatory and discretionary rate relief for both the occupied and unoccupied rates.

113.     Registered community amateur sports clubs (CASC's) under Schedule 18 to the Finance Act 2002 will be eligible for mandatory and discretionary rate relief as provided under the relevant sections of the Local Government Finance Act 1988. The section also makes discretionary rate relief unavailable to registered CASC's that occupy excepted premises. Excepted premises are properties occupied by local authorities, precepting authorities etc.

114.     In addition, the section also amends the section 67 of the 1988 Act to take account of the provisions for retrospective registration and de-registration in paragraph 11 of the Schedule 18 to the Finance Act 2002. The section makes it clear that a registered CASC's right to rate relief starts on the date of registration (even where that date is a retrospective date) and ends with the date of termination of registration (even if that date is a retrospective date).

Section 65: Transitional relief

115.     Transition schemes were established at the 1990, 1995 and 2000 revaluations to allow ratepayers time to adjust to changes in their bills, with both significant increases and decreases resulting from changes in rateable values being phased in by annual stages. This section provides that in future in England there always must be a transition scheme established at a revaluation: the current provision, section 58 of the Local Government Finance Act 1988 confers a power on the Secretary of State to establish a scheme, but does not impose a duty on him to do so. As a result of subsection (2) of the section, section 58 will in future apply in Wales only. The 1988 Act originally required transition schemes to be self-financing: the amount of rate income lost in any year through phasing in increases in bills had to be off-set by the rate income gained from phasing in decreases. The Act was however subsequently amended to allow the Exchequer, i.e. the general taxpayer, to contribute to the cost of transition schemes. Under both the 1990 and 1995 schemes there was a net loss in rate income which the Exchequer made good so that local authorities did not lose out.

116.     This section imposes the requirement for future transition schemes in England to be self-financing. It allows for this to be achieved by adjusting the chargeable amount or the component elements through which the chargeable amount is calculated. The methods likely to be used include making a transition scheme which balances the rates lost through phasing in increases in bills against the rates gained by phasing in decreases, or meeting the costs of phasing in increases through what in effect amounts to a supplement on the multiplier. This section allows for either approach or a combination.

117.     The details of future transition schemes in England - the maximum annual increases allowed in bills and whether they are to be funded by the phasing of decreases or through what in effect amounts to a supplement on the multiplier - will be decided in the light of the outcome of each revaluation, during the year before it takes effect. Section 65 accordingly provides for the details of schemes to be prescribed in regulations.