Oh, oh – no business rates devolution? Where’s the lost income coming from?

“Councils demand ‘clarity’ over funding after business rates devolution is dropped.

A steering group which spent the last 15 months consulting on how 100% business rates retention would work has been disbanded after the exclusion of local government finance legislation in this week’s Queen’s Speech.

Parliamentary time to consider the Local Government Finance Bill in the last Parliament ran out before Theresa May called this month’s General Election. However, the sector was stunned this week when the government made it clear that it would not revive the process for at least two years.

Room151 has seen a letter sent to members of the steering group from Anne Stuart, the newly-installed civil servant leading the business rates retention process.

It said: “I’m sorry this should be my first communication, but I am emailing because as you will have no doubt seen, the Queen’s Speech did not include a new Local Government Finance Bill and so it will not form part of the Parliamentary timetable for this session.”

In her letter, she thanked members of the steering group but said she would only be in touch “once we are in a position to resume working with you on the future of local government finance reform.”

However, she said that ministers remain committed to local government taking greater control of its income. “We are engaging ministers on the options for future reform without an immediate Bill…,” she said.

Ministers have reaffirmed their commitment to a thorough, evidence-based review and that work will continue with local government on that issue, Stuart said.

One steering group member told Room151: “This is more than a year’s work down the drain.

“If the government is planning to introduce any reform by executive order, it needs to make sure they take the sector with them.”

Lord Porter, chairman of the Local Government Association, said that the failure to move on with business rates devolution was “hugely concerning”.

He said: “While negotiating Brexit will be a huge challenge for the government, it cannot be a distraction from the challenges facing our public services. The day-to-day concerns of our communities go far beyond Brexit.

“Only with adequate funding and the right powers can local government help the government tackle the challenges facing our nation now and in the future.”

Jo Miller, Solace president and chief executive of Doncaster Metropolitan Borough Council, said: “I am disappointed that key legislation—absolutely fundamental to ensuring the future sustainability of local government—has now been dropped.

“Local government urgently needs clarity around our future funding—at present we simply face a cliff edge from 2020. This must urgently be resolved.”

A DCLG statement said: “The government is committed to delivering the manifesto pledge to help local authorities to control more of the money they raise and will work closely with local government to agree the best way to achieve this.”

The steering group to guide the process of business rates devolution was created in March last year after George Osborne announced that primary legislation would be introduced to allow councils to keep 100% of growth in business rates—up from the current 50%.”


EDDC’s reputation on planning described as “disaster area”

Express and Echo interview online with editor Patrick Phelvin had a brief mention of the reputation of East Devon (about 5 minutes into the interview on the video embedded within the article)

being an absolute disaster area on matters like planning


And, no, he hadn’t contacted Owl when he said it!

East Devon bursting at the seams – official!

Owl says: all these extra residents accessing fewer and fewer services. Let’s hope most of them are young and going to Cranbrook, Exmouth and Sidmouth – because there will be no maternity services or community hospitals in Axminster, Seaton, Honiton or Ottery St Mary.

“People moving to East Devon increased the population by almost 2,500 people – more than almost anywhere else in England and Wales.

An estimated 8,316 people moved to East Devon from elsewhere in the UK between July 2015 and June 2016.

This compared to 5,848 who went the other way during this time, new figures from the Office for National Statistics show.

This meant that an extra 2,468 people moved to East Devon than left – the second highest figure anywhere out of almost 350 counties and districts around England and Wales.

As of June 2016 there were 139,908 people in East Devon, meaning that 1.8 per cent of the population was made up of people who had just moved to the county from elsewhere within Britain.

This was the highest share out of anywhere in England and Wales.

The most popular destination for people to move to East Devon from was Exeter.

… A total of 700 people were estimated to have moved from East Devon to Exeter after subtracting those that went the other way, more than anywhere else.

On the other hand, Taunton Deane was the number one destination away from the area.

A net total of 54 people moved to Taunton Deane from East Devon in 2015/16.”


A tale of two seaside towns


BIG seafront development plans, unpopular with locals, lots of income for land-holding EDDC and big income potential, quick tender and choice of partner:


SMALL seafront development plans, popular with locals, almost no EDDC land- holding or big income potential, no tender, no progress:

Gung-ho Exmouth, inertia on Seaton

If anything illustrates EDDC as business-led rather than resident-led this is it.

Local government property investment – the auditors’ roles

“Are these the magic money trees? The office blocks, shopping centres and petrol stations currently filling up the local government property portfolio with their promise of a harvest abundant enough to keep the fruit bowl full for years to come? Quite possibly, with a good soil for rooting, plenty of sunshine and lots of green-fingered attention. But also quite possibly not. Which is why you can expect a visit from your auditors, once they have remembered where they put their wellies.

It is a common scenario for auditors to have no knowledge of a substantial and risky project until it is too late for them to have any influence over it. Commercial sensitivities often lead to projects being run on a “need to know” basis, with external auditors joining internal auditors, scrutiny committees and sometimes even the section 151 officer on the other side of a firmly locked door.

The auditor may only find out about a project when the ink is drying on the contract, when there doesn’t seem much more to do than offer a sheet of blotting paper.

However, there is still a lot that the auditor can do that would be of benefit, even if there is nothing to be critical about.

For instance, the Spelthorne Borough Council £360m purchase of the BP campus with new borrowings of £377m against a budget requirement of around £13m is such a huge transaction that its mere existence surely justifies a public interest report from the auditors to reassure the local population that their new role as BP’s landlords will not weigh heavy upon them. There is no reason why public interest reports have to be reserved for bad news.

Unfortunately, auditors are not particularly keen on bringing good news. The best you will get is “negative assurance”: a declaration that, based on the investigations carried out, there is nothing that provokes the need for criticism. But this would still be a valuable contribution and is arguably what is required by the reporting duties in Schedule 7 of the Local Audit and Accountability Act 2014.

The least that we can expect is that auditors will eventually say enough to manage their reputation risk – limiting the possibility that someone at some point in the future could ask “where were the auditors?”. A couple of paragraphs in the audit letter affirming that it is an authority’s responsibility to make its own investment decisions and summarising the less reliable judgements by which those decisions have been taken.

So what will the auditors be particularly interested in?

Legal Powers

Since the introduction of the general power of competence, people seem more relaxed about identifying the legal powers supporting a decision. However, it is still important to know what powers are being exercised, particularly in understanding the implications of the limitations on those powers for a particular proposal.

For instance, the general power comes with restrictions on charging other than to recover costs and requires commercial activity to be run via a company. And the investment powers in the Local Government Act 2003 only extend to purposes relevant to an authority’s functions or the prudent management of its financial affairs. Advice confirming legality will be expected.

It is sometimes forgotten, by those without a legal background, that even if a power can be identified, then that power has to be exercised reasonably under the Wednesbury rules. Auditors will look for legal advice being properly grounded.

If an authority is borrowing to fund its purchases, there may also be questions about the propriety of borrowing to invest. Not so long ago this is something that would have rung alarm bells across the audit community. Judging by their appearance before the Public Accounts Committee in 2016, though, it does not seem a matter that DCLG and the Treasury are overly concerned by.

Finally, how are these projects integrated into the Prudential Framework? Arguments can be put that asset prices will rise to more than cover the cost of acquiring property and making good its depreciation, such that Minimum Revenue Provision (MRP) is not needed. But this is risking a potentially major funding problem if the value/cost relationship shifts adversely in the future. How can an authority demonstrate its legal duty to act prudently?

Value for Money

Auditors will be concerned to examine all the significant judgements, estimates and projections involved in a decision to invest. They will also review accounting treatments to ensure they align costs and benefits appropriately and look critically at funding and financing arrangements.

Exit strategies will also be relevant, particularly noting that if rental income falls sale of a property will only generate a capital receipt rather than revenue income that might fill the gap in the budget.

Any reporting in this area will be restricted to the adequacy of the arrangements put in place by the authority to achieve value for money and will not provide any comfort that it has actually been achieved.

Decision Making

Auditors will check that the authority has complied with its democratic framework and schemes of delegation, particularly if the proposal has proceeded on a “need to know” basis.

So, if you are in the process of bulking up your property portfolio, prepare for the muddy tread of your auditors as they come to gaze sceptically upon your magic money tree.

Stephen Sheen is the managing director of Ichabod’s Industries, a consultancy providing technical accounting support to local government.


Affordable homes in Budleigh Salterton? You’re having a laugh!

Owl says: two totally different plans? A new planning application called for. Show your mettle EDDC!

“The number of affordable homes in a 59-dwelling development being built south of the B3178 is set to be slashed by nearly half under altered plans.

At a meeting of the town council’s planning committee, it was also revealed that the amount of one- and two-bedroom ‘starter’ houses could be reduced from 39 to 12.

Town councillors raised concerns over the change while discussing plans to move plots due to the costs of relocating a foul drain on the site, which will be known as Evans Field when it is built.

The council backed plans to move the plots in phase one of the project, but expressed ‘disquiet’ about the changes lined up for phase two.

Planning committee chairman Councillor Courtney Richards said that changes, which could see the amount of people living on the new site increase, did not ‘sit easy’ with him.

He added: “It’s exactly the same number of dwellings; however, there’s one extra five-bedroom house, 11 extra four-bedroom houses, 15 extra three-bedroom houses, 22 fewer two-bedroom houses and five fewer one-bedroom houses.

“I find that a very significant change in the plan to what has been previously agreed. The two sets of plans are very, very different.”

Previously, an application to reduce the amount of affordable homes on the site from 50 per cent to 40 was rejected.

Thirty affordable homes were originally planned for the site, but under the variation proposal, this could be reduced to 16. The requirement for 50 per cent affordable homes would still be met as shared-ownership homes would make up the other 14 needed.

Deputy mayor and district councillor Tom Wright added: “We’re keen to have starter homes for people. The need in Budleigh is for young families to move into smaller homes to get onto the housing ladder.”


Plymouth sets up independently inquiry into voting problems

Owl says: chances of EDDC investigating its postal voting screw-up? Zero!

Plymouth City Council has set up an independent investigation over administrative issues in the lead-up to the general election earlier this month.

The investigation, which has been jointly commissioned with the Electoral Commission, was launched after problems emerged with the sending out of postal vote packs to people who had applied for them.

The Guardian reported that the loss of 1,500 postal voting packs was being blamed on a computer problem.

The council had already apologised after the final number of votes declared for the Plymouth Sutton and Devonport constituency was incorrect. In that instance some 6,587 votes for Efford and Lipson were not included in the final declaration for the Plymouth Sutton and Devonport constituency.

The investigation will be led by Dr Dave Smith, former chief executive of Sunderland City Council. Dr Smith sits on the Elections and Referendum Steering Group. He is also a non-executive board member for the Cabinet Office Electoral Registration Transformation Board and leads on elections and democracy for Solace.

His investigation will cover all issues relating to the election including:
The processes and controls around election planning.
The factors that led to postal voting packs not being received.
The sequence of events and consequences at each stage.
An assessment of the overall numbers of voters affected.
The approach, effectiveness and timeliness of remedial action taken to rectify the issue, once the council became aware of the scale of the problem.
The advice and guidance provided by the Electoral Commission regarding the council’s responsibilities, and their adopted method of resolving the issue.
The staffing and operation of the election call centre leading up to the day of the election, and on polling day itself.
The effectiveness of communications, and the way in which customer enquiries were dealt with.
Evidence of customer interactions including the outcomes and levels of satisfaction.
The general effectiveness of the elections and electoral registration function, including the capacity and capability of the team.
The robustness of systems and processes, with a particular focus on applications for, and distribution of postal votes.
Any other matters that might have influenced the elections process or response to the issues encountered.

Dr Smith will present the findings and recommendations from his investigation to a meeting of the full council “within the next few months”, Plymouth said.

The council has called on anyone who has further information or comments to provide this to the investigation through a portal that has been set up on its website. All information and comments submitted through the portal will go direct to Mr Smith.

See also: http://www.plymouth.gov.uk/electionreview

Council Leader Ian Bowyer said: “I am deeply concerned by the problems that have occurred with the administration of the General Election and want to be assured that we urgently get to the bottom of what happened and why. The Chief Executive and Acting Returning Officer announced at an early stage that a full and independent external investigation will be held, which is essential as we must ensure that these problems can never recur.

“I have asked that the investigation makes every effort to hear evidence from as many people in Plymouth as possible who have been affected by the problems. This way the investigators will be able to better understand the problems, how and why they happened and how many people were affected.”
Newcastle-under-Lyme Borough earlier this month called in the Association of Electoral Administrators to conduct an independent review of the Parliamentary election.

The council said this followed “adverse coverage in the media and also social media about the process of the election”.

Criticisms focused on: the issue of postal votes; individuals whose application to join the Electoral Register was awaiting determination; and voters who had been added to the Electoral Register after the issue of poll cards being able to vote in polling stations.”