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BUDGET REACTION: HEADLINE ISSUES FOR LOCAL GOVERNMENT

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This briefing sets out the key issues from today's budget statement by the chancellor. The headline issues for loca...
This briefing sets out the key issues from today's budget statement by the chancellor. The headline issues for local councils are:

- Improving waste management

- Public sector pay and workforce

- PSA targets

- Futurebuilders fund

- Spending Review 2004

- Relocation of public service staff

- Employment

- Promoting regional flexibility

- Regional flexibility

- Enterprise in deprived communities

- Planning and housing supply

We have set out the detail of these issues below, with our initial commentary.

The issues in more detail

Improving waste management

- The government reiterated decisions already made on future increases in the landfill tax ie that it will increase from £14 to £15 per tonne from April 2004, by a further £3 per tonne in 2005-06 and by at least £3 per tonne in years thereafter until it reaches £35 per tonne.

- There will be further consultation with stakeholders on options to make the increase in landfill tax revenue neutral to business a whole. Final decisions will be made in the 2003 Pre Budget Report.

- The Waste Minimisation and Recycling Fund will be reformed into a local authority Waste Management Performance Fund in England, providing 'non-ring fenced incentives for local government to deliver a step change in sustainable waste performance for all households'. Final decisions o the start date of the Fund and its operational details will be announced following further consultation with local government stakeholders. Decisions on how the landfill tax increase will be made revenue neutral to local government will be taken at the same time.

- The government reiterated the Pre Budget Report reforms to the Landfill Tax Credit Schemes and the decision that £100m in 2003-04 and £110m in 2004-05 and 2005-06 would be red irected to public spending on a new sustainable waste delivery programme

Most of these measures have already been announced or trailed. The LGA particularly welcomes the commitment to make the landfill tax neutral for local government.

Public sector Pay and workforce

The Budget Report said the government aims to use pay as part of its package of reforms to improve public service delivery 'To recognise local and regional conditions in pay, such as the extra costs for retention and recruitment that arise in London and the South East, especially for the low paid, the government will also make sure that the remit for the Pay Review Bodies and for public sector workers, including the civil service includes a stronger local and regional dimension'

PSA Targets

Regular web-based reporting against all the new PSA targets will be introduced on the HM Treasury website from April 2003, making all the latest performance information accessible to the public in a single place.

Futurebuilders Fund

The government reiterated the policy to invest £125m in a futurebuilders fund to assist voluntary and community sector organisations in their public service work. They will consult shortly on how the funding should be used. The government also announced a study of departmental involvement with the voluntary and community sector in local service delivery, building on the cross cutting review in the last Spending Review, with the intention of informing the next Spending Review. The government will seek to develop the Community Interest Company, 'an entirely new legal form designed for socially responsible enterprises'. The government believes that CICs have a role to play in complementing government services at the community level in areas such as childcare provision, community transport or leisure.

The LGA has been involved in initial discussions on the use of the proposed fund and will respond to the consultation paper when published. We will work with the government in deve loping the CIC concept.

Spending Review 2004

The government announced a number of key issues for consideration in the lead up to SR 2004:

- Tackling child poverty ??? to examine how public services and welfare reform can most effectively tackle child poverty, further integrate services for the under 5s and improve the prospects of work and opportunity for families especially in deprived areas

- Devolving decision-making from the centre ??? to examine how best to achieve decentralised delivery and responsive local and regional services in a way that is consistent with equity and efficiency, against a framework of national standards. This will consider the way in which targets are set and the flow of information on performance

- Engaging the community and voluntary sectors ??? to assess progress in encouraging their involvement in local service delivery

- Delivering better childcare ??? building on the inter-departmental childcare review to focus on the further steps needed to ensure an adequate supply of good quality childcare

The LGA will seek involvement in all of these reviews. The chairman of the LGA has already written to the chancellor on how crosscutting reviews in SR2004 might contribute to delivering the shared priorities. This is on the agenda for the next Central Local Partnerships meeting.

Relocation of public service staff

The government will also be examining the scope for relocating civil service and other public service staff from London and the South East to other parts of the country to improve cost effectiveness and achieve a better regional balance of government activity. The study will be led by Michael Lyons.

Employment

Local discretion is to be given to Job Centre Plus local area offices to provide incentives for training and other schemes to help the unemployed to return to work. The chancellor said those unemployed for 13 weeks or more would now have to travel up to 90 mins from home to accept work. He also said the number of job applications required would be increased for all unemployed.

The chancellor announced greater incentives in the housing benefit system to encourage lone parents to return to work.

LGA view

Through work on its policy commitment on 'helping the hardest to reach into work' the LGA has long argued for greater discretion to be made available to local authorities and Job Centre Plus offices at the local level in order to respond to local needs. The LGA is currently undertaking a review of innovative local authority practice in this area which is due to be launched at an event on 'removing barriers to work' to be held at Local Government House on 13 May. Details available on the LGA website (http://www.lga.gov.uk/Events.asp?lsection=113)

Promoting regional flexibility

Key measures in the Budget include:

- the structured involvement, for the first time, of the nine English Regional Development Agencies (RDAs) in preparatory work for the Budget. In recognition of their strong regional knowledge, the RDAs were asked to provide advice on measures to increase regional flexibility. Budget 2003 reflects and responds to their input; and

- new steps to promote dialogue and discussion with the regions to strengthen their input into future policy-making, including new regional statements of the key Budget decisions.

Measures suggested by the RDAs, to which the Treasury has responded positively today, include:

- on enterprise, focusing newly announced resources on encouraging enterprise in schools ??? Detailed measures include £16m over two years to fund Enterprise Advisers, who will work alongside head teachers in 1000 secondary schools in disadvantaged areas, and a £1m Enterprise Promotion Fund, to support private and voluntary sector in promoting enterprise awareness in schools, business and the wider non-business community. Also Customs and Excise will operate a time-limited incentive scheme for businesses not currently registered for VAT but trading above the VAT threshold, to move into VAT registration.

- on innovation, that universities should be encouraged to engage in knowledge transfer ??? the Budget today announced that the first chair of the regional Science and Industry Councils to undertake a review of good practice in promoting innovation and knowledge transfer among RDAs. In addition, the Government will ask the OGC, the SBS and the Local Government Procurement Forum to act on the recommendations of the Better Regulation Task Force's report on reducing the barriers to SMEs in doing business with the public sector when it is published during May.

- on regulatory reform, work with government to consider how the regulatory burden on small firms can be minimised. The Budget announced changes to company law, extending the less onerous accounting and reporting regime to more small businesses and clearer principles for future employment regulation, as well as an increase in the VAT threshold in line with inflation.

- on skills, greater flexibility to meet employer needs ??? pilots of regional management of post-19 skills budgets began in four regions (the East, South East, North East and North West) last week. The Budget announced that the government has agreed to consider suggestions such as the 'single pot' for some LSC money in the context of the review of funding and LSC/RDA pilots. Also announced was the work plan of national Modern Apprenticeship Taskforce which was launched in February with the aim of increasing the numbers of employers offering work-based learning to young people. Finally, the Budget also announced a new package of support for the development of SMEs. The package will include measures to stimulate the demand for advice and training by SMEs, and a web-based directory to improve the links between the demand for training by SMEs and the diversity of public and private sector provision of trai ning, and offer access to online counselling and mentoring.

LGA Response

Regional flexibility

In its evidence to the ODPM Select Committee inquiry into Tackling Regional Economic Disparities the LGA argued for greater regional flexibility and incentives to boost enterprise, skills and employment. Available on the LGA's website http://www.lga.gov.uk/OurWork.asp?lsection=59.

Enterprise in deprived communities

The LGA is involved in considerable activity around its policy priority on 'promoting local economic vitality' and has commissioned research focusing on the Fostering Business Growth 'beacon' authorities aimed at sharing lessons from innovative local measures eg on boosting enterprise in deprived communities though outreach activities. The results of this work will be published in Summer 2003.

Planning and housing supply

- New Regional Spatial Strategies are to take account of volatility in the housing market and promote macro-economic stability as part of delivering sustainable development.

- Government intervention where local authorities are not delivering housing numbers in high demand areas

- The introduction of binding local plans is to further explored, which appears to be closely linked to the introduction of binding reports proposed in the Planning Bill currently passing through parliament

- In light of the proposed reforms to the planning system, the CBI is to undertake a review of housing supply in the UK and report interim findings by autumn 2003. In particular it will look at the how competition, capacity and finance of the house-building industry interacts with the planning system and sustainable development objectives.

- As part of the government's work to promote a culture change in planning, Sir John Egan is to develop a skills and training strategy for economic development, regeneration and planning to deliver sustainable communities. This will build on work currently b eing undertaken by the Royal Town Planning Institute examining skills and educational needs within the planning profession.

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