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COUNCILS TO BE FREED OF CAPITAL CONTROLS - AND SCHOOLS TO TAKE CONTROL OF THEIR FUNDING

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Schools will be guaranteed control over 90% of their funding under plans to be unveiled this week by education secr...
Schools will be guaranteed control over 90% of their funding under plans to be unveiled this week by education secretary David Blunkett, reported The Independent on Sunday (p15). He will tell head teachers that they can have almost all the cash allocated to spend at their discretion, but he will draw the line at giving schools control over the cash to run their own bus services, as proposed by the Conservatives.

Schools are to be given control over 85% of their funding from next April, but the local government finance green paper tomorrow will signal that the proportion will be raised. 'We believe the optimum

level of delegated funding is around 90%', said a Whitehall source. 'It means that school heads can shop around for best value in their areas'.

The green paper, to be introduced by local government and regions minister Hilary Armstrong, will also propose sweeping changes in councils' funding, including abolition of controls on the money they spend on buildings and large items of equipment.

It could mean pupils being allowed to use cash cards to buy school meals. In one [unidentified] county, the introduction of electronic cashless machines for meals has already started, but the tight controls on capital spending by councils have stopped it spreading. Whitehall officials said the use of cash cards for school meals had led to an increase in the uptake of meals, generating more surpluses for the school meals service. 'Without the limitations of the current system, all schools could be considered for the scheme now', said one official.

It could also open the door to councils that want to help the private sector to regenerate urban areas. One council tried to create a project with a firm of private developers, but the company pulled out because of the inflexibility of the capital control regime in the local authority. In another council, attempts to use the income from its swimming pools and sports halls to finance the building of new sports facilities were blocked because it was not allowed under the capital spending controls.

The green paper will propose that councils will be free to spend on capital schemes without interference from Whitehall, provided that they stay within their overall limits for revenue support grant agreed with the DETR.

The government is refusing to back down over its most controversial proposal - to allow local authorities to set a local supplementary council tax on businesses. The green paper will emphasise that local businesses will have a say over how much they are levied.

'It has been alleged that the supplementary business rate will raise an extra£2.75bn without giving commercial companies any say. That is absolutely not true', said a DETR source. 'Councils will have to put in place a partnership with business which the majority of businesses will have to agree to before any additional tax can be levied'.

Under the plans, local authorities will be able to raise 1% of the national business rate, which could add£40 a year to the rate bill for a business with a rateable value of£10,000. Over two to five years, the sum could be raised to betwen two and five per cent of the national rate - equivalent to£200 on small business.

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