» Introduction
» The Current Situation
» Proposals for GLMCA Funding Post 1 April 2001
» Transitional Phasing
1.1 This paper sets out, as a basis for consultation, the Lord Chancellor's proposals regarding financial mechanisms for the Greater London Magistrates' Courts Authority (GLMCA). It seeks your views on;
We welcome your views in general, particularly on any practical problems you foresee in implementing the proposals, to confirm their accuracy and whether you feel any issues have been overlooked.
1.2 Background On 1st April 2001 the GLMCA will replace the existing 22 Magistrates' Courts Committees (MCCs) as the MCC for Greater London. In February 1999 a consultation paper on a wide range of GLMCA implementation issues informed the main principles of the policy in order to determine the primary legislation affecting the GLMCA. The outcome of this was that it will be an authority under Part IV of the Local Government and Housing Act 1989. Also, whilst other Magistrates' Courts Committees (MCCs) have their expenses paid on their behalf by their local "paying" authorities, given the particular circumstances of the capital (in particular the great number of local authorities) the GLMCA will be its own paying authority. It will therefore receive grant from the Lord Chancellor's Department (LCD) and funding from its local authorities, and will pay its own expenses for both revenue and capital expenditure. Much informal consultation has already taken place with other government departments, local authorities and the GLMCA in order to formulate these proposals. This consultation paper now lays out the proposed financial mechanisms in greater detail, in order to seek your views to inform the final policy decisions and the drafting of the relevant secondary legislation.
1.3 Copies of this paper are being sent to:
Further copies of this paper can be obtained from the above address or by calling Alan Bates on 020 7210 8711.
1.4 If you would like to comment on any of the proposals or questions in this paper, please send your responses by 6 November 2000 to:
Alan BatesThe normal 8 week period for responses in this consultation has been reduced because significant policy development has already taken place with the key stakeholders; (DETR; local authority finance directors and the GLMCA) on these issues, resulting in the enclosed proposals.
1.5 When responding it would be helpful if you explain who you are and, where relevant, who you represent.
1.6 Please ensure that you mark your response clearly if you wish the Government to keep your name and the contents of your response confidential. Otherwise, your name and the general contents of your response may be made public in response to questions under the Open Government initiative.
Revenue Funding.
2.1 At present the LCD pays up to 80%, of either the expenditure of the Magistrates' Courts Committee (MCC) or of the Lord Chancellor's determination, whichever is the lesser amount, to the paying authority for that MCC. The paying authority funds the remainder.
Capital Funding.
2.2 The manner in which capital expenditure in the Magistrates' Courts is financed depends on whether the expenditure was Pre or Post 1990. Outstanding loan charges are therefore funded by two different mechanisms.
2.2.1 Capital Expenditure Obtained Pre 1990. There was no capital grant before 1990. Capital expenditure incurred before this date is therefore funded by the payment from the LCD to the paying authority of loan charges grant. This covers up to 80% of the annual cost for interest and part-repayment of the capital. The paying authority pays the remainder of the cost.
2.2.2 Capital Expenditure after 1990. For capital expenditure incurred after 1990, LCD provide the paying authority with a capital grant of up to 80% of the cost of the project. The paying authority, either from their own resources or through borrowing, fund the remainder of the cost. In the latter case, the LCD issues a Supplementary Credit Approval (SCA) that allows the paying authority to borrow up to the total of their contribution to the project. The paying authority then receives Revenue Support Grant (RSG) from the Department of the Environment Transport and the Regions (DETR) to support payment of the loan charges.
Apportionment.
2.3 For the Outer London Boroughs and the City of London, there is currently no need for apportionment of costs, as the authorities and MCC boundaries align. In Inner London, the costs are apportioned by the Receiver between the boroughs on the basis of their respective council tax base for any financial year.
Mechanism for Payment.
2.4 For revenue, capital and debt expenditure, the paying authorities meet the costs as they arise. The LCD's contribution is made by grant payment, at fixed times.
2.4.1 Revenue and Capital. LCD pay revenue and capital grant to the paying authorities 4 times a year; on 15 May and quarterly thereafter.
2.4.2 Pre 1990 Debt. Local authorities submit annual estimates of likely expenditure in the coming year to the LCD. Grant is paid in two equal advances on 15 July and 15 January.
3.1 It is LCD policy that the GLMCA should remain within the national policy framework for MCCs wherever possible, only varying where its particular circumstances require it. The general principles of "80:20" funding will therefore be maintained in London, as in all other MCCs. However, some aspects of the financial mechanisms need to vary in order to cater for London's particular situation, as proposed below.
Revenue Funding.
3.2 The LCD will pay grant of up to 80% of the actual revenue expenditure, or of the amount determined by the Lord Chancellor, whichever is the less, directly to the GLMCA. The London local authorities will fund the remainder by payments direct to the GLMCA. The total local authority cost will be apportioned between the local authorities on the basis of the Council Tax base (see paragraphs 3.4 - 3.5 below). Timings of payments are as detailed at paragraphs 3.7 -3.9 below.
Capital Funding
3.3 We propose that existing debt stays where it is. The mechanism for paying the various categories of debt would be as follows;
3.3.1 Pre 1990 Loans. The LCD will continue to pay up to 80% loan charges grant directly to the local authorities who will pay the remainder, as at present. The mechanics for this will be the same for Outer London and the City as they are now. However, the mechanics for the Inner London boroughs will change due to the demise of the Receiver - see paragraph 3.3.3 below.
3.3.2 Existing Post 1990 Loans. The LCD is not directly involved in payment of these debts. Leaving them where they are is administratively the simplest and most cost effective mechanism for dealing with them. Central government grant (RSG) has the effect of making the financing of these loans broadly cost neutral in the long term to the individual local authorities.
3.3.3 Inner London. The Receiver currently holds Pre and Post 1990 debt relating to ILMCS but these debts will transfer to the Metropolitan Police Authority. For administrative purposes, the liability for servicing these debts will transfer from the Receiver to the GLMCA from 1 April 2001 and the GLMCA will be reimbursed by the Inner London boroughs.
3.3.4 Capital Expenditure incurred after 1 April 2001. Any new capital expenditure will be financed by a Capital Grant from LCD to the GLMCA of up to 80% of the cost with the local authorities funding the remainder.
Apportionment.
3.4 We propose that the proportion of the GLMCA's revenue and capital expenditure which falls to be funded by all the local authorities should be apportioned between them based on the Council Tax Base.
3.5 Each local authority's contribution can be calculated as follows;
If; LAF is the total of the sum to be funded by the
local authorities,
T is the Council Tax base for a local
authority,
and ST is the sum of all the local authorities' Tax bases,
then that Authority's contribution is (T divided by ST) multiplied by LAF.
e.g. If a local authority's T is 25, and the total of all the London Ts is 1000, then that local authority's contribution is 25/1000 (i.e. 2.5%) of the total local authority funding.
This new basis for apportionment would be introduced gradually (see section 4).
3.6 The tax base to be used will be either the DETR's Council Tax Base (as used for the calculation of RSG) or the local authorities Council Tax Base (as used for setting their Council Tax), depending on the figures which are available at the point when the regulations have to be laid. However, the regulations can be revised periodically if, over time, the relevant Council Tax based figures vary significantly from those laid out in the regulations.
Mechanism for Payment.
3.7 Revenue Funding. The LCD will pay grants to the GLMCA in a similar way as it currently pays them to other paying authorities. It is proposed that the local authorities contributions should be paid to the GLMCA in 10 instalments over the financial year in line with the existing timetable for payment of precepts. Precise dates will be specified in regulations.
3.8 New Capital Funding. The LCD will approve capital grant of up to 80% of the cost of an authorised project . Payment will be made in accordance with paragraph 2.4.2. The local authorities will pay the GLMCA under the same timetable as stated in paragraph 3.7 above.
3.9 Interest on late payments. It is proposed that the GLMCA shall have a right to interest on late payments.
3.10 Loan Charges Grant for Pre 1990 Debt. This mechanism will continue between LCD and paying authorities as now (see paragraph 3.3.1).
Transitional Period.
4.1 For some local authorities, their funding contribution will change fairly significantly if, as proposed, the basis used for apportionment after 1 April 2001 is the Council Tax Base. We would therefore propose that for revenue funding there is a 5 year transitional period during which the payments determined under paragraph 3.4 above are phased in. Each local authority's contribution would progress from its current figure to the Council Tax based figure in 5 approximately equal steps. It is not practical to use the new Council Tax base figure each year (as this would require the legislation to be revised every year) so we propose to use the 2001/02 Tax base as the end-point for the transitional phasing.
4.2 To calculate the transitional contributions, 20% of the difference between their current funding contribution and their funding contribution under the Council Tax basis will be added to each local authority's current contribution for each of the transitional years, as illustrated below;
| Local Authority |
Current (00/01) contribution |
Difference from Council Tax |
20% of difference |
Year 1 (01/02) |
Year 2 (02/03) |
Year 3 (03/04) |
Year 4 (04/05 |
Year 5 (05/06) |
| A |
250 |
+50 |
+10 |
260 |
270 |
280 |
290 |
300 |
| B |
350 |
-50 |
-10 |
340 |
330 |
320 |
310 |
300 |
| Total |
600 |
- |
- |
600 |
600 |
600 |
600 |
600 |