Clause 25
Local Government and Public Involvement in Health Bill
9:30 am
Phil Woolas (Minister of State (Local Government & Community Cohesion), Department for Communities and Local Government; Oldham East and Saddleworth, Labour)
While I wait for inspiration, perhapsI should explain what the clause seeks to do. The explanatory notes say that clause 25 is consequential on clause 24 and relates directly to it. It provides thata direction under clause 24 may provide that, if an authority seeks to apply financial reserves to reduce its budget requirement for council tax purposes, consent is not required in relation to financial reserves
“of a description specified in the direction”.
Likewise, the direction may provide that consent is unnecessary for application of financial reserves below a certain amount.
Hon. Members will be aware that school reserves are reserves that belong to the school—that has been the case since the legislative changes made by the House. Although the calculation of balances and assets includes school reserves, those reserves are ring-fenced, so they cannot be accessed for council tax purposes or, indeed, other purposes outside the remit of the school. The reason for inclusion is that school reserves are part of public sector assets and are therefore related to the public sector borrowing requirement. Many local authorities think that the situation should be otherwise, but Parliament decided that school balances should be treated in that way.
A second, related factor is that of the requirements and guidance of district auditors on what constitutes a reasonable level of reserves for local authorities, which varies between authorities, but which a direction under clause 24 cannot overturn. The Secretary of State may decide that consent is not required for, say, insurance reserves. That is because an authority might require its insurance reserves to be available for use at any time and needs to adjust them annually to reflect changing risk costs. Therefore, it might be appropriate for the authority to budget to use some of those reserves to reduce the council tax. As a consequence, it is not possible to say that all reserves are treated exactly the same. One would have to make a direction in light of the provision that has just been made.