Tuesday, May 29, 2012

Budget Committee

This morning the Budget Committee met for the first time under its long standing Chairman John Biggs. We heard from the finance directors of the GLA, TfL, Met Police and LFEPA. Being a broad bruush meeting, debate was expected to cover a lot of ground in not much depth - but in the event there was even less depth than we had anticipated.


We heard about government proposals to allow local authorities to retain half the business rates collected in their areas. Currently they collect the money but it all goes to the treasury. The new proposal is intended to encourage councils to find innovative ways to help business growth.

Where two tier authorities exist there needs to be a way to divide the proceeds of business growth. In the counties the district councils will keep 80% of the revenue and the counties will get 20%. However in London the GLA has greater responsibility for infrastructure than any county so a different split is being negotiated with London Councils. We felt that 60% to the boroughs and 40% to the GLA would be a fairer division of the new income stream.

Furthermore, some councils with large business bases will do disproportionately well - these include The City of London, Westminster and Hillingdon which hosts Heathrow Airport. So some redistribution would be necessary from these to 'top up' other councils' budgets - for example Lewisham and Bromley who have comparitively little business property in their boroughs.

For many years councils have been encouraged to develop employment sites for housing because they got to keep the council tax receipts. This modest reform will redress the balance somewhat, encouraging the development of more business facilities.


It was too early for much in depth comment to be made on these, with the financial year barely begun and appointments to the new governing boards incomplete.

The police told us they had a budget 'gap of £148m, which was awaiting the appointment of the new Deputy Mayor Policing, due for confirmation on Thursday. Then there would be a pause during the Olympics before cuts could be made. The need for some closed police stations was questionned by new member Andrew Dismore. PCSO recruitment was expected to be completed in the autumn.

The Fire Authority had vired £30m to support the police budget in 2011/12, and they expected the money to be returned in the coming year. With the Board of LFEPA not yet appointed, the director would not be drawn on possible cuts.

Transport For London was in better shape owing to bouyant fares income. However this could all change if the economy declined - just a 1% drop in Tube ridership would cost £40m. Savings of £7.6 billion were being made with two thirds of these already implemented. New Deputy Chairman Stephen Knight suggested increasing prudential borrowing in order to reduce the revenue contribution to capital spend, and thus providing room to cut fares. Sephen Critchley from TfL was worried that this might damage TfL's credit rating.

So it was a wide roundup but with a lot of 'wait and see'. With the scene set, a challenging financial year stretches ahead...

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