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Is financial ignorance bliss for councillors?

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councilTHE COUNCIL’S budget is essentially the same as our household budget: we get a salary and/or pension/benefits out of which we pay our expenses, and with a bit of luck, have some disposable income for non-essential ‘luxuries’ such as holidays, and if we are really fortunate, are able to set aside some savings. The Council gets its income from a variety of sources: Rate Support Grant (our income taxes), Non Domestic or Business Rates (paid by local businesses), Council tax paid by us, and direct charges from “customers” of Council services, for example Car Parking and some Adult Services, e.g. Day Centres and Meals on Wheels. The Council can also receive direct grants for providing specified services. It can increase its income yields by putting up the Council Tax and direct charges. From this collective income, the Council budgets and prioritises how much it can spend on providing our services. Much in the same way that we may be fortunate enough to build up a savings pot, the Council can build up reserves, which are required to even out peaks and troughs of expenditure over a number of years, or to put by for specific purposes or projects. Like us, the Council can also borrow money to fund projects that have a ‘life’ over a number of years. However, unlike us, it is not allowed to finance expenditure in the current year from borrowing.

Leaving it to officers 

It is impossible for Councillors to authorise every payment the Council makes. For day to day operational purposes, the Cabinet therefore authorises or delegates spending powers to unelected officers to incur expenditure during the year on services within the Council, approved Budget allocations. The Cabinet has delegated wider powers to the Director of Finance for the allocation and use of reserves, both Capital and Revenue. Every three months, throughout the year, officers are required to report the financial position to Cabinet and Scrutiny Committees, plus a final outturn monitoring report at the 12 months stage. In theory, these reports enable financial performance to be monitored, by elected Councillors, against the approved annual budget. Any corrective action considered necessary as proposed by officers should be considered and agreed by Cabinet. However, these reports are focussed at Net expenditure level, which masks the true level of services provided and expenditure incurred at Gross Expenditure level. Any specific remedial action necessary is therefore not fully reported for approval. While the position on spending against the Council’s approved budget must be reported to Cabinet and Scrutiny Committees on a three monthly basis, the position on reserves is only reported to Cabinet/Council at Annual Budget time, and annually to the Corporate Governance Committee as Draft Accounts pre-audit, and then as the Final Audited Accounts.

Revealing Reserves 

On September 29, the Council’s Corporate Governance Committee received a report on the Audited 2013/14 Accounts, which included, a table of Usable Reserves on page 64. Page 63 provides description of the individual reserves for those interested. This is the only comprehensive presentation where all reserves are reported on one page. Categories of reserves are subject to different controls. The Council is required to carry annual Working Balances, and the Auditor comments on the adequacy of these reserves, provided specifically in order to meet urgent, unforeseen contingencies or circumstances. The Education Reserves are primarily under the control of individual schools. The Children and Families Overview and Scrutiny Committee November 10, received a comprehensive report providing information on the amount of balances held by schools over the last three years with a commentary on future prospects. The Table shows that the Council had a total Earmarked Capital and Revenue reserve balance of about £50m under its direct control at 1 April 2013, rising to £56million at 31 March 2014, allocated for the purposes shown. To set these amounts in some sort of context: the Council sought to raise £40.5m from Council Tax in 2014/15 (an increase of £1.5million over 2013/14) and £13.4million from its Discretionary Direct Fees and charges, (an increase of £1.6million over 2013/14). Of particular note and significance, is the trail of money movements between The Pay and Grading Reserve and 21st Century Schools Reserve during 2013/14: all happening without councillors being informed but within the delegated authority of the Director of Finance.

Moving money

 Some years ago, in common with other Councils, grants were made by the Welsh Government, staged over a number of years, to fund the likely cost of the Equal Pay/Pay and Grading reviews. In total, by March 31, 2012, our Council had received around £11.5m by grant, which was not hypothecated, and therefore did not have to be used for the purpose for which it was given. During 2012/13, £4.5million was charged against this provision in settlement of Pay Awards, leaving a balance of £7.0million – £5.6m of which was allocated to the Pay and Grading Earmarked Reserve on March 31, 2013 (let’s leave the unallocated amount of £1.4m ‘floating’ for the moment, I have yet to follow this through, suffice it to say that there is another ‘hidden’ category of reserve or Provision). The £5.6million can be picked up on the accompanying table, where the line shows a further contribution of £0.5m coming from revenue accounts, providing a total available Pay and grading reserve of £6.1m. From this sum, a contribution of £2.335million to revenue accounts was made in 2013/14 to meet the cost of further settlement of awards, leaving a balance of £3.765million at 31 3 2014 available for Pay and Grading. In total, an amount of £7.3million has been paid in pay settlements out of the total grant of £11.5million, leaving a balance of Pay and Grading Grant money of £4.2million. We have been told by officers and councillors that the Council could not afford to pay out more. While it may be true that the Pay and Grading Review was conducted fairly, an Appeals process was instigated at the behest of indignant Councillors. I understand that Appeals are still being considered and settled. I am not aware that the financial position on Pay and Grading has ever been explicitly reported or that appropriate questions have been asked by Councillors. I am sure that if I have got this wrong, the Council would be only too pleased to clarify the position.

21st Century Schools 

The table reveals that £2.861million was allocated out of the Pay and Grading Reserve into the 21st Century Schools Reserve, leaving £0.9million available on March 31, 2014 to settle Future Pay and Grading appeal awards. The 21st Century Schools programme represents a significant investment by the Council and has been agreed as a priority. Turning to the 21st Century Schools Reserve, an initial £8.514million reallocation of balances out of other earmarked reserves in order to prime the 21st Century Reserve was approved by Council in February 2011, as part of the 2011/12 Budget. Starting with the £8.514million pump priming, further contributions from revenue service accounts of £4.526million in 2011/12, £0.174m in 2012/13 and £3,519m in 2013/14, which, with the addition of the transfer during 2013/14 of £2.861million from the Pay and Grading reserve, leaves the 21st Century Schools balance on March 31, 2014 standing at £19.594million. With services being under such financial pressure, the intention is to fund the Council’s share of this significant programme from Capital Receipts (proceeds from the sale of Assets) and Borrowing.

No questions asked 

The Council, when setting its budget, rarely, if ever, considers the allocation and level of reserves. With an apparent ability to increase reserves by a total of £6.0million during £2013/14, at a time when targeted budget cuts of £1.6million were also achieved, it is perhaps time that councillors took an interest in the allocation and level of reserves. Perhaps more to the point is the question of how service budgets, under pressure, can make contributions into earmarked reserves. By amending the Council’s Constitution it is possible for the Council to redefine the terms of delegations given to Directors and the Director of Finance, and regain a measure of financial control for themselves. There may well be good arguments for doing this, in the light of the severe financial constraints the Council faces, for the sake of openness and transparency and democracy.

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Scheme to upgrade Dinas Cross holiday park withdrawn

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PLANS to create a ‘five-star resort’ in one of Wales’s most popular holiday locations have been withdrawn.

In an application submitted to Pembrokeshire Coast National Park, Chester-based Boutique Resorts Ltd sought permission to relinquish 50 mixed touring pitches (caravans and tents) at Fishguard Bay Resort, Dinas Cross, replacing them with “36 high quality timber-effect holiday lodges”.

The application, recommended for refusal at the April 24 meeting of the national park’s development management committee, also included an increase in the site area of the approved park, a new entrance, a new reception lodge, staff and visitor parking area, with extensive environmental improvements.

The site, established in the 1950s, currently has planning permission for 50 static caravans and 50 mixed touring units, and it is intended 23 of the proposed lodges to be sited at the entrance, with a further 13 throughout the site.

Despite the proposals seeking a reduction in outright numbers, the applicants say the scheme would see an increase in the number of full and part-time jobs associated with the resort, from 29 to 62 jobs.

A previous application was refused in 2019, mainly on visual impact, ecological impact and highway impact, and the applicant has sought to address the issues raised by that refusal, a supporting statement says.

It adds: “The applicant purchased the site in 2014 with the intention to upgrade the site into a five-star luxury resort. This is very much still the applicant’s intention and whilst he has replaced some existing static caravans with luxury lodges, he also seeks to replace the touring caravans and tents with luxury lodges too.

“The resort is now considered one of the most desirable holiday parks on the Pembrokeshire Coast which is evident on the number of holidaymakers who return to the resort year on year. Such is demand for luxury lodges on the site, the applicant requires additional units.

“The applicant now wishes to move the resort further by replacing the mixed touring pitches with luxury lodges but also provide a much-needed new entrance into the resort.”

Objections to the scheme were received from the National Trust, the national park’s strategic policy and ecologist, and the South Wales Trunk Road Agency, and 12 members of the public, along with one letter of support.

The application was recommended for refusal for reasons including it was “likely to have a significant detrimental impact on the special qualities of the National Park by intensifying the visual impact and intrusion of a large static caravan site within the extensive coastal views of this section of the National Park,” it would represent an intensification of the site, and was likely to “have an unacceptable impact on neighbouring residential amenity through increased noise and traffic movements”.

The application, listed for consideration by park planners next week, has since been withdrawn.

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First step towards council tax and business rate reform

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MAJOR reforms to council tax and business rates have cleared the first hurdle in the Senedd.

MSs backed the general principles of the local government finance bill, which would introduce a five-year cycle for council tax revaluations from 2030.

The bill would lay much of the groundwork for Welsh Government proposals to redesign council tax, with current bands based on property values from 2003.

It would also increase the frequency of business rates revaluations from five to three years.

Rebecca Evans told the Senedd the bill forms a vital part of the Welsh Government’s wider programme of local tax reform.

Wales’ finance minister explained the bill would enable ministers to modify business rate relief exemptions and the multiplier to support policy priorities.

John Griffiths outlined the local government committee’s stage-one report recommendations aimed at improving the bill and guarding against unintended consequences for taxpayers.

Mr Griffiths explained that the bill provides a framework for future policy changes to be made by the Welsh Government via secondary legislation.

The Labour MS, who represents Newport East, said the committee heard concerns that this limits opportunity for public engagement and scrutiny by the Senedd.

Welcoming the Welsh Government’s commitment to retaining the single-person council tax discount at 25%, he highlighted wide-ranging powers in the bill over vital reduction schemes.

In terms of business rates, the committee chair said MSs heard broad support for a move to three-yearly revaluations, which he described as a reasonable, proportionate cycle.

Peredur Owen Griffiths, who chairs the finance committee, backed the bill’s key aim to create a fairer, more flexible system.

The South Wales East MS welcomed reassurances from the Welsh Government that the intention of council tax reforms is not to raise more revenue.

“Given the regressive nature of council tax, we support the aim to make it fairer without affecting the tax base,” he said.

Plaid Cymru’s finance secretary said the proposed powers will reduce the Welsh Government’s reliance on UK bills to make changes.

Alun Davies, a Labour backbencher, warned that delegated powers in the bill risk diminishing the role of the Senedd.

Sam Rowlands, the Tories’ shadow local government secretary, raised concerns about the bill putting more power in the hands of the Welsh Government rather than councils.

He warned the bill is a stepping stone towards higher taxes through the back door, saying: “This bill in and of itself does not necessarily do that but it certainly enables future changes.”

The former leader of Conwy council, who represents North Wales in the Senedd, called for reforms to the formula used to allocate funding to Wales’ 22 councils.

Raising concerns about digital exclusion, Mr Rowlands opposed a provision in the bill which would remove a duty to publish council tax notices in local newspapers.

He said: “We believe it’s a really important part of the democratic process in local government, especially in relation to transparency.”

Backing a revaluation of all 1.5 million properties in Wales, Labour MS Mike Hedges described council tax as fundamentally unfair.

He said: “Someone living in a property worth £100,000 pays around five times as much council tax relative to the property value as someone living in a property worth £1m.”

Mr Hedges, who represents Swansea East, also opposed the removal of the duty to provide council tax information in newspapers.

On business rates, he said: “I’ve always supported the returning of them to local authorities. We don’t need an all-Wales system; let each local authority set its own business rates.”

Ms Evans told the chamber she intends to make a statement on the next steps for council tax reform before the summer recess.

The Senedd agreed the general principles of the reforms without objection, and the bill now moves to stage two which will see MSs consider detailed amendments.

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Senedd backing for major infrastructure approval changes

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THE SENEDD agreed reforms aimed at streamlining the consenting process for significant infrastructure projects in Wales.

MSs passed the infrastructure bill, which will establish a unified process, known as infrastructure consent, for major on and offshore projects.

Infrastructure consent will replace existing procedures for energy, transport, waste, water and gas projects above a certain size or capacity threshold.

Julie James, Wales’ housing, local government and planning secretary, argued the bill will introduce a modern and simplified process.

She said the bill will play an important part in moving towards net-zero emissions by 2050 by enabling consent for renewable energy projects in a timely but robust manner.

She told MSs: “Not only will it improve the competitiveness of Wales as an attractive place for investment and jobs, it will also empower local communities and other key stakeholders.”

Ms James said it is a “process bill” with much of the detail to follow in secondary legislation and a significant amount of work ahead to ensure a smooth implementation process.

She told the chamber that secondary legislation will ensure the infrastructure consenting process operates effectively, efficiently and with maximum engagement.

She explained that two consultation papers will be issued by late May, with the first focused on pre-application consultation processes and the second centred on fees.

A third and final consultation paper will follow this year outlining the whole new process.

Janet Finch-Saunders, the Conservatives’ shadow secretary, described the reforms as hollow and lacking in fundamental details.

She argued this is in complete conflict with the bill’s core aims of delivering a streamlined process and empowering communities to engage.

Ms Finch-Saunders warned that the bill is missing a vast amount of details, including on how open-floor hearings will be triggered and time limits for making decisions.

She said: “It is apparent to any reasonable person that this bill does not represent anywhere near what it promises to do, and that is a streamlined and unified process.

“The reality is that so much information is omitted that we do not know how these processes are going to work in reality.”

The Aberconwy MS added: “Clearly, the legislation is not as I believe it should be. We do not believe that it delivers a robust process for Wales.”

Delyth Jewell stressed the importance of striking the right balance between tackling the climate emergency and safeguarding the natural world.

Plaid Cymru’s deputy leader said planning processes must be more accessible to the public.

“Too often communities are left feeling disenfranchised and marginalised when decisions about infrastructure are made without their say,” she warned.

Calling for a coal-free future for Wales, Ms Jewell reiterated her party’s calls for coal to be removed from the list of significant infrastructure projects in the bill.

The South Wales East MS said: “We will keep pushing for a number of changes in regulations. But passing the buck and allowing this bill to fail would be a retrograde step.

“Let this be the first step in a journey towards democratising our planning process. There’s an awful lot more that we need to do, but it can at least start here.”

Ms James reiterated that many details were deliberately not included “on the face of the bill”.

She said: “If you were to put that into primary legislation, it would become out of date so fast that it wouldn’t make the end of the year.

“So, it is very important that we put those things in secondary legislation.”

Before the debate could be held, the King’s consent had to be sought because the bill could impact the Royal Family’s interests, such as the Crown Estate.

MSs agreed the stage-four vote on the final text of the bill, with 36 in favour and 15 against.

The infrastructure bill now enters “post stage four”, a four-week period during which it could be challenged by the UK Government but it is expected to move on to Royal Assent.

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