The Community Right to Bid could cost town halls an extra £5m. This completely contradicts ministers’ promises that any new local burdens will be funded by central government
In his attempts to sit on council tax increases and ensure that ‘new burdens’ on councils are properly funded, Unison has discovered that Eric Pickles seems to have landed them with over £5m worth of potential new financial burdens through the Community Right to Bid. In the process he has also generated enough new blue tape to even tie himself up in knots.
The Community Right to Bid is an offspring of the Localism Act. It provides for groups within local communities to register buildings or assets – public or private – as having ‘community value’. In theory, if such an asset comes up for sale, community groups can ‘stop the clock’ on the sale and attempt to raise the necessary capital to buy the asset.
The original proposal for the Community Right to Buy was watered down as the Localism Bill progressed through Parliament and ‘Buy’ became ‘Bid’. Private sellers can simply ignore bids too, but some communities facing library, pub or cinema closures might just fancy creating their own Bigger Society in their neighbourhoods and exercise their right to bid.
So what’s the problem? While the right may appear appealing to some, Unison’s enquiries have established that it comes with hidden costs for councils and in itself is likely to create a fair bit of new true blue tape. Regulations released on 20 September determine that local authorities are liable to pay compensation to private sellers should the right to bid cause them financial loss through, for instance, creating delay in selling.
The Department for Communities and Local Government’s New Burdens Doctrine should – if applied to the letter – deal with that problem. Described as ‘part of a suite of measures to ensure council tax payers do not face excessive increases’ it says, in bold, that ‘the net additional cost of all new burdens placed on local authorities by central government must be assessed and fully and properly funded’ by the relevant department. But the DCLG appears to be breaking its own rules.
Unison’s enquiries have resulted in confirmation that in 2012-2013 local authorities will be paid only £4,873 each to administer the new scheme. This is based on the one already introduced in Scotland, which apparently suggests that 700 assets could be listed each year, of which 183 will go to the full moratorium and be eligible for compensation under the scheme.
Any compensation payments above £20,000 will be met by government. But what happens about compensation payments in between the £4,873 allocated to each council and the £20,000?
According to the DCLG, the 326 local authorities facing the new burden will be left to find their own funds to pay this compensation. This creates a potential funding shortfall of just under £5m across councils – and breaches the DCLG’s own doctrine, which says that ‘where a department considers that it requires additional resources to fund a new burden, it is responsible for securing those resources’. In suitably stentorian tone it adds that ‘if a new burden is imposed, a transfer must be made’.
Unison enquired of the DCLG who would meet the difference between the potential cost and the amount allocated by the department, which will arrive on 15 October. We were told that councils themselves must consider ways of mitigating and managing the risks and consider pooling the resources made available.
That’s all very well, but aside from breaching its own New Burdens Doctrine – a crime that suggests serious retribution indeed – it ignores the unequal burdens that may fall on councils and, of course, shifts risk from private sector owners to council tax payers via the missing £5m that councils will have to find.
In the grander scheme of local government finance, £5m may be deemed hardly a sum to write home about, but tell that to the local government workforce. Damned by a three-year pay freeze and almost 250,000 lost jobs, Unison members would no doubt have some suggestions about how that £5m a year could be spent.
How about on 100 social worker jobs, new stock for the dwindling number of libraries that remain after 620 closures or funding for a few community nurseries having to fill the gaps left by cutting Sure Start?
Just a thought…..