PAPER
D
ENVIRONMENT AND TRANSPORT SELECT COMMITTEE – 29 OCTOBER
2004
TRADING AND CHARGING REPORT
OF THE CHIEF FINANCIAL OFFICER AND THE HEAD OF LEGAL AND
DEMOCRATIC SERVICES |
REASON FOR SELECT COMMITTEE
CONSIDERATION
At a meeting on 30 July 2004 the Select Committee requested an overview of the new statutory provisions on trading and charging, in order that the committee could consider adding an enquiry designed to identify trading or charging opportunities to recommend to the Executive, Portfolio Holder(s) and/or Strategic Directors/Heads of Service.
|
ACTION REQUIRED BY THE SELECT COMMITTEE 1.
To receive information and advice from the Chief Financial Officer and
the Head of Legal and Democratic Services 2.
To consider the criteria suggested to assist identifying opportunities
for charging and either: ·
Determine to add terms of reference to the Select Committee work
program designed to lead to recommendations in relation to and charging, and/or ·
To make recommendations to the Executive,
Portfolio Holder(s) and/or Strategic Directors/Heads of Service in relation
to charging 3.
To determine whether to receive a future report in relation to trading
activity and the criteria which can be applied in order to identify potential
trading activity 4.
To determine whether to receive a future report detailing trading and
charging activity in other authorities identified by a survey currently being
undertaken by the Local Government Association. |
BACKGROUND
1.
The 2003 Local Government Act (“the
2003 Act”) provides two new regimes for local authorities. They are distinct
and confusion between the two must be avoided. Useful and comprehensive
guidance has been issued by the Office of the Deputy Prime Minister.
Charging
2.
Under the 2003 Act all local
authorities may now charge for services which:
3.
The discretionary element is vital to
the concept of the charging regime as use of services charged for is entirely
voluntary by those using the service.
4.
The charge must not exceed to cost of
providing the service. Making a profit is prohibited. Any charge need not cover
all the cost of delivery, allowing for example subsidy to economically excluded
service users where there is a source of funding for the subsidy.
5.
Any charge imposed must be justified by
a robust methodology identifying the cost of providing the service.
Trading
6.
The power to trade is only available to
authorities judged fair or above by their Comprehensive Performance Assessment.
Trading:
Island Context
7.
Charging should never principally be
seen as a way of raising money, and trading rarely so. To see charging in this
way is to run the risk of establishing a taxation regime by stealth and to miss
the true opportunity that the new powers provide.
8.
The primary value which the new regimes
add to the planning and delivery of public services is the ability to provide
services which existing public, voluntary or commercial provision does not
provide.
9.
The Island, like many rural communities
on the mainland, does not have commercial provision of some services (usually
provided by the private or voluntary sectors) which can be taken for granted in
more densely populated areas. Examples, not particularly related to the terms
of reference of the select committee, might include voluntary sector support to
vulnerable people (such as simple DIY and personal security/safety advice) or
services to start up companies, such as payroll administration.
10.
Equally, members and service managers
will be familiar with the desire to provide public services where funds from
local taxation, government and European grants are insufficient to allow free
delivery.
Criteria to Identify Charging Opportunities
11.
It is suggested that the following will
usefully identify opportunities for charging, and that any recommendation to
develop a charged for service should conform to one of the first two criteria,
and one or more of the subsequent criteria.
i.
The proposed charged for service is
discretionary in law, not currently provided and there is evidence of an unmet
need which users will pay to have delivered, or
ii.
is discretionary in law, is currently
provided but under threat and there is evidence that users will pay to secure
ongoing delivery of the service
These
first two criteria require a business plan to be developed.
i.
the proposed charged for service makes
use of an existing asset (including people, premises or plant) which is
currently under used, or
ii.
there is a proposal to buy an asset for
purposes which will not be charged for but there are insufficient funds to
acquire the asset, and the charged for service will cover the cost of
acquisition
iii.
the charge proposed is sufficiently
high to cover both the marginal
additional cost of providing the service and
to cover part of the fixed costs of the existing or new asset being utilised
iv.
there is an opportunity increase the
size and value of existing activity and to achieve economies of scale
v.
some obstacle to service provision can
be removed by charging for novel provision of the service
12.
Some illustrative examples may assist.
These should not be taken as proposals as no risk analysis, market test or
feasibility study has been undertaken.
13.
The Seaclose building is a substantial
asset which is substantially unused in the evenings and at weekends. Offering
pre planning advice by appointment, out of hours is a discretionary service
which may appeal, say, to busy lay applicants who do not want to take time off
work to seek advice.
Any
charge made for such out of hours service could (and must) include not only the
marginal cost of providing staff out of hours and additional heat and light,
but also a substantial contribution to the overheads of running the planning
service, including the Seaclose building, depreciation of IT equipment and the
on costs of employment.
Out
of hours work is traditionally seen as a burden to employees, but at a time
when flexible working is valued, and qualified staff are hard to recruit and
retain offering the premium service may actually assist in delivering the core
service – and reduce the demands on it as quality applications would be
delivered with the cost being borne voluntarily by the applicant.
14.
The Isle of Wight Council does not
deliver many direct services. It cannot., therefore, apply plant unused at
certain times for doing private work. It may, however be worth exploring
whether the contracts which the council lets (particularly where they are call
off or unit cost contracts) could be made available outside of the council.
This would be a particular advantage if the size of the contract in question
increased to enable the authority to negotiate ore favourable terms.
Criteria to Identify Trading Opportunities
15.
There are similar but different
criteria which can be suggested. The first is absolutely necessary.
i.
Market testing suggests that there is a
trading opportunity with the opportunity to make a profit sufficiently high to
offset the cost of running a company and the risk of engaging in commercial activity
ii.
The proposed activity enables some
other existing or proposed activity –
·
for example providing an income stream
to reduce the cost of a strategic partnership or PFI deal
·
is a function that the local authority
can bring to a partnership with, say, a health agency which is itself unable to
charge for services
An
Example
16.
The idea of advertising on the Wightbus
fleet was floated at the 30 July meeting. Applying the criteria above the
following conclusions can be drawn:
·
it is lawful to charge and may be
worthwhile doing so provided a market test shows this is of interest to the
advertising industry, and
·
RELEVANT PLANS, POLICIES, STRATEGIES AND PERFORMANCE INDICATORS
CONSULTATION PROCESS
None.
FINANCIAL, LEGAL, CRIME AND DISORDER
IMPLICATIONS
APPENDICES ATTACHED
None.
BACKGROUND PAPERS USED IN THE PREPARATION OF THIS REPORT
Contact Point :
John Lawson ( 823203
e-mail johnlawson@iow.gov.uk.
Paul Wilkinson John
Lawson
Chief Financial Officer Head
of Legal and Democratic Services