Background and Policy Objectives
3.The Act modernises the legislative framework relating to local government finance and councillors’ remuneration in Northern Ireland, which had been set out mostly in Part V of the Local Government Act (Northern Ireland) 1972 (“the 1972 Act”). Although Part V of the 1972 Act had been updated by subsequent legislation, provisions in relation to borrowing and council funds remained mostly unchanged. Through engagement with key stakeholders, it was identified that the legislation for local government finance needed to be updated to reflect modern accounting practices. This was confirmed by the Local Government Taskforce Finance Sub-group, which issued its report in July 2006. Membership of that sub-group included elected members and officers from local government and officials from central government. This Act replaces Part V of the 1972 Act.
4.The Act introduces a new capital finance system and sets out the legislative framework within which a district council may manage its finances and central government may regulate that activity.
5.The Act allows district councils greater freedom to manage their own financial affairs without having to obtain consent from the Department. Control by central government will be exercised, where necessary, through subordinate legislation and guidance.
6.Articles 3 to 6 of the Local Government (Miscellaneous Provisions) (Northern Ireland) Order 2002 (“the 2002 Order”) make provision for the payment to district councils of a general grant, consisting of a resources element and a derating element. The separation of the general grant into two elements has caused some confusion in the past. The Department aims to remove this confusion by replacing the general grant with two new grants – the de-rating and rates support grants – that will be calculated using the same statutory formulae used to calculate the separate elements of the general grant.
7.The Act extends the general power to pay grants to district councils, which previously applied only to the Department of the Environment, to all departments to enable them to pay grants in relation to their areas of responsibility.
8.The Act updates and consolidates the provisions of the 1972 Act which deal with payments to councillors, taking account of the recommendations of the Councillors’ Remuneration Working Group (“the CRWG”), following its review of councillors’ remuneration in Northern Ireland. Membership of the CRWG included representatives from the National Association of Councillors, the Northern Ireland Local Government Association, trade unions, the business and voluntary sectors, together with an independent member. After considering views received from a number of district councils and local government representatives, the CRWG made recommendations, in June 2006, for the system of councillors’ remuneration both under the current 26 district councils and also for the new councils following the re-organisation of local government.
9.The CRWG’s recommendations included the introduction of a requirement for councils to make and publish schemes of the allowances they intend to pay to their councillors, and provision for the establishment of an independent remuneration panel to advise the Department on payments by councils to councillors. The Act makes provision for schemes of allowances and the establishment of the panel.
10.In order to ensure that all provisions relating to local government finance arrangements and payments by councils are consolidated into one piece of legislation, the Act repeals and re-enacts the provisions of the 1972 Act relating to expenditure for special purposes.