HOW LOCAL IS FINANCED -strikes needed to stop the cuts

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assist in that work.

There are basically two categories of Local Authority Expenditure-Capital and Current.

In simple terms current expenditure is money spent on immediate activities-wages, working materials, petrol, maintenance, etc., whereas capital expenditure is money spent on fixed assets-housebuilding, road building, new schools, town halls, etc.

Major repairs are usually included in capital programmes, minor repairs and maintenance in current programmes.

Capital works are usually paid for with money borrowed by the Authority. (In rare cases it will have money in reserve from sale of assets or from surpluses in previous years).

Two systems Repayments of principal and interest on these loans-called 'debt charges' • are an annual cost to the Authority until the total loan is repaid.

Debt charges and current expenditure are added together to make up the total Revenue Expenditure.

There are two quite different systems for deciding on Capital and Revenue expenditure programmes.

Revenue expenditure is paid for with money from three sources: rates (local property taxes); grants from government and other income.

The largest part of an Authority's other income is usually the rent received from its tenants.

Other income can also be derived from services for which the Authority makes a chargeswimming baths, lettings of public halls for meetings or dances, etc.

Within the general category of revenue expenditure there are several special areas where government controls can be applied against the interests of the residents in the Authority's area.

The most important of these areas is housing.

The largest and most important of the grants towards revenue expenditure is the Rate Support Grant.

Important

The operation of RSG and the way it is settled is fairly complex but important to understand if cuts are to be identified and combatted. • The government states its intentions in relation to RSG as equalising the cost of providing a standard level of services, taking into account the different conditions in different areas.

It also wishes to share costs 'fairly' between local ratepayers PHOTO: Laurence Sparham, IFL and national taxpayers.

In order to meet these differing objectives the present RSG system was developed. t consists of three components.

The first of these is the domestic element. This is a direct subsidy from taxation to the ratepayer at a rate in the pound fixed each year.

Thus it gives most benefit to the occupiers of the dwellings with the highest rateable value.

The second component is the resources element. This is a subsidy from taxation to those authorities with very small rate bases-for example those with no industrial or office premises.

Each year a standard level of resources is set, in terms of rateable values per head of population, and resources element is paid to any authorities falling below this level.

Over the years this standard has steadily increased, to the point where the overwhelming majority of authorities now receive resources element.

The third, and most controversial, component is the 'needs' element.

The intention of the 'needs' element is to distribute money according to the different needs of different areas-a worthy objective which runs into difficulties almost immediately.

The first problem of course is to decide on the needs of an area. This is done in each year by drawing up a list of factors believed to contribute to 'need'.

The composition of this list changes from year to year, but usually contains over 20 items, such as numbers of elderly, numbers of school meals, numbers of households overcrowded, and so on.

Prime target-housing The second problem is to attach a financial value to each of these aspects of need.

This is done by looking at expenditure in previous years and producing a formula which relates proportions of past expenditure to each of the need factors.

These proportions are then applied to the total amount available for distribution in needs element.

In outline, that is rate support grant. The procedures for fixing the sums of money involved are, unfortunately, as complex as the principles.

There is a series of discussions between the local authorities and government spread over the year leading up to the RSG announcement in November or December.

Because of its political importance, the way these discussions proceed changes year to year.

In a 'typical' year there are two parallel streams of discussions, one dealing with producing forecasts of future expenditure, the other with the question of distribution.

The method of distribution is usually agreed first.

The forecasts of future expenditure are less easy to arrive at.

Certain factors can be forecast reliably-including population changes, and the cost of interest charges.

Improvements in services however are 'forecast' in terms of a balance between what can be achieved (given, for example, the present capacity of the building industry) and the government's likely provision of funds.

Thus the real decision about total expenditure is blurred over a period of three months discussions.

Increasingly, the forecasting groups have drawn up a range of options, ranging from growth to cuts, and permit the choice to be made by the Secretary of State for the Environment, based on the cash total allocated to him by the Treasury.

'Needs' element

In dividing up his cash total, the Secretary of State first deals with specific grants for services over which government chooses to exert control-the police, coastal protection, transportation.

Next in sequence, and political importance is the domestic element, the subsidy to the ratepayer, followed by the resources element.

The 'needs' element is the remainder after all these payments.

When the grants are announced, a local authority has to draw up its budget. Essentially it has to make up the difference between its receipts in grants and rents and the expenditure needed to provide its services.

The two most important decisions in an authority's year are usually the level of rates to be called for and the level of rents to be charged.

Once grants are fixed there is no other significant source of income.

Occasionally an authority will have to increase rates or rents because of changes in the RSG formula.

This can, and does, happen even when the total RSG money increases.

When the grant is announced by government there is no constitutional method of appeal or objection.

Straightforward

So long as it is determined to act constitutionally an authority must meet the difference between grant and budgeted current expenditure out of rates and rents, or by reductions in planned current expenditure.

Compared to current expenditure, capital expenditure control is straightforward.

The biggest spending services -education, housing, social services-fall into what the government calls the 'key Thatcher sector' This means that the government must approve each project individually.

When approval has • been obtained the authority may borrow the money to carry out the project. Most of this borrowing must be done on the open market, with a government agency, the Public Works Loan Board making loans when the market fails to deliver.

A minor part of capital expenditure falls into the "locally determined sector' Here the government gives the authority a total borrowing limit, within which it can select schemes without specific approval.

This applies mainly to environmental works, but includes small sections other programmes.

Over recent years

additional stage of control has been developed in the housing and transportation fields.

This entails the preparation by the authorities of five year plans, within which the spending plans must be justified.

Clearly this is an important development in that it extends government controls further over local authorities' policies.

How then should workers proceed in seeking to understand the cuts to come?

In purely technical respects it is difficult to assemble the necessary information.

associations, etc., should elect committees to collect informotion from Council reports, from central government documents and other sources.

The union branches representing local authority employees will have a particularly valuable role to play in these committees, as will Labour councillors for indeed Communist councillors in some areas).

The work of monitoring the local authority's programmes must lead to regular reports back into Labour Party and trade union branches.

It will only be on the basis of detailed information and an intensive campaign of education that a struggle against cuts can be developed.

Resistance can be mounted by Labour councilors, especially when they are in a majority.

However, their resistance can be easily overcome by the removal of their powers by the A determined political struggle by the local labour movement will be needed if services and programmes, as well as council employees jobs are to he saved This will take the torm of industrial action against government officials appointed to implement cuts, leading to occupations to keep open schools, day centres, etc., etc.

One thing is certain. The right of the Tories to govern will have to be challenged directly at a very early stage in the fight against the new wave of cuts.

This will require a new leadership in the labour movement.

Labour reformists and trade union bureaucrats will be unable to lead such a fight:

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Evans puts on a left face for NAC lobbyers to the amusement of fellow bureaucrats Wednesday Hamilton blocked the first day of committee discussion of the Corrie Bill, effectively postponing its progress until October 24.

But such delaying tactics offer only a short extension of the time available for the mounting of a full scale campaign by the labour movement.

And other Labourites are firmly nailing their colours to the Tories' reactionary anti-abortion mast.

Bigots

James Dunn, Labour MP for Liverpool Kirkdale has helped the bigots of the so-called "Society for the Protection of the Unborn Child" (SPUC) to launch a new network of hospital chaplins to gather "evidence" about abortions from religious fanatics in the

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