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Localism Act 2011

Section 72: Referendums relating to council tax increases

162.Subsection (1) gives effect to Schedule 5 which inserts a new Chapter 4ZA into Part I of the Local Government Finance Act 1992. Subsection (2) gives effect to Schedule 6.

Schedule 5: New Chapter 4ZA: Referendums relating to council tax increasesNew Section 52ZB: Duty to determine whether council tax excessive

163.New section 52ZB sets out the duty on billing authorities, major precepting authorities and local precepting authorities to each determine whether their relevant basic amount of council tax for a financial year is excessive. If an authority’s relevant basic amount of council tax is excessive, the provisions in relation to the duty to hold a referendum apply.

New section 52ZC: Determination of whether increase is excessive

164.New section 52ZC provides that a set of principles determined by the Secretary of State will be used to decide whether an authority’s relevant basic amount of council tax for the year is excessive. One or more principles may be set. The set of principles must include a comparison between the relevant basic amount of council tax for the year under consideration, and the preceding year. Two different relevant basic amounts of council tax are applicable to the area of the Greater London Authority because the special expense of the Mayor’s Office for Policing and Crime(1) relates to only part of the Greater London Authority’s area. The different amounts are defined as the unadjusted relevant basic amount and the adjusted relevant basic amount in new section 52ZX(3). Principles which apply to the Greater London Authority may only make a comparison between unadjusted relevant basic amounts of council tax, a comparison between adjusted relevant basic amounts of council tax or a comparison between unadjusted relevant basic amounts of council tax and a comparison between adjusted relevant basic amounts of council tax. A comparison between unadjusted relevant basic amounts of council tax and adjusted relevant basic amounts of council tax cannot therefore be made. Other than the principle comparing relevant basic amounts of council tax, the Secretary of State can determine other principles. One of the other principles could potentially include a de minimis threshold or thresholds. This may state that neither council tax increases, nor a basic amount of council tax, would be considered excessive if these are below a specified threshold level.

165.New section 52ZC also provides that the Secretary of State may determine principles for particular categories of authority. The principles must be applied to all authorities falling within that category. Where the Secretary of State determines categories and an authority does not fall within any category, its relevant basic amount of council tax for the financial year cannot be determined as excessive. Where no categories are determined, any principles determined will apply to all authorities.

New section 52ZD: Approval of principles

166.New section 52ZD provides that the principles for a financial year must be specified in a report to be laid before the House of Commons before the date on which the local government finance report for the year is approved by resolution of the House of Commons. Where the report is not laid, or not approved by resolution of the House of Commons, no principles can take effect and no authority’s relevant basic amount of council tax can be determined as excessive for the year under consideration.

New section 52ZE: Alternative notional amounts

167.New section 52ZE provides the Secretary of State with the power to make a report setting alternative notional amounts to be used in place of an authority’s relevant basic amount of council tax for the preceding year. The alternative notional amounts will be used when making a comparison with an authority’s relevant basic amount of council tax for the year under consideration to determine whether its council tax is excessive. An alternative notional amount report may be made when an authority did not exist at the beginning of the financial year preceding the one under consideration, or where the functions of an authority have changed. This is to enable a like-for-like comparison of council tax changes for the purposes of determining whether an amount of council tax is excessive by reference to the principles. The amount should be set out in a report that may relate to more than one authority. It must contain such explanations as the Secretary of State thinks desirable of the need for an alternative notional amount to be calculated and the method of calculation, and must be laid before the House of Commons. The report takes effect if approved by resolution of the House of Commons.

New section 52ZF: Billing authority’s duty to make substitute calculations

168.New section 52ZF sets out what a billing authority must do if it sets an excessive council tax increase. It must make substitute calculations which will have effect, in the event that the authority’s proposed excessive increase in council tax is rejected in a referendum or the authority fails to hold a referendum when it is required to do so. The amount calculated as an authority’s relevant basic amount of council tax in the substitute calculations must be below the amount which is considered excessive under the principles.

New section 52ZG: Arrangements for referendum

169.New section 52ZG provides that a billing authority must make arrangements to hold a referendum where the billing authority itself has set an excessive increase in council tax. The referendum can be held at any time of the authority’s choosing subject to this being no later than the first Thursday in May or a date specified by the Secretary of State by order.

New section 52ZH: Effect of referendum

170.New section 52ZH requires the billing authority to inform the Secretary of State of the result of the referendum. Where the result of the referendum is that an authority’s excessive increase in council tax is rejected the authority’s substitute calculations have effect for the financial year.

New section 52ZI: Failure to hold referendum

171.New section 52ZI sets out the position where a billing authority is required to hold a referendum but, for any reason, fails to do so by the deadline date which would be either the first Thursday in May, or another date the Secretary of State may specify by Order. In such circumstances, the authority’s substitute calculations will have effect.

New section 52ZJ: Major precepting authority’s duty to make substitute calculations

172.New section 52ZJ provides that where a major precepting authority sets an excessive council tax increase it must make substitute calculations, which will have effect in the event that the authority’s proposed council tax increase is rejected in a referendum. The substitute calculations will also have effect where a referendum is not held on an excessive increase by the required date. The amount calculated as an authority’s relevant basic amount of council tax in the substitute calculations must be below that which is considered excessive under the principles. The section outlines the different methods of calculation which are required by (i) all major precepting authorities except the Greater London Authority and (ii) the Greater London Authority, to reflect the different way in which it must make its calculations.

New section 52ZK: Major precepting authority’s duty to notify appropriate billing authorities

173.New section 52ZK provides that where a major precepting authority has set an excessive increase in council tax it should notify each appropriate billing authority that its council tax is excessive and that the billing authority is therefore required to hold a referendum. The section outlines the different calculations which must be included in the notification for (i) all major precepting authorities except the Greater London Authority and (ii) the Greater London Authority, to reflect the different way in which it calculates its basic amount of council tax. The date by which the notification is to be given is to be prescribed by the Secretary of State in regulations.

New section 52ZL: Local precepting authority’s duty to make substitute calculations

174.New section 52ZL provides that where a local precepting authority sets an excessive council tax increase it must make substitute calculations which will have effect in the event that the authority’s proposed increase is rejected in a referendum. The substitute calculations will also have effect where a referendum is not held on an excessive increase by the required date. The amount calculated as an authority’s relevant basic amount of council tax in the substitute calculations must be an amount below that which is considered excessive under the principles.

New section 52ZM: Local precepting authority’s duty to notify appropriate billing authority

175.New section 52ZM requires that where a local precepting authority has set an excessive amount of council tax it must notify its appropriate billing authority that it is required to hold a referendum. The section sets out the calculations which must be included in the notice. The date by which the notification is to be given is to be prescribed by the Secretary of State in regulations.

New section 52ZN: Arrangements for referendum

176.New section 52ZN provides that where a major or local precepting authority sets an excessive amount of council tax and gives the required notification to a billing authority, the billing authority must make arrangements to hold a referendum. The referendum can be held at any time of the billing authority’s choosing subject to this being no later than the first Thursday in May or a date specified by the Secretary of State by Order. However, where a precepting authority sets an excessive increase in relation to which two or more billing authorities must organise a referendum, the referendums must be held on the first Thursday in May or such other date as the Secretary of State may specify by Order. This section provides that, subject to any regulations made by the Secretary of State, the billing authority can recover the costs of holding a referendum triggered by a precepting authority from that precepting authority.

New section 52ZO: Effect of referendum

177.New section 52ZO requires that the precepting authority must inform the Secretary of State of the result of the referendum. Where the result of the referendum is that an authority’s increase in council tax is rejected the authority’s substitute calculations have effect for the financial year.

New section 52ZP: Failure to hold referendum

178.New section 52ZP sets out the position where a billing authority is required to hold a referendum on behalf of a precepting authority but, for any reason, fails to do so by the deadline date of the first Thursday in May or such other date as is specified by Order. In such circumstances, the precepting authority’s substitute calculations have effect.

New section 52ZQ: Regulations about referendums

179.New section 52ZQ allows the Secretary of State to make regulations concerning the conduct of referendums. It also allows the Secretary of State to make provision in regulations to combine polls where more than one referendum on a council tax increase is being held or where other elections or referendums are being held.

New sections 52ZR to 52ZW: Directions

180.New sections 52ZR to 52ZW make provision for a situation in which an authority is in financial difficulty. Under new section 52ZR if it appears to the Secretary of State that an authority will be unable to discharge its functions in an effective manner, or unable to meet its financial obligations unless it sets a council tax increase which exceeds the principles determined under new section 52ZC, the Secretary of State may direct that the referendums provisions do not apply to the authority for a financial year. In the case of the Greater London Authority, a direction may be given where it appears to the Secretary of State that one or more of the Greater London Authority’s constituent bodies will be unable to discharge its functions in an effective manner or one or more of the bodies will be unable to meet its financial obligations unless it sets a council tax increase which exceeds the principles. The Greater London Authority’s constituent bodies are the Mayor of London, the London Assembly or a functional body. For the Greater London Authority, a direction may only be given after the authority has calculated its council tax for the financial year. For other authorities, a direction may also be given before the authority has calculated its council tax for the financial year. A direction may not be given in any case where an authority’s relevant basic amount of council tax for the financial year has been rejected in a referendum.

181.Under new sections 52ZS and 52ZT, where a direction is given to a billing authority or a major precepting authority other than the Greater London Authority, the direction must state the amount that is to be the authority’s council tax requirement for the financial year. Where the direction is given before the authority has calculated its council tax, the authority is required to comply with the Secretary of State’s direction when calculating its council tax for the financial year. If the direction is given after the authority has calculated its council tax the authority must make substitute calculations to comply with the direction.

182.Under new section 52ZU, where a direction is given in relation to the Greater London Authority, the direction must state the amount that is to be the council tax requirement for the relevant constituent body. The Greater London Authority must then make substitute calculations in relation to the relevant constituent body to comply with the direction and it may also make substitute calculations for other constituent bodies. Where the substitute calculations result in an increase in the consolidated council tax requirement for the Greater London Authority, or the council tax calculations made for the Greater London Authority would differ from the last relevant calculations made, the Greater London Authority must make substitute calculations. The increase in the Greater London Authority’s consolidated council tax requirement as a result of the substitute calculations must not exceed the increase which was required to be made to the component council tax requirement for the relevant constituent body to comply with the direction.

183.New section 52ZV provides that where a direction is given in relation to a local precepting authority, the direction must state the amount that is to be the amount of the local precepting authority’s council tax requirement for the financial year. This amount is to be treated as the authority’s council tax requirement for the year.

184.New section 52ZW sets out the time period in which an authority must make substitute calculations where it is required to so after a direction has been issued. Where a billing authority fails to make the required calculations within the time period stated it will have no power to transfer any amount from its collection fund to its general fund. This restriction will continue to apply until the authority makes the required substitute calculations. Where a precepting authority fails to make the required substitute calculations within the relevant time period, no billing authority to which it has power to issue a precept will be able to pay anything in respect of a precept issued until the precepting authority makes those calculations and issues any precept that is required to be issued in substitution.

New section 52ZX: Meaning of relevant basic amount of council tax

185.New section 52ZX sets out the meaning of an authority’s relevant basic amount of council tax and how this should be calculated. Two different definitions of the relevant basic amount of council tax are applicable to the area of the Greater London Authority. The unadjusted relevant basic amount of council tax relates to the area of the Greater London Authority in relation to which the special expense of the Mayor’s Office for Policing and Crime does not apply. The adjusted relevant basic amount of council tax relates to the part of the Greater London Authority’s area to which the special expense of the Mayor’s Office for Policing and Crime does apply.

New section 52ZY: Information for purposes of Chapter 4ZA

186.New section 52ZY provides that the Secretary of State may require an authority to supply information for the purpose of the performance of the Secretary of State’s functions under this Chapter. Where an authority fails to comply, the Secretary of State may exercise those functions based on such estimates and assumptions as the Secretary of State sees fit. The Secretary of State may also take account of any other available information.

Schedule 6: Council tax referendums: further amendments

187.Schedule 6 of the Localism Act makes further amendments in relation to council tax referendums. In particular, it amends Chapter 4A of the Local Government Finance Act 1992 which deals with the limitation of council tax and precepts so that the Secretary of State will no longer have the power to cap council tax increases and the provisions of this Chapter will only continue to apply in relation to Wales.

188.A number of other amendments are made in the Schedule. Paragraph 37 amends Schedule 6 to the Greater London Authority Act 1999 so that the procedure for determining the Greater London Authority’s consolidated council tax requirement includes a duty to prepare and approve a substitute consolidated council tax requirement. This duty will apply if the amount determined as the Greater London Authority’s consolidated council tax requirement for the year results in a relevant basic amount of council tax which does not comply with the principles approved under new section 52ZD. The amount determined as the authority’s substitute consolidated council tax requirement under Schedule 6 will be used when the Greater London Authority makes substitute calculations under new section 52ZJ.

1

Once the relevant provisions of the Police Reform and Social Responsibility Act 2011 are in force, the Metropolitan Police Authority will be replaced by the Mayor’s Office for Policing and Crime.

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