County Council Services

Part Three

1. County Council Services

Finance

THE extensive services provided by the County Council require large sums of money. The Acts of Parliament which govern these services include financial provisions to ensure that stringent precautions are taken so that public monies are properly accounted for. Local Government finance is indeed a very wide subject and it is not possible in the space available to give more than an impression of the primary aspects. Neither is it intended to quote many figures, as the County Council’s financial publications which are referred to later will supply the interested reader with any further information of this kind. For the financial year ended 31st March 1953 the Middlesex County Council estimated that the gross expenditure on rate accounts would be over £31,000,000. If to the County Council’s expenditure is added that of the borough and urban district councils within the County, the resultant expenditure exceeds that of the governments of many independent States.

The rate-payers, who produce most of the money for these authorities, may well be anxious for assurance that their interests are adequately protected. The volume and magnitude of the financial transactions necessitate a sound financial organization to look after the collection and payment of money.

The County Treasurer and his Department are in intimate contact with every branch of the Council’s activities, and modern business methods are essential to the smooth running of the finances of the County services; consequently the development of the department has been comparable with that of the largest commercial undertakings and extensive use is made of modern mechanized methods.

The Finance Committee

County councils are required by statute to appoint finance committees and a recommendation of the finance committee is required to enable payments to be made. This is necessary to prevent the Council committing itself to expenditure which might be beyond its means. As a protection in ensuring that every proposal involving expenditure is carefully examined, it is also laid down by statute that no liability exceeding £1oo may be incurred on the County Council’s behalf until the Finance Committee has submitted to the Council an estimate of the proposed expenditure. In this way attention is directed towards all material expenditure on new policy or commitments. No county council can plead ignorance of the estimated cost of any proposal which it has approved.

In addition to its duties of examining and submitting estimates, the Finance Committee also examines and approves all accounts for payment. It has also the important duty of making all arrangements for financing expenditure, including the raising of any necessary loans.

The chief financial officer is the County Treasurer. Apart from his responsibility for the conduct of his Department and the organization and control of the staff, one of his principal duties is to prepare, in conjunction with the other chief departmental officers, estimates of the expenditure of each committee for the ensuing year.

It is the duty of the County Treasurer to draw attention to any expenditure incurred which has not been sanctioned by the County Council, to see that the charges are proper and to warn the Finance Committee if there is any likelihood that any Committee’s estimated expenditure for the year will be exceeded.

Apart from responsibility for the administrative and clerical tasks calling for technical knowledge, the chief financial officer has advisory duties to other executives and to committees of the Council, the importance of which cannot be exaggerated having regard to the essential bearing of finance on most of the decisions of the Council.

Annual Estimates

The task of preparing the estimates commences in the autumn, and the financial year commences on 1st April and ends on 31st March. Thus, the estimates for the year i st April 1953 to 31st March 1954 were commenced in October 1952. A comparison of the figures prepared is made with those for the current year, for which a revised estimate is made at the same time, and with the expenditure for the preceding year, the actual figures for which are by then available. The attention of each Committee is drawn to increases and decreases of expenditure and income on all principal heads of account, and probable new commitments are also considered and estimates included. Each committee is naturally anxious to pursue its programme of work, but it must at the same time be advised upon the financial effect on the county rates of each major proposal.

At the end of January, all the figures are assembled in readiness for a meeting of the Finance Committee at which the rates for the ensuing year are considered. The Finance Committee’s proposals are submitted to the County Council at its meeting in February and it then approves or amends the recommendations. The County precept, which is dealt with below, is issued after this meeting. The occasion is one on which the chairman of the Finance Committee makes a speech outlining the proposals and calls attention to outstanding financial matters and to particular events which have caused changes to be made since the previous year. Copies of the County Council’s budget are available for inspection at all libraries in the County, together with copies of the statement by the chairman of the Finance Committee. These documents enable any who desire to amplify their knowledge of the County finances to obtain further information.

The annual abstract of accounts which is prepared after the close of each financial year and contains much interesting information besides accounts, is also sent to every public library in the County.

Audit

The collection and disbursement of money is the chief duty of the department, together with the necessary recording in such a way that accurate statements may be prepared showing the cost of each of the Council’s activities. It is, however, necessary to keep in constant touch with all officers responsible for the payment and collection of money or money’s worth (such as stocks and stores), and for this purpose a section of the staff is employed on internal audit. This name “internal audit” distinguishes the check from the “external audit” made by the Government auditors by whom the Council’s accounts are examined each year. At first sight these two duties, accounting and audit, do not appear to create many difficulties, but there are so many branches of the work and so many differing features in each branch that local government finance is by no means a simple subject.

All the powers and duties of a local authority are governed by Acts of Parliament. Unless expenditure is authorized by statute it is illegal, therefore knowledge of the extent of the Council’s powers is necessary. In some instances, notably education, the Government shares the cost. Accordingly, such accounts must be modelled to produce the information required by the appropriate Government Department.

WHERE THE MONEY COMES FROM

County councils have three sources of revenue:-

(a) the receipts from charges of various kinds which they are allowed by law to levy; government grants;

(a) rates.

The first, charges for services, are numerous but in recent years have been considerably reduced, as many services for which charges were made are now free, notably school tuition. Charges are made in certain cases for accommodation at old people’s homes, for children maintained by the County Council, for home helps and other health services. There remains a

revenue from rentals of properties, smallholdings, fines and court fees and various licences. Local taxation licences for dogs, guns, etc., purchased in post offices within the County are paid over to the County Council, but the motor tax collected is paid to the Exchequer.

Government grants

Government grants are of two kinds: those on a percentage of cost, and “block grants “. Amongst the former are the Ministry of Transport contributions towards upkeep of roads, 75% of the cost of Class I roads, 6o% for Class II roads and 50% for Class III roads. The Ministry reimburses the whole cost of maintenance of trunk roads. The Ministry of Agriculture assists with the cost of small holdings. The Ministry of Education pays approximately 6o% of the cost of education and I00% for expenditure on school meals and training of teachers. The Home Office makes a 25% grant for the Fire Service and the Ministry of Health a 50% grant for health services. A substantial sum is also received in lieu of the rates lost to the County when the electricity and transport undertakings were nationalized.

An “equalization grant” has been designed to give greatest assistance to high-rated districts. The Middlesex County Council does not participate in this because the rateable value per head of the population is higher than the average for the whole country. The County Council, in common with others, has to distribute a per capita grant to Middlesex county districts, and the figure is calculated by the Ministry of Health. The cost of this is the equivalent of a is. iid. rate and the Middlesex boroughs and urban districts with the lowest rateable value per head of population derive the greatest benefit. This is a further measure of “rate poundage equalization “.

Rates

The balance of the County Council’s requirements is obtained by rates which are raised not by a direct levy upon the rate-payers but by a precept on each borough and urban district council, as rating authority, within the County. This precept requires each authority to pay to the County Council a rate of so many pence in the /J by instalments spread over the financial year. The rating authorities have to supply an estimate of the product of a penny rate to the County Council to enable the latter to calculate the rate required. The authorities include the County Council’s precept, together with their own requirements, in the demand made on the ratepayers. On the back of a rate demand note can be found the details which show how much is required for the principal services.

For the bulk of its services the County precept is levied over the whole County, but for some services, in respect of which certain boroughs or urban districts are responsible for the administration, what is known as a “special

County rate” is levied on the authorities in the remaining areas in which the

County Council administers the service. For example the Borough of Acton is responsible for public libraries within its area and it would obviously be unjust for the rate-payers of that borough to be called upon to pay as well the County charge for public libraries in those areas where the County Council is responsible. Similarly, the drainage schemes, whilst administered by the County Council, affect two distinct areas. Special County rates are levied for—

Registration of Electors

Services which are administered by the County Council in parts only of the administrative County.

Public Libraries
West Middlesex Drainage Scheme
East Middlesex Drainage Scheme

The everyday expenditure on the upkeep of schools and roads, on salaries and wages and on the many other services is known as “revenue expenditure”, as distinct from “capital expenditure “.

Briefly, the building of a new school or any other project resulting in an acquisition of lasting value for the performance of the local authority’s service, is capital expenditure. In most cases this would be too heavy to charge on the rates in one year in the same way as revenue expenditure and borrowings are therefore made by stock issues or mortgages. There is nothing to prevent the County Council from charging to revenue this type of expenditure and, in fact, every year many small capital works are financed from revenue. Loans must be repaid according to the terms of issue.

In the revenue account of a local authority will be found charges for interest on the loans, and also charges for annual repayments of principal. Whilst a limited company raising its capital by means of shares has no obligation to repay its subscribers, every penny of money raised by a local authority must be repaid in a fixed time. The provision made in the revenue account is based roughly on the life of the asset, but, except in rare cases, the maximum period is 6o years.

Thus, loans for purchasing land for school sites are repaid in 6o years, for the buildings in 30 years and for the initial furnishing equipment in 15 years. These periods are generally fixed by the Ministry of Local Government and Planning (formerly by the Ministry of Health), which issues sanctions to borrow, except where the sanction is given by a Local Act of Parliament obtained by the County Council. The Ministry thus exercises considerable control over the borrowing powers of local authorities and can refuse sanction.

The good management of loans is an important phase of the work of the Finance Committee and its officers, in connection with which knowledge of the money market and public finance is necessary.