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Local Authority Finance

Volume 403: debated on Thursday 10 April 2003

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To ask the Deputy Prime Minister if he will publish the calculation used by his Department to reach the conclusion that the forthcoming change in national insurance contributions would increase local authorities' pay costs on average by 0.7 per cent. [106176]

The changes to employers' national insurance contributions announced in the Budget will raise revenue by £4.0 billion in 2003–04. This puts pay costs up on average by about 0.7 per cent. across the economy, calculated by expressing the increase as a percentage of the total pay bill in the economy and allowing for the element on which NICs are not paid. At the time of the Spending Review, we looked at the actual total local authority pay bill for 2000–01, including pay, national insurance, pension contributions and other costs. This was then uprated by an assumption for pay increases to estimate the first year direct costs. The precise cost will be dependent on a number of factors including the actual pay award and the number of part-time staff employed by local government.

To ask the Deputy Prime Minister what assessment he has made of the additional cost to local authorities in a full year of the recently announced extension of TUPE provisions in PFI and PPP contract arrangements. [106993]

Clauses 102 and 103 of the Local Government Bill confer new powers on the Secretary of State, the National Assembly for Wales and Scottish Ministers to require best value authorities, in contracting with other persons for the provision of services or in circumstances where a contracted-out service is brought back in-house, to deal with staff transfer matters (employment and pensions) in accordance with any directions made. This will enable the Office of the Deputy Prime Minister to meet its commitment, following the Best Value Review to make statutory within local government the policy set out in the Cabinet Office "Statement of Practice on Staff Transfers in the Public Sector" and the Annex to it, "A Fair Deal for Staff Pensions".The Regulatory Impact Assessment (RIA) published when the Bill was introduced contained estimates of cost based on data from a Local Government Management Board (LGMB) survey carried out in 1998. This survey found that up to 12 per cent. of local authority staff transferred without TUPE applying and up to 35 per cent. transferred without a broadly comparable pension. This figure represents contracts entered into in any one year but is calculated over the full term of the contract.The RIA estimated that for England and Wales the additional cost of protecting employees' terms and conditions could equate to almost £5.5 million. The additional cost of protecting employees' pension provision was estimated to be almost £21 million (the survey indicated that fewer contracts contained pension provision in the past). Therefore the total additional cost of protecting transferees' terms and conditions and pension provision could amount to almost £27 million.

These estimates, however, illustrate a maximum possible cost scenario and because of policy and legislative changes since the survey was carried out, we do not consider that the shortfall is likely to be more than a few per cent. The RIA therefore made an assumption that if only 2 per cent. of employees currently transfer without TUPE and 6 per cent. currently transfer without a broadly comparable pension, then the additional cost of protecting these employees would amount to approximately £4.5 million.

A revised RIA will be published shortly reflecting amendments made to the Bill during Standing Committee to extend the provisions to Scotland.