Pensions: Local Authority Members (Hansard, 7 April 2003)

§ The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)

As part of our agenda on modernising local democracy, the Minister of State, Office of the Deputy Prime Minister, has laid before Parliament regulations dealing with remuneration and pensions for members of local authorities. This is in line with our White Paper commitment to reduce the burden of red tape on local authorities and providing councils with flexibilities in managing their business, balanced by local accountability.

The Local Authorities (Members' Allowances) (England) Regulations 2003 (the "allowances regulations") replace six existing sets of regulations and put in place a consolidated and simplified regime for allowances.

The Local Government Pension Scheme and Discretionary Compensation (Local Authority Members in England) Regulations 2003 (the "pensions regulations") will allow councils to decide whether their councillors should have access to the local government pension scheme.

These two sets of regulations give effect to the broad policy announced on 28 November 2002 in our response to the Urban Affairs Select Committee Report on the Local Government Act 2000.

Both the allowances and pensions regulations, which we have introduced following extensive and detailed consultation, will provide a simple, fair system for remunerating local councillors. Local authorities will have discretion to come up with remuneration schemes reflecting local circumstances. The system also provides for clear and transparent local accountability since councils will have to have regard to the recommendations of local independent remuneration panels. This approach is in line with our commitments given in the White Paper, Strong Local Leadership, Quality Public Services, to remove 5WA unnecessary red tape and regulation from local government, and balancing this freedom with the responsibility to be clearly accountable to their communities.

The allowances regulations replace the six previous sets of regulations dealing with allowances for elected local authority members, dating back to 19911, which we have now revoked. As before, councils will be able to decide for themselves the levels of allowances for elected members, and in doing so will have to have regard to the recommendations of a local independent remuneration panel.

The allowances regulations make a number of changes to the system of allowances, following from consultation we conducted in 2001 and further detailed discussions with key stakeholders, including the Local Government Association.

Local authorities will now determine their own travel and subsistence allowances, having regard to the recommendation of their independent remuneration panels. The Secretary of State will no longer be involved in setting maximum levels. Councils will have to set out the circumstances in which they will pay these allowances, so that these are open to public scrutiny. Local authorities and other bodies will be able to pay a cycling allowance to be determined in the same way as other travel allowances.

Parish councils will be able to make payments to their members, and in doing so will have to have regard to the recommendations of a local independent panel. This brings the allowances to parish councillors very much in line with the allowances for principal councils.

Combined fire authorities and the conservation boards of areas of outstanding natural beauty will be able to establish their own schemes of allowances, rather than members being paid by their constituent authorities. All secondary authorities which set up allowance schemes for their members will be required to have regard to the recommendations of the panels of those authorities which make nominations to the secondary authority.

Councils will be able to pay co-opted and appointed members of principal councils a "co-optees' allowance". This will be determined by the local authority, taking into account the recommendations of the independent remuneration panel.

Authorities will be able to make provision for the withdrawal of allowances where a member has been wholly or partially suspended because of a breach of the code of conduct. Authorities will be able to make provision for the repayment of any allowance which has been paid in respect of a period when a member was suspended, or had ceased to be a member.

The council's local independent remuneration panel will make binding recommendations on which councillors may be eligible for access to the local government pension scheme.

The Association of London Government may pay special responsibility allowance to those serving on it. The ALG must establish a scheme specifying for which 6WA responsibilities the allowance may be paid, and the levels of payments.

The allowances regulations clarify that authorities may backdate changes to their allowances to the beginning of the financial year. They similarly clarify that authorities may alter their allowance levels by reference to an index.

The allowances regulations finally provide a transitional period until 30 September 2003 to allow authorities to make any necessary changes to their schemes in line with the revised arrangements.

The Local Government Pension Scheme and Discretionary Compensation (Local Authority Members in England) Regulations 2003 modify the principal regulations, The Local Government Pension Scheme Regulations 1997. They are intrinsically linked to the allowances regulations. In effect the amendments provide access to the local government pension scheme (LGPS) to those councillor members whose authorities, acting on the recommendations of the locally appointed independent review panel (I RP), decide should be eligible for membership.

The key changes to the LGPS as it applies to eligible councillor members are: they will be treated as if they are in local government employment for the purposes of the regulations; an eligible councillor will have positively to elect to become a member of the LGPS; a councillor member's pay in any year comprises (a) the basic allowance and (b) any special responsibility allowance payable under the allowances regulations; pension benefits will be calculated by reference to career average pay not final salary; the retirement age for a councillor will be age 70; and councillor membership will not count towards calculating any other period of local government employment/LGPS membership. An eligible councillor will be able to contribute to AVCs to enhance his pension benefits where appropriate.

Essential consequential changes have also been made to the injury allowances and gratuities provisions of the Local Government (Discretionary Payments) Regulations 1996 to exclude eligible councillors, the Mayor of London and members of the London Assembly in connection with their employment. The Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 have also been amended so that the calculation of discretionary compensation for redundancy for a person does not include a period of membership as a councillor member, Mayor of London or member of the London Assembly that he may have in the LGPS.

The regulations reflect our commitment made during the passage of the Local Government Bill which gave rise to the Local Government Act 2000.

The provisions for pensions take into account the commitment of local councillors, and their contribution to public life. Many members of local authorities may have lower personal or occupational pension provision than they could otherwise have had, due to missing out on full time employment or forgoing promotions and other opportunities on 7WA account of their public duties. The pensions regulations address this disincentive from serving in local politics.

¹the Local Authorities (Members' Allowances) Regulations 1991;
the Local Authorities (Members' Allowances) (Amendment) Regulations 1995;
the Local Authorities (Members' Allowances) (Amendment) Regulations 1996;
the Local Authorities (Members' Allowances) (Amendment) (England) Regulations 2000;
the Local Authorities (Members' Allowances) (Amendment) (England) (No. 2) Regulations 2000; and
the Local Authorities (Members' Allowances) (England) Regulations 2001.