Parish councils step into the modern money world

Outdated rules that require parish and community councils to make all payments by cheque - signed by two members - will be scrapped.

Minsters have unveiled plans to finally allow the lowest tier of local government to embrace the 21st century, by making electronic payments.

They have been driven to act by fears that some parish councils struggle to buy important computer equipment - such as anti-virus software - which is only available over the internet. The 'two signatures' rule also adds to the costs of businesses, or other public bodies, forced to receive cheques from the councils.

Meanwhile, the use of cheques is falling fast. They made up just 3% of UK payments in 2010 - a 59% decline since the start of the century.

Now the 9,000 parish councils in England - and 734 community councils in Wales - have been asked for their views, in a quick-fire consultation. Grant Shapps, the local government minister, said: "Parish councils have a highly significant role in the government's agenda for promoting localism and open public services.

"It is right, therefore, that the government should help them take on this new role by seeking to remove outdated and cumbersome legal controls wherever possible.

"The 'two signature rule' puts barriers in the way of them using modern electronic methods of payment and adopting proportionate controls to authorise payments."

The minister said that he hoped to make the change "as soon as possible", by passing a statutory instrument (SI) through Parliament. However, the consultation states: "The bodies will be free to retain the two signature rule, if they consider that appropriate."

The rule dates all the way back to the Local Government Act of 1894 - surviving "virtually unchanged" in the landmark 1972 Act, that set up most current structures. Yet that 1972 Act allowed other, higher tiers of local government to make their own "arrangements for the proper administration of their financial affairs".

A 2001 proposal to allow electronic payments - while retaining the two signature rule - was abandoned because of "practical difficulties". Although some banks allow two-signature authorisation of electronic payments, the service is not widely available and "may be difficult for some parish council members to operate", the consultation states.

The National Association of Local Councils would put in place "safeguards to ensure that payments were legitimate and there was no misuse of the system."

The change will also affect 'charter trustees' - 13 bodies responsible for the charters and regalia of any borough abolished in local government reorganisations.

Responses should be received by Tuesday September 11, by emailing parishpaymentslro@communities.gsi.gov.uk