Wednesday 25 January 2012

Why a 2.95% Council Tax rise?

I am sure a debate is likely to rage over the next few days about the County Council's proposal to increase council tax by 2.95% this year - including some who consider that a Council is not properly Conservative if they choose not to accept central Government's one-off payment of 2.5% this year if they choose to freeze council tax (known as the Pickles promise).

Last year we did choose to freeze council tax and accept Eric Pickles' offer - because the funding was for 2.5% each year over a period of four years.  This year it was a one-off offer.  That makes a difference because any council tax increase this year carries forward into next (in simple terms if you add 2.5% onto a base of £100 it becomes £102.50 - and that figure carries over to next year and any increase is added on to £102.50 and not the original £200).  In fact, the cumulative impact of not having that 2.5% on our council tax over ten years amounts to some £30m.  The other option would, of course, be to take the Pickles' money and make a bigger increase next year - which would trigger a local referendum.   There are two issues here that cause problems:
  • In order to deal with the the financial issues the council faces we have a medium term plan that includes investing in prevention.  How on earth can anyone embark on that sort of medium term thinking when there is a huge question mark over your plans at the end of year one?
  • A local referendum would cost money to deliver, money that could be spent on services
That last point is an important one, it is not that anyone is scared of listening to local people, rather that we have already consulted as part of our consideration for the current budget proposals.  That (statistically valid) consultation showed that there was appetite around the County for a small council tax rise - provided that the money was spent on residents' priorities; we have done this.  As an example by investing more in Adult Social Care in order to slow down the reductions and allow us to make the long term savings we need in a much more measured and joined up way, and by investing an extra £90m in roads (which means roads, pavements and cycle paths).  Both of these areas were shown to be priorities in our consultation.

One other very important factor here is that Cambridgeshire is not and never has been a wasteful and high taxing council.  We have a reputation for sound financial management and as this graph shows, we are the seventh lowest taxing shire county in England.

This highlights yet another flaw with the Pickles' promise; we faced years of a Labour Government diverting funding to its own local councils to the detriment of Cambridgeshire.  We, as a County, also suffered much lower grant increases than our neighbouring counties year on year, yet every authority, however efficient, has an increase of 2.5%.  It is much easier to take 2.5% off your base and take the Pickles promise if you are a council that has been wasteful and bloated in the past, Cambridgeshire never has been.

That does not mean we have been complacent.  We continue to eradicate waste and find better ways of working.  The cost of our senior officer team has reduced, and we have already identified other management costs that can be taken next year.

One other argument that has been used is that we should be working closer with other councils in order to reduce overheads.  We have done this by combining many of our back office functions (legal and HR services for example) with Northamptonshire through creating an organisation called LGSS.  This is already making savings and we are looking to make more by involving other councils.

Before I come to a conclusion on this I want to cover one more issue.  I am sure the naysayers will point at the review of members allowances as an example of us being wasteful.  I, and others, keep making the point that this review is something we are legally required to do.  It is a poor system and, as a Council, we have asked Government to change it - but as things stand now we have to do it (and actually the sums involved in member allowances are a tiny part of our overall budget). It is wrong for MPs to recognise the flaws in voting on their own remuneration and then to have a system that makes councillors vote on theirs.

I have a great deal of time for much of what Eric Pickles and the DCLG are doing. Their ideas on housing are very challenging but are headed in the right direction, many of the planning reforms are much needed and the localism agenda is a breath of fresh air.  Indeed, on balance, last year's Pickles' promise was right.  But this year's proposal of one-off funding is flawed and the suggestion that it is both  immoral and not Conservative to take a local decision on council tax, based on local circumstances is also flawed.


  1. If the cost of my shopping shopping goes up I can change supermarkets or look for different items. If my energy bills go up I can change suppliers. If I'm spending more than I can afford then I have to cut spending.

    The Council Tax, which I have to pay under threat of imprisonment, I cannot get round this apart from moving house.

    Next year are the County Council elections. Why not take the Government freeze money and hold a referendum at the same time on a Council tax increase?

  2. The answer to your question is in the blog post. How on earth do you take a five year view on investment in prevention with a massive question mark on your finances at the end of year one?

    In adult services we are trying to invest in prevention as a means of reducing costs in the face of a future scenario of rising demand because of the good news that people are living longer. In order to make sure we can continue that investment we have to have some certainty of funding. The huge question mark that a referendum leaves over future funding is a big inhibitor to that. So given that we already have statistically valid evidence that our electorate will support a council tax rise as long as we use it to invest in priority services why should we head into that uncertainty and slow down some very important forward looking work that will benefit the people of Cambridgeshire?

  3. Because there is no certainty in funding. Eric Pickles set the level for a referenda to be needed at 3.5% for this year with inflation at roughly 4.8%. A 1.3% discount on the inflation figures. If inflation dropped to say 2% during this year and Pickles comes back and sets the level at 0.7% or 1% increase for the need for a referendum then you are stuck. You haven't taken the Government money and you still have to make those cuts to avoid a referendum.

    Though why you need to avoid a referendum is a bit beyond me. There seems to be an aversion to referenda. Capping has been taken away and councils can up their tax as much as they like so long as a simple majority supports such a rise in a referendum.

    Holding such a referendum in tandem with the County Council elections would save on referendum costs. There is already a set of elections so tacking on a referendum wouldn't cost that much. If the cost of holding a referendum is a problem then isn't the cost of holding elections also a problem?

    The government is towards the end of a review in to local government funding. Pickles has yet to announce the figures. Therefore your funding has not been set for the medium term. The localisation of business rates and the end to formula grant or grants from Government could go either way for CCC.

    In fact CCC is starting out on a Medium Term plan when most of the funding apart from Council Tax could change significantly.

  4. If inflation is lower then council tax increase is lower - but 2.95% is still in the base and allows us to move forwards.

    There is no suggestion that Council Tax will be reformed in the review of funding. I do not see the point of waiting for a referendum and paying ht additional cost in a years time when we can make a decision and look forwards now based on a very good consultation the results of which are statistically valid. We get criticised for not consulting and then criticised for doing so and using the results.