05 December 2003
The Audit Commission waded into the bitter council tax row this week with research laying the blame for England's 12.9% average rise in the tax on the government's poor funding system and its increasing spending demands.
But as the Local Government Association gleefully celebrated its vindication, the commission warned that it would be including 'value for money' judgements on spending in its future Comprehensive Performance Assessments.
The unprecedented report, ordered by commission chair James Strachan in March, found that a number of national cost pressures – £2.3bn out of total spending of £4.4bn – contributed to the record average rise.
Despite an increase of 8% in the revenue grant settlement, councils faced a rise in national insurance contributions, increased pension costs, and pressure to passport funds fully to schools and to provide a high level of social services. It was also the first year of the move from Standard Spending Assessments to Formula Funding Share, which involved a large chunk of resources moving from southern councils to northern ones.
Significantly, the huge discrepancies in the 3.7% basic council tax increases expected by the government and the 12.9% actual rises appear to stem from these pressures, a difference in central and local spending assumptions and the inevitable gearing effect.
The Audit Commission appears to cast doubt on whether the government made the correct spending assumptions and was unable to assess whether Whitehall fully funded authorities because the way funding decisions are reached is never disclosed.
'Some of the simplistic explanations for this increase are simply not true,' Strachan said. 'It is quite clearly a fault with the system – grants need to be more transparent.'
The commission called for the current balance of funding review to address the 25:75 ratio in council funding and the lack of transparency in central government decisions.
The LGA, which has railed against accusations of poor management and political motivation, said that the evidence spoke for itself.
'This report nails on the head any belief that councils have been frivolous, careless or politically motivated when taking hard decisions on council tax and spending on vital services,' said Sir Jeremy Beecham, chair of the LGA.
But councils did not escape criticism from the Audit Commission. Strachan said there was less pressure from capping, and a 'herd instinct' that might have contributed to increases.
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