Council tax freeze signals anti-localist move
By Vivienne Russell | 31 October 2012
Whitehall’s third council tax freeze offer has met with mixed reactions from councils — not least because it is another shift back from ‘localism’ to centralism.
They say that everything comes in threes, and so it is with council tax freezes.
Eric Pickles’ announcement at the Conservative Party Conference of yet more Whitehall funding to hold down council tax in England for a third successive year grabbed relatively little media attention compared with previous years. Perhaps this is unsurprising – an indicator of how quickly the tax freezes have become part of the fiscal landscape.
Trailed in a pre-conference interview by Chancellor George Osborne, the council tax freeze didn’t even get a mention in his main platform speech. It was left to Local Government Secretary Pickles to confirm the funding and set out the details. He said the freeze grant would be £450m, to be paid over two years to local authorities that decide to hold down or reduce their council tax.
According to the Department for Communities and Local Government, councils, police and fire authorities going for a freeze stand to receive £225m in funding in both 2013/14 and 2014/15 – equivalent to raising their 2012/13 Band D council tax by 1%. A tempting-sounding carrot, perhaps, but there’s also a stick: any authority proposing to increase council tax by more than 2% will have to hold a local referendum – a significantly lower threshold than the 3.5% that previously applied. Pickles will provide more details on the referendum in December.
At the Conservative conference in Birmingham, new local government minister Brandon Lewis shared some of the government’s reasoning for lowering the referendum trigger point with Public Finance. ‘Inflation is lower,’ he said. ‘I think the public expectation, rightly, is that we do all we can to reduce cost to people. So I think it’s right that if councils think they should increase council tax, they go and get permission from their residents.’
He added: ‘Our view is that we should set it relatively low to do what we can to protect as many residents as possible.’
The last freeze-grant round was not entirely successful, with around 15% of English councils opting to increase council tax, according to CIPFA’s annual survey. While Lewis admits some councils in the next budget cycle will refuse the freeze cash, he’s hopeful that the majority will accept it.
Reaction from local authorities and their representative bodies has been mixed. The Local Government Association noted that, while any extra help for councils was welcome, the freeze grant could only be a short-term option and was not a solution to the long-term pressures in the local finance system.
LGA chair Sir Merrick Cockell also observed that the lower referendum trigger point brought the government’s localist credentials into question. ‘If local referendums are to be truly localist, they should be triggered by local people who can determine whether a council tax increase is excessive or not,’ he said.
CIPFA is also unhappy at Whitehall’s attempts to hold down local taxation levels. ‘It is worrying that we seem to be drifting to a position in which the council tax is effectively determined by central rather than local government,’ says chief executive Steve Freer. ‘That’s bad news for local democracy, and sits awkwardly with the government’s own localism policy.’
On the front line, some authorities – such as Suffolk County Council – have been quick to go public with their acceptance of the freeze grant.
Suffolk leader Mark Bee points out that the economic slump means many of his residents are struggling to make ends meet. ‘It’s therefore our moral and professional duty to do everything we can to keep delivering quality public services without asking people for more money, however hard that is to achieve,’ he says.
‘I’m delighted that this additional support from the government means we can freeze council tax for a third year and help the hard-working people of Suffolk during these difficult financial times.’
Other councils, however, are choosing to keep their options open until they receive details of their grant settlements in December.
Peterborough City Council, a Tory-run authority, made waves last year by turning down the freeze-grant funds on offer and raising council tax by 2.95%. John Harrison, executive director of strategic resources at Peterborough, tells PF that levying a rise had been a ‘difficult decision’ for his members.
Harrison won’t be drawn on what his members might do next year, but he offers a summary of how the lower referendum trigger has changed the nature of the council’s options.
‘The medium-term financial plan had assumed council tax increases of 2.95%, so if it were to look at that level of increase, it would be looking at triggering a referendum, with all the costs and uncertainty that may go with it. Or, does it drop it to below 2% and avoid a referendum? Or, does it drop it to 1% and take, in effect, the freeze grant?
‘There are varying levels of decisions, but none of that can be taken without the context of the overall spending power and grant settlement, and what that will mean for services locally.’
At Brighton and Hove City Council, the Green Party are in minority control. Their attempt to reject last year’s freeze grant and introduce a 3.5% council tax increase was scuppered by opposition parties. This decision has left the council with a £3.6m funding hole for next year, council leader Jason Kitcat tells PF.
Kitcat is awaiting the outcome of the Autumn Statement and grant settlement before making any commitments on what Brighton and Hove might do next year, but he says annual freeze grants make long-term financial planning incredibly difficult.
He adds: ‘It’s pretty absurd to suggest that the coalition government believes in localism if they don’t even let us choose our council tax.
‘The government doesn’t seek a referendum when it amends any of its taxes whatsoever, and yet they are saying that government will set the method, the question and the type of referendum, and that it will only be valid for one year – and they’re also setting the bar at which it will be triggered. It doesn’t feel like freedom, from our perspective.’
He adds that the referendum measures are ‘completely untested’ and would cost Brighton around £300,000 to implement.
Simon Parker, director of the New Local Government Network think-tank, offers the view that, while it might be ‘good, short-term politics’ to freeze council tax, in the long run, it is bad for local democracy and localism.
‘Council tax is the only tax that’s local in the UK,’ Parker points out. ‘We’ve already got one of the most centralised financial systems in the developed world; once you start freezing council tax, it becomes very hard to stop freezing it.’
He goes so far as to suggest that we might be witnessing the ‘slow death’ of council tax. ‘It’s a real possibility that we’re slowly strangling our only source of local taxation,’ he tells PF.
Parker predicts that more councils could break the freeze next year. ‘Councils will be worried about their council tax bases, they’ll be worried about the principle of the tax effectively being nationalised over time.
'They’re negotiating the third year of a seven-year austerity programme. They’ve kept the tax down so far, but things are pretty tight.’