21 February 2003
It's been a remarkably successful few weeks for London Mayor Ken Livingstone. His £2.7bn budget for 2003/04 was passed with surprisingly little opposition, while his controversial £5 congestion charge scheme was introduced this week with few hitches and even fewer cars on the roads.
But, as the saying goes, where there are winners there are always losers, and this year it's the London boroughs.
With a poor finance settlement for 2003/04 and a 29% increase in the Greater London Authority precept, the boroughs are now facing the painful decision of huge council tax hikes or savage service cuts. With ten boroughs already struggling with the minimum 3.5% budget increase (the floor), including Waltham Forest, Westminster and Barnet, there are warnings that in the absence of a government cap, council tax rises in the capital could hit anywhere between 10% and 25%.
Livingstone maintains that his budget is 'financially balanced'. After shaving off £32m following negotiations with the Assembly's Labour group, he claims that it's a good deal for the capital. Borough leaders are less than convinced and have already described the final budget as 'profligate, unnecessary and excessive'.
Council sources claimed that leaders privately fear a 'tax and spend' era – with them doing the taxing and Livingstone the spending. 'He is practically unopposed in the Assembly and managed to set the precept through the roof, knowing full well that the boroughs will take the flak,' one told Public Finance.
Behind the budget, Livingstone's highlights are again police numbers, with a further 1,000 promised by March 2004. His 8.3% increase for the Metropolitan Police Authority (MPA) remains unchanged from his original proposals. It includes £500,000 to pay for congestion charges and £7.7m to fund police overtime.
Transport for London's original budget has been scaled down by £28m to £57.8m – a £22m increase mainly to cover 'affordable fares' for buses and for the takeover of London Underground.
The London Fire and Emergency Planning Authority will receive £33.9m, a 10% increase on 2002/03, with 15% of its spending on 'new initiatives' also designed to pay for congestion charges. The Greater London Authority budget was reduced by £0.2m from the original proposals, although Livingstone rejected calls to hold over £2m-worth of initiatives until 2004 while agreement was still being sought.
But while boroughs can do little about this year's GLA precept, fears are growing that with apparently little effective opposition in the Assembly, Livingstone will be free to hike up the precept year on year.
Figures show that from 2001 to 2003, the precept rose by 83%, while, in contrast, boroughs have increased their council tax by an average of just 10%. Projections based on Livingstone's expenditure plans, compiled by council officers, show that the Band D precept for each council taxpayer will increase from £150.88 in 2001/02 to £249 by 2004/05 and to £440.35 by 2005/06 – incidentally the year after the next mayoral elections.
The Association of London Government maintains the precept must be kept as low as possible, but within the Assembly all parties are busy blaming each other for failing to keep Livingstone's spending plans in check.
The Conservatives and Liberal Democrats have accused Labour of a 'cop-out' for colluding with Livingstone on his final budget announced on February 12. It is claimed they failed to get a two-thirds majority to overturn the mayor because Labour 'cut a deal'.
'The Labour group has allowed Livingstone to push through a budget on a voting technicality,' said Eric Ollerenshaw, Tory leader in the Assembly.
But Labour hit back, claiming that without their intervention, the final budget would have been much higher. 'The Lib Dems were just being childish,' Toby Harris, Labour leader of the Assembly and chair of the MPA said. 'We would have liked the budget significantly lower, but had we not pressed the mayor to adapt his budget it would have come in at the original figure.
'We understand the impact the precept may have on boroughs, it should affect the average bill by 3–5%. We are not the main driver of the overall increase in the council tax precept, individual boroughs have different problems.'
London, it seems, is going to be a very expensive city.
PFfeb2003
