19 June 2008
Government proposals to reform council tax are likely to be put forward before the general election, the local government minister has indicated.
Speaking at the opening plenary of the CIPFA conference in Brighton on June 18, John Healey said: 'You'll find politicians in all parties looking hard at council tax now. In my view it will be difficult for any party to go into the next election without some plans on council tax.'
He paid tribute to Sir Michael Lyons' 2007 report as the 'most authoritative on local government, ever', but said finding a way forward would be difficult. While Lyons had concluded there was a good case for a local, property-based tax closely linked to local service delivery, the minister said: 'There's no-one in this room who would believe that having come to that conclusion, the next steps on how you reform council tax are self-evident and easy to take.'
Adding that it would be a mistake to view Lyons' report merely as an analysis of local government finance, Healey praised its wide and profound impact. The supplementary business rate legislation currently being prepared was a direct response to Lyons' work, he said.
'It has hugely strengthened the case for local government in public policy terms within central government.
'Lyons has been as important as anybody in laying the ground for what we are now being able to do in creating more freedoms for local authorities and seeing in a number of policy areas – not just those the Department for Communities and Local Government is responsible for.'
He said this was 'a devolution of decision-making' that had the potential 'to go a lot further yet'.
Despite the controversy over council tax, council performance on the mechanics of its collection continues to improve, he said. Figures published by the DCLG on June 18 revealed an average collection rate of 97.1% for 2007/08 – a 0.2% improvement on the previous year's rate.
This was the eighth consecutive year of improvement, and some councils had managed to boost their performance in this area by more than 5%, the minister said.
'I urge councils not to let up the pressure, but to continue their good work on chasing arrears and make further improvements to their collection rates. It is only fair on other council tax payers that everyone pays what they owe.'
But focus on effective council tax collection needed to be matched with efficient spending of resources, he added.
Along with the rest of the public sector, councils are being expected to find efficiency savings worth 3% in each year of the current spending review period.
Healey revealed to the conference that local government is on track to deliver the £3.2bn in efficiency gains demanded over the past three years – equivalent to £123 off the average council tax bill.
He urged delegates to ensure that this focus on innovation and improvement was kept up over the next three years.
Meeting the efficiency target this year would mean local authorities could generate an extra £1.5bn between them to invest in local services or manage council tax pressures, he said.
The minister also reiterated his call for councils to make more of the avenues open to them to generate additional finance. He said only one in 12 Local Strategic Partnerships is using the new wellbeing powers, just one in five councils is using charging to its full potential, while half do not have a policy on charging.
Only 60% of local authorities have made use of the borrowing powers that Healey introduced when he was at the Treasury, he said.
He reminded the audience that the nineteenth-century 'golden era' of civic pride was built on councils generating surpluses and taking advantage of long-term loans.
Healey went on to dash finance managers' hopes of any extra funds to help them through the lean years ahead.
'In a tightening economy and with inevitably tightening tax revenues and therefore public finances, I think it's unrealistic either to expect there to be extra funds available, or if there are, to expect them to go to local government or for local government to be first in the queue,' he said.
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