John Marriott: How to pay for local services

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For many years now governments of all political colours have seen fit to centralise more and more powers to themselves. The result of this has impacted directly on the councils that in the past were the major providers of the kind of services that have improved the lives for generations of our citizens. Today they are a shadow of their former selves, whose lack of influence is clearly reflected in poor turnouts in local elections.

There have been promises to reverse the centralisation of powers and to devolve many of the powers back from where they have been taken over many years. So far, the progress has been painfully slow.

Whatever services that remain the responsibility of local government still have to be paid for. Traditionally the bulk of the funding came from central government grant, based on a formula devised and administered in Whitehall. The rest (around 30%) came from revenue and a smaller contribution from the recipients of those services via the Council Tax.

The strains are now really beginning to show. The 2010-2015 Coalition Government used its austerity programme to cut its central grant progressively and used the so called ‘Council Tax Freeze Grant’ to bribe councils not to raise Council Tax, at least not above 2%. The result was that a council like Lincolnshire that accepted the grant was forced massively to reduce its staff and many of the services it provided, libraries being just one example, in an attempt to protect so called ‘front line services’ such as Adult Social Care.

Interestingly, had the county not accepted the grant but had raised Council Tax by 1.99% for the duration of the grant, it would now be around £30 million better off.

The government has decided gradually to reduce the central grant to zero by the beginning of the next decade, while offering the sop of allowing councils to retain more of the uniform business rate. Already the cracks are getting wider. Northamptonshire County Council has put in a ‘Section 114 Notice’ banning all new expenditure, while the UK’s richest county, Surrey, has been hit by a £100 million cash crisis.

It’s reckoned that nine out of ten authorities could go over budget this year. Here the Lincolnshire County Council has proposed an increase in its take of the Council Tax of just under 5%. That works out to about £1 per week extra for a Band C property as a 1% rise in the County Council’s share of the tax bill is around £2.5 million.

Now I know that some people will blame those greedy people some of us elect to run our local services, as Northampton’s seven Tory MPs have done. Certainly our councillors do come in all shapes and sizes and abilities; but those few who actually run the show have usually got there by merit. The allowances they are all paid, which some claim to be either excessive or indeed unnecessary, are actually extremely modest. I certainly wouldn’t expect anybody to put the time in that many councillors do without any remuneration.

Local government finance is desperately in need of major reform. The Council Tax, which is still in England based on early 1990s property values, is clearly no longer fit for purpose. A revaluation would undoubtedly produce howls of protest, especially where it would penalise those people who, whilst living in large properties, may have a restricted income. Adding a few bands on the top would make little difference.

The only tax worth considering is one that takes proper account of an individual’s ability to pay and that has got to be some form of Local Income Tax. However, even this would not be the complete answer in places like Lincolnshire where incomes are traditionally lower than in other parts of the country. In addition some form of central government grant will still be required as may a small ‘Property Tax’ based on land values.

That’s not to say that financial savings can’t be made. As far as Lincolnshire is concerned, we really do not need a county and seven district councils. Areas like Wiltshire, Cornwall and Northumberland, to give just three recent examples, have posted significant savings by replacing their county and district councils with a unitary authority. However, even unitary authorities are struggling now to balance the books.

Many people already think that they pay quite enough taxes already. There will undoubtedly be a few of you out there, who fit that bill. However, whether we like it or not, if those of you who can afford it are not prepared to pay more, then the services on which many of us currently rely could belong to history.