Cuts, cuts, cuts – the issues Spending squeeze on public sector means council grants from Govt. being cut by 28% over four years Public angry over cuts to services and closures of facilities and job losses “Democracy dodgers” – councils defying Govt. call to freeze council tax Demand for many council services increasing putting extra pressure on budgets People on benefits now having to pay council tax for first time

Revenue expenditure Essentially, a council’s day-to-day running costs necessary to provide services It covers: Employees pay Repair and maintenance of land and buildings Payments to contractors or suppliers Grants to organisations

Capital expenditure Spending on building things like: Building new schools Roads Facilities like sports centres/libraries Major items of equipment (eg IT) Large capital projects usually cover three to five year periods – spread the costs

The Council Tax (funds revenue expenditure) A hybrid tax based on property element and personal element How much you pay is based on: i) Property bands: Band D (£68,000-£88,000) is the average (middle band) – Band H (more than £320,000 is the highest) ii) Two adults occupying property Decisions on bands are based on property valuations as assessed by Inland Revenue Valuation Office Agency – based on property prices in 1991

The council tax A council tax is set by each council Resident (over age of 18) with strongest legal interest is liable to pay In two-tier areas, districts/boroughs are responsible for sending out bills and collecting payments Council tax levels must be set by full council

Council tax bands Band A - <under £40,000 Band B - £40,001 to £52,000 Band C - £52,001 to £68,000 Band D - £68,001 to £88,000 (the average) Band E - £88,001 to £120,000 Band F - £120,001 to £160,000 Band G - £160,001 to £320,000 Band H – more than £320,000

Discount and exemptions Single person households discounted by 25% Those on low incomes or benefits receive rebates Full-time students in student accommodation; those in care homes and homeless in hostels do not pay Bills for second home owners may be discounted (10 to 50 per cent - at council’s discretion)

Exemptions Properties are exempt where: They are empty and unfurnished for more than 6 months Empty and where person is in hospital or long-term care Empty and where person is in prison

Council tax bills Bills are made up of different “precepts” - another word for the council tax sum being levied - of the different charging authorities: In two-tier areas: County council precept (the highest amount) District/borough council precept In unitary areas: The unitary precept

Council tax bills All council tax bills also include: Police And Crime Commissioner precept Fire authority precept And if there is one: Parish or town council precept

How council tax has risen Average bill 1995: £609 Average bill 2012: £1,201 Kent County Council bill 2014: £1,133.55 Medway Council average bill: £1,113

Is it fair? Regressive: unrelated to ability to pay; those in lower bands pay proportionately more Tougher on those on fixed incomes (pensioners) Valuations out of date – wide regional variations Bills have increased above rate of inflation Does not give councils financial autonomy or enhance accountability

New – local council tax benefit schemes Govt. says councils must now arrange council tax benefit schemes But councils say Govt. has not given enough money to do so – grant has been cut by 10% Pensioners continue to be protected But others on welfare benefits being asked to pay council tax for first time Typically, about 8.5% of average bill

Referendums… Govt. says any increase in council tax of 2% or more should be subject to public vote Most councils evading this by increasing by less than 2% Leading to “democracy dodgers” complaint by Mr Pickles

New...the “social care” precept Government allowing councils to increase council tax by additional 2% for care costs Aimed at easing pressure on rising costs of adult social care [NOT children] Extra money must be used only for care – accountability? Means many councils are raising bills by 4%

Where the money comes from Central government provides the lion’s share of council money (approx 75 per cent) – controls of purse strings Money from Government comes in the form of different grants (called ‘specific’ and ‘general’ grants) Spending framework for all public services set over three year period More specific figures come via the yearly Local Government Finance Settlement (usually November)

Government grants for revenue expenditure Formula Grants Block grants that can be spent by council as it sees fit on revenue expenditure Take into account council tax base (ie how much can be raised) and how many people rely on services

Specific grants Grants paid for particular services Includes bulk of money for schools (Dedicated Schools Grant - DSG) Some specific grants are ring-fenced (money comes with conditions) Some are unfenced/targeted (no restrictions)

Uniform business rates Paid by occupiers of commercial and industrial properties (shops, factories, businesses) Based on rateable value of property x national multiplier (set by Government) Collected by district councils but passed to Government for redistribution (based on ‘need’) Also know as National Non-Domestic Rate

Relief/discounts on UBR Small business rate relief (<£50,000 = 50% discount) Lower multiplier for those with rateable values between £10,000 - £14,999 Empty properties Charities and charity shops Non-profit organisations Agricultural land

Uniform business rates How formula is calculated: Rateable value of property x National Multiplier For eg, where premises have rateable value of £50,000 and multiplier is 50 pence, the UBR is £25,000

New...business rates Government to allow councils to keep all the business rates (currently 50%) Will be able to cut rates (incentive to businesses) And....also be able to raise rates Elected mayors to be allowed to raise more through a premium to pay for big infrastructure costs

Fees and charges Parking Planning application fees Allotments Libraries Leisure centres Social care + others specific to councils, (eg Kent Freedom Pass fee rising to £100 in 2011)

Capital funding – how it works Borrowing to pay for capital schemes operates under “prudential borrowing regime” Councils decide how much they can afford to pay, taking into account how much they need to repay (impact on council taxpayers) Money may be borrowed from various sources

Ways of funding: The Private Finance Initiative - PFI Private consortium pays upfront for project in a contract with council Building/facility is leased back to council Costs paid off by council over period of between 20-30 years (plus interest) after which council retains ownership

PFI – advantages/disadvantages Good: Risks taken by private contractor Enables council to get scheme built more quickly Less good: Risk of contractors underbidding for contracts and then folding Interest costs hike up eventual overall bill Council ends up after agreement period with relatively old asset

Public Works Loan Board Executive arm of the Treasury Enables councils to borrow money more cheaply than if they went to the City or banking institutions Board approves loans only if satisfied loans can be repaid Collects the repayments, which include interest (usually lower than elsewhere)

Capital receipts Sale of assets, eg land, buildings, housing One-off money: once spent, it’s gone! Some money from any sale must be “pooled” – given to the government, which redistributes it How much is pooled varies according to how much is raised – can be 50 per cent Can prove controversial (eg playing fields, allotments to developers)

Other capital sources Money from income raised by rents, fees and charges (eg leisure centres; library charges; fees for planning applications; parking; school meals) Councils raised £10.8billion from charges in 2006-07 – equal to £210 per person Income from fees/charges usually relatively small when compared with other sources

Other capital grants Central govt - through national schemes, such as Single Regeneration Budget, Sure Start European Union – via structural funds (usually to deprived/disadvantaged regions) – Objective One and Objective Two status National Lottery