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FINANCE SUPPLEMENT - THAT'S THE WAY TO DO IT

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The government's big stick, small carrot approach has held council tax rises to a minimum, says Kerry Lorimer...
The government's big stick, small carrot approach has held council tax rises to a minimum, says Kerry Lorimer

Single mums, asylum seekers and council tax rises - the three bogeymen of the right wing tabloids. But now, the last of that triumvirate looks to have lost its ability to cause outrage. This year's round of increases raised barely a whimper.

The government is rubbing its hands with glee. Over the last few years it has honed a new approach based on cash injections and thinly veiled threats of capping. And in that time it has learned one key fact about the big stick, tiny carrot approach - it works.

This year's average increase is set to be 4.5%, higher than last year but safely below the government's notional 5% barrier beyond which 'reasonable' becomes 'excessive'.

'The capping threat is working,' says Steve Pick, executive director of finance at Barnsley MBC, which set a 4.9% increase this year. 'In the past district colleagues of mine didn't think they would be capped. Believe you me, they listened this time round.'

That view is shared by Mike Taylor, executive director for performance and resources at Surrey CC, whose increase this year was also 4.9%. 'Yes, it has achieved what the government wants, on one hand,' he says. 'But it shows the system is broke - both in the sense of no money, and in the sense of not working any more.'

And yet many believe the very fact that council tax rises have been so successfully contained makes fundamental reform unlikelier than ever.

'I am very sceptical about significant change,' says Mr Pick. 'If the threat of capping keeps increases to levels the government thinks are acceptable, a lot of the noise in terms of public complaints is gone, and the government won't be in the game [of major reform] at all.'

Nathan Elvery, director of finance and resources at Croydon LBC, says the problem is compounded by those authorities who set minimal, or even zero, increases for short term political gain, undermining the case both for reform and for adequate funding for local government as a whole. 'The council tax debate will quietly disappear and we will have only ourselves to blame,' says Mr Elvery.

In the meantime, councils are left struggling to cope with the excessively tight budgets they have been forced to set.

Finance directors say the pressure will fall more on social services than any other service area.

'The council cannot continue to do everything it did in the past. We're now in the business of closing old people's homes,' says Mr Elvery. Elderly people in two homes will be shifted to accommodation in the private sector, and staff will be made redundant as part of a programme of 300 job cuts which will impact on frontline as well as back office workers.

Social services is also 'the single biggest talking point' among metropolitan treasurers, according to Mr Pick, who is also treasurer of SIGOMA, the Special Interest Group of Municipal Authorities Outside London. 'It feels like a pressure cooker,' he says. For mets, the main gripe is the introduction this year of a ferocious damping system which cancelled out the benefits that would otherwise have come their way under the settlement. Government determination to reduce volatility in the system has hit social services particularly hard.

Counties, too, are struggling to coming to terms with upward cost pressures in social care. Mr Taylor says prices in Surrey are going 'through the roof', with increases of 6-10% on the cards. That is one reason the council is looking to make 600 reductions among its back office staff.

Mr Taylor says the main problem is in the grant distribution system, and in particular the introduction of the dedicated schools grant which, by corralling resources into Surrey's schools system, leaves next to nothing for

non-schools services such as social care.

Next year looks no brighter. This year saw the first two year settlement, which in theory allows councils to plan their spending in the medium term and reduces the number of nasty surprises.

In practice, councils have been left with so little room to manoeuvre that budget setting is more an exercise in compliance than political and financial judgment. '[Ministers] say they want 5% and we all follow. Next year, they could say they want 4.5% or 4% or 3.5%,' says Mr Elvery. 'Ultimately, government cracks the whip.'

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