A majority of county councils look set to increase council tax next year as leaders try to fill a financial black hole created by funding reductions and increasing demand for services.
More from: LGC View: Council tax
Exclusive research by LGC suggests that 75% of county councils are set to reject the government’s freeze funding offer amidst widespread concerns about the long-term impact of a deal which is not guaranteed beyond 2015-16.
The decision of Conservative county leaders to reject the advice and financial incentives of their own coalition government comes ten months after county leaders wrote to the prime minister complaining of a “fractious” relationship with ministers.
One Tory leader told LGC that the mood amongst colleagues had not improved in the months since the letter was sent.
A realisation of the threat indicated in our survey would mean council tax increases in Conservative heartlands in the run up to the 2015 general election.
The pressure is now on the chancellor to deliver some good news in the Autumn Statement, with several finance directors and Conservative leaders indicating that decisions about council tax will depend on his announcement and a decision on the threatened top-slice of New Homes Bonus.
The annual LGC Council Tax Survey found that more councils than ever before intend to reject the government’s funding, which is equivalent to a 1% increase in council tax and will be paid in 2014-15 and 2015-16.
Across all councils, 32% have indicated will reject the offer, but this trend is even more pronounced amongst counties.
According to David Hodge (Con), chairman of the County Councils Network and leader of Surrey CC, counties face a particularly challenging set of circumstances.
Demand for services, such as adult social care, was rising; roads had “taken a hell of a hammering” and were costly to repair over a large county area; and many were suffering a major shortage in schools places, he said.
Writing for LGC this week, Cllr Hodge said the Treasury needed to support councils.
“Central government has a choice - they can either support councils in meeting growing demand pressures via direct support or by giving councils the flexibility to raise taxes locally,” he said.
“We are already finding it difficult ensure our books balance. To echo what LGA chairman Sir Merrick Cockell said earlier this week, the government “must not exacerbate that problem by deepening the cuts in the Autumn Statement”.
While LGC’s annual survey is anonymous, a number of Conservative county leaders have already spoken publicly about the need to increase the charge.
Buckinghamshire CC leader Martin Tett (Con), also writing for LGC this week, said he was consulting on an increase of up to 5% because of a “significant reduction in government grant” combined with inflationary costs and demographic pressures.
Worcestershire CC leader Adrian Hardman (Con) told LGC a 1.8% increase in council tax would resolve the council’s £3.8m a year overspend on looked after children. Feedback from budget roadshows indicated 60% of residents supported an increase, he said.
But he said a final decision would depend on whether or not the chancellor could make the freeze funding permanent grant beyond 2015-16.
“[If] the grant was put into the base we would be much keener on taking the grant, because it [then] has longevity,” he said.
Local authorities are also still smarting after the spending round which set out details of council funding for 2014-15 and 2015-16.
Several survey respondents mentioned the additional cuts in the July draft local government settlement and 15% of those considering a council tax increase said this had only been an option since the funding figures were published.
The same announcement detailed how New Homes Bonus payments to councils could be top-sliced by £400m and handed to local enterprise partnerships.
Two respondents said their council tax decision would be made once the government’s final decision was known.
Gary Porter, leader of the LGA’s Conservative group, said proposals to increase council were not entirely about money. “Part of it is the unhappiness about things like the New Homes Bonus [top-slice]” which he described as “a big breach of promise”.
Local government minister Brandon Lewis (Con) called on councils to help local residents who were struggling with household bills.
“Over the last three years, the government has worked with councils to cut council tax by 10% in real terms – by contrast, under the last government, council tax more than doubled.
“Extra funding is on the table for councils to freeze council tax for another two years. I would encourage every council to take it up. There is a clear choice for councils: extra help for hard-working people with the cost of living, or higher state taxation to fund more council administration.”
These LGC Council Tax Survey results are based on the 142 responses of finance directors who stated the type of council they represent. The survey received responses from 58% of London boroughs, 48% of unitary authorities, 44% of counties, 37% of districts and 28% of metropolitan boroughs.