The lifting of council tax increase limits is being discussed in Whitehall and is very much “in play” as part of the comprehensive spending review, the Ministry of Housing, Communities & Local Government’s permanent secretary has said.
Melanie Dawes acknowledged there are “really serious, short-term pressures on the local government system” and urged the sector to provide her with the evidence so that she can better make the case to other government departments that they should ensure councils are placed on a sustainable footing.
Speaking at the Society of Local Authority Chief Executives & Senior Managers summit yesterday, Ms Dawes also reiterated the government’s plan to focus on funding councils through a greater share of business rates retention.
When asked about lifting council tax increase limits, Ms Dawes said “we are very much up for that conversation” and added: “Council tax has been part of the conversation of the spending review – how much can we lean on the local taxpayer rather than the national taxpayer? There’s a choice there.”
While Ms Dawes said it is “difficult” to ask residents to pay more tax, she added: “It’s in play and I think we should have a conversation about it, but at the end of the day it’s about political choices about where you fund something from.”
LGC reported how Solace president Jo Miller on Wednesday lambasted the government for its lack of financial forward-planning.
Ms Dawes said the sector’s financial pressures were at the “forefront of our minds” and added she recognised the value of letting councils plan for the future
“The comments that Jo Miller was making yesterday we do absolutely understand those arguments,” she said.
Ms Dawes said the Ministry of Housing, Communities & Local Government is “trying to make you as sustainable as a sector, without central government support, as possible” and added: “That remains at the core of our approach.”
Funding councils through a greater share of business rates retention will continue to be a major theme though.
Ms Dawes said: “Despite what is reported in the press, business rates remains a very stable source of revenue compared to other parts of the economy. But clearly as the economy changes and more move online and companies move offshore then that’s a real issue for the Treasury.
“I don’t think we should overstate the extent to which business rates is a problem. It’s a pretty reliable and steady tax, although there are issues around appeals and uncertainty in individual areas.”
Ms Dawes said Brexit is a “really big, dominating issue” in central government at the moment but added the Budget will also be a major event in the next few weeks.
“Do watch the Budget… but the big decisions for local government will be next year [in the comprehensive spending review] and that’s what our focus is on,” she said.
Ms Dawes struck a conciliatory tone throughout and said ensuring public services are sustainable was “important” to her. While redistribution through the fair funding review will come into it, she said there was also ”something about the amount of money” available to councils overall.
She praised the National Audit Office for the way it has “very clearly” set out the situation with its analysis of the sector’s financial situation.
The permanent secretary urged council chiefs to provide her with more evidence so she can make a better case in Whitehall for putting the sector on a more sustainable financial footing.
“Please do help us to make that analysis as strong and compelling as we can,” she said.
In relation to the extra £20bn for the NHS, announced by the prime minister in June, Ms Dawes said: “I don’t think we can expect money from that to be given to social care. We need money for social care separately.”
She later added: “Don’t short-change yourself and think the solution to funding social care is to take some of the £20bn… I don’t think that’s the funding solution.
“I absolutely agree we need to be investing more in prevention, but we can’t just take it away from critical care overnight.”
As the financial situation “gets tighter” solutions may lie in internal structural reform, digital transformation, closer working between councils or “dare I say, unitaries where that is supported locally”, said Ms Dawes.
Yesterday the Chartered Institute of Public Finance & Accountancy warned councils not to expose public funds to “unnecessary or unquantified risk” when borrowing to invest in commercial property.
Ms Dawes said she wanted to “encourage commercial activities” among councils but warned the sector: “It’s very important every local authority is really careful and doesn’t do something that causes to us to clamp down on something which we don’t want to be clamping down on.”
Meanwhile, Ms Dawes was asked if introducing a tourism tax in England was on the agenda. She questioned its impact on the economy in general and how any income raised might be redistributed.
“Maybe it’s only something that can be done in cities or combined authority areas,” she said. “It’s not actively on the table but it is out there. If you want to have the debate more vigorously then let’s do that.”