Positively charged findings from the Audit Commissions national study

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Positively charged findings from the Audit
Commissions national study

• Society of District Council Treasurers
• 18 July 2008

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Charging is fundamental to the achievement of
local priorities

• The decisions made by councils and central
  government about charging for local public
  services affect everyone . . . in setting charges
  councils determine not only the service users
  from whom they will generate income, but how they
  will spend money to subsidise services.
  Positively charged

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It makes an important contribution to council
finances

• 10.8 billion nationally in 2006/07
• 8 per cent of total income
• Half as much as council tax
• Over one quarter of councils generate more
  through charges than council tax

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It makes an important contribution to council
finances
Charging and council tax income per capita
District councils
Source CLG - Revenue Outturn Service Expenditure
Summary and CIPFA Finance and General Statistics
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And supports delivery of a wide range of services

• nursery and early years services
• school meals
• social care
• transport services
• environmental health
• sports and leisure

• arts and heritage
• car parking
• planning
• building control
• licensing
• burials and cremations

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And supports delivery of a wide range of services
Charging income by service District councils (
million)
Source CLG - Revenue Outturn Service Expenditure
Summary Data 2006/07
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The contribution of charging varies between
different types of council
Charging income by council type 2006/07
Source CLG - Revenue Outturn Service Expenditure
Summary Data 2006/07
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And also between councils with the same
responsibilities
Charging income as a of service expenditure
District councils
Source CLG - Revenue Outturn Service Expenditure
Summary Data 2006/07
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Even very similar councils have quite different
approaches
Charging income for a group of district council
nearest neighbours
Source CLG - Revenue Outturn Service Expenditure
Summary Data 2006/07
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People can pay very different amounts for
essentially the same services
Household expenditure on charges and council tax
Source Audit Commission
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Different approaches to charging impact on some
households more than others
Household expenditure on charges as a of net
income
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Councils can use charges to achieve service and
strategic objectives

• Setting prices lower than market rates
• Encourage use
• Setting prices higher than market rates
• Discourage use of scarce resources
• Discourage behaviours with undesirable
  consequences
• Increasing, constant or decreasing unit price
• Influence the level of consumption
• Differential price based on time of consumption
• Ration use at certain times of day, month or year
• Differential prices for different groups
• Target services to priority users

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But too few councils are making the best use of
charging opportunities

• Only one in five council finance directors
  believe that their councils make optimal use of
  charging powers
• The general power to charge for discretionary
  services has remained largely unused
• Charging is commonly used as a tool to minimise
  council tax increases

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The legislative framework constrains the use of
charging

• Prohibitions on charging for some services
• Restricted to cost recovery in most cases
• Required to charge at nationally prescribed level
  for some services
• The rationale for restrictions not always clear
• Inhibits flexibility to respond to local
  circumstances
• Concerns about postcode lotteries, but the public
  have mixed views
• Poses challenge to governments own devolution
  agenda

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Local factors also act as barriers to better use
of charges

• The contribution of charges to council objectives
  is unclear
• 4 in 10 councils have no charging policy
• Budget information presented net of income
• Council tax receives considerably more scrutiny
• The public, and some managers, have little
  understanding of costs and subsidies
• Benchmarking often limited to charges, not costs,
  markets or impact
• As a result, resources not targeted to priority
  services and users

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Local factors also act as barriers to better use
of charges

• Councils are cautious of public opinion
• The public are concerned about stealth taxes
  and paying twice
• More tolerant of charges where they have a choice
  or understand the purpose of charges
• Some prefer the direct link between charge and
  service
• Willing to pay more where they see service
  improvement
• For most charged for services people believe they
  get value for money
• Failure to engage openly with public opinion can
  lead to poor charging decisions

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Local factors also act as barriers to better use
of charges

• Charging can be politically contentious
• Politicians views regarded as a barrier in 70 per
  cent of councils
• Rightly concerned about affordability and
  protection of vulnerable groups
• Micro-management of charges can be a distraction
  from policy setting
• Some have increased levels of delegation

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Local factors also act as barriers to better use
of charges

• The legacy of historic approaches
• Reluctance to review charging where previous
  decisions have been unpopular
• Annual inflationary increases can fail to account
  for changing costs, usage and priorities
• Striking the right balance
• Political choices to be made about resourcing
  priorities
• Need to balance ability and willingness of users
  and taxpayers to pay for services
• Tensions between finance and service objectives
• Where finance is the main focus other strategic
  opportunities may be missed

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Councils can do more to understand the effect of
charges

• Charges work within a systems of choices made by
  councils and individuals
• Understanding the system for different services
  and user groups is essential to effective use of
  charges

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Councils can do more to understand the effect of
charges

• How might charging contribute to the achievement
  of objectives?

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Councils can do more to understand the effect of
charges

• How will (potential) users respond to price?
• What other factors influence service use by
  different groups?

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Councils can do more to understand the effect of
charges

• What impact do charges have at different levels?
• service usage
• household expenditure
• income/subsidy
• Are impacts equitable?
• Is the council achieving its objectives?

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Further information

• Our study report, charging directory, household
  charges calculator and income comparison tool can
  be accessed via
• www.audit-commission.gov.uk/charging
• The charging income comparison tool can also be
  found at
• www.charging.audit-commission.gov.uk
• You can contact the study team via
• charging_at_audit-commission.gov.uk