Cuts, cuts, cuts

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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

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Revenue expenditure

• Essentially, a councils 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

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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

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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

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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

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Council tax bands

• Band A - ltunder 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

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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 councils discretion)

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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

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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

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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

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How council tax has risen

• Average bill 1995 609
• Average bill 2012 1,201
• Kent County Council bill 2012 1,047
• Medway Council average bill 1,113
• Three Kent councils are increasing bills in 2013
  Tunbridge Wells, Gravesham, Canterbury

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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

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Capping

• Govt. has reserve powers to cap a councils
  budget if deemed excessive
• Powers to either nominate or designate
• Used to halt excessive council tax increases
• Can mean councils having to issue new bills

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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

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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

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Where the money comes from

• Central government provides the lions 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)

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Government grants

• Grants in all forms are known as Aggregate
  External Finance.
• This money supports
• Revenue expenditure
• Capital expenditure
• Housing expenditure

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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

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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)

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Specific grants - DSG

• The Dedicated Schools Grant
• Provides funding for schools
• 100 from the DfE
• Councils have no say in how it is spent just
  pass it on to schools passporting

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Revenue Support Grant - RSG

• Post 2006 accounts for much smaller slice of
  grant aid to councils about five per cent. How
  much a council gets is based on
• Relative Needs Formula (RNF) formula based on
  various factors deprivation high wage costs
  tourism commuters
• Relative Resource Amount (RRA) how much
  councils can raise from council tax. In effect, a
  Govt. judgement about an authoritys wealth
• Central Allocation (CA) additional money based
  on population

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Area based grants (ABG)

• Designed to encourage partnership working
  councils with other organisations, eg charities
  businesses neighbouring authorities
• Aimed at improving efficiency cutting costs and
  avoiding duplication of services
• 45billion of ABGs has gone to councils in 2009

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Govt. approach to revenue grants

• Vulnerable communities a priority deprived
  areas with social challenges
• Protection for social care
• Council tax freeze funded by extra 2.5 per cent
  in grants for councils
• Power for residents to veto council tax increases
  in future years through referendums

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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

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Relief/discounts on UBR

• Small business rate relief (lt50,000 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

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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

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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)

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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

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Capital projects - Prudential funding

• Govt. has reserve power to limit how much can be
  spent
• System encourages responsibility how much can
  we ( taxpayers) afford?
• Allows councils greater freedom to decide
  priorities
• Could be self-financing (eg adding facility to
  leisure centre that pays for itself)

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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

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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

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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)
• Money drawn from National Loans Fund
• Overseen by 12 commissioners

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Capital receipts

• Sale of assets, eg land, buildings, housing
• One-off money once spent, its 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)

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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

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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