Latest Public Sector News

10.02.15

A quarter of local authorities to freeze or lower council tax

Only a quarter of local authorities are set to freeze or lower their council tax this year, figures from the Department for Communities and Local Government (DCLG) have revealed. 

It has been highlighted hat 114 councils and police authorities will take up the offer of the government’s “freeze” grant, with only eight, including Hammersmith & Fulham, East Staffordshire and South Holland, set to reduce bills. 

However, the DCLG claims that councils can do more to protect taxpayers as government analysis suggests that at least a further £30bn is available to local authorities in reserves and uncollected income. 

It was reported that council reserves stood at £21.4bn at the end of the last financial year, up from £14.3bn in 2010-11. 

But the Local Government Association (LGA) claims that reserves are all that stands between councils and financial collapse. Also, the number of councils who are putting up rates by 1.99% – just below 2%, which would trigger a local referendum – is continuing to grow. Examples include South Tyneside, which plans a 1.95% increase, and Surrey, which wants a 1.99% rise. 

Communities secretary Eric Pickles said: “Reserves have rocketed up in the past few years and councils could be making better use of assets to keep taxes down and protect frontline services, while at the same time doing more to stop the billions they are losing to fraud and collecting more council tax arrears.

“It’s great news that so many local authorities have already promised to keep bills down for taxpayers and take up our support for freezing or reducing council tax.” 

New figures released by DCLG also revealed that Birmingham City Council had the highest rate of council tax arrears, with £105.2m outstanding. Liverpool was next with £97.6m in arrears, followed by Manchester, which is owed £57m. 

LGA chairman David Sparks said: “With further cuts expected in the next Parliament along with ever-growing pressure on services, putting aside money for the difficult years ahead is prudent financial management. 

“Councils work hard to ensure council tax and business rates have among the highest collection rates of any tax. The exchequer would be billions of pounds better off each year if central government's collection rates matched those of councils. 

“The slight increase in unpaid council tax will come as little surprise to those in local government, who warned that this would be a consequence of government cutting funding for council tax support. This cut has left local authorities with little option but to reduce discounts for people on low incomes, some of whom have found it a struggle to pay. 

“The Local Government Finance Settlement confirms that core central government funding to councils will be reduced by 8.5% in April. Local authorities are now in the process of finalising next year's budgets. These savings will be the most difficult yet, and it is unavoidable that they will have an impact on local government's ability to improve people's quality of life and support local businesses.” 

Apart from the Greater London Authority, Hampshire had the highest amount of non-ring-fenced reserves as of March 2014, holding £357m in a rainy day fund. Essex Council has £323m in reserves. 

Recently Simon Edwards, director of the County Councils Network, said: “Counties face difficult choices around whether to raise council tax to maintain essential services residents rely on, implement new duties and continue to support local economies. 

“Some counties are considering raising their council tax as they are experiencing the perfect storm of substantial cuts to their core grant at a time increasing demand for their services and significant new duties under the Care Act. 

“When pooled budgets – where much of the spending is out of the council’s control – are taken out of their spending power, counties are looking at just under a 4% reduction to their spending power from the latest Local Government Finance Settlement. This, on top of the 40% reduction counties have already experienced, is pushing Counties to the brink.” 

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