A Taxing Issue
Has the threat of capped council tax rises threatened relationships between local and central government, asks Seamus Ward?
There have been a number of dire warnings about council tax rises recently. The Government has threatened to cap next year’s council tax rises if they find them as unacceptable as this year’s, and councils have insisted they will not be able to deliver adequate services if they do not get extra cash.
The barbs may still be flying from some quarters but when the dust has settled a fundamental question will become apparent: what effect will the threat of capping have on the relationship between central and local government and in particular on the future of the Comprehensive Performance Assessment (CPA)?
Local Government Minister Nick Raynsford says this year’s council tax rises have reached the “limits of acceptability”. But, memorably, Deputy Prime Minister John Prescott (whose brief includes local government) told the Labour Party conference: “Some councils have the cheek, and yes I call it cheek, to hike up their council tax after receiving large grant increases, and then blame the Government.”
Surprised
The threat of capping has come as a surprise to councils. They feel they have
a strong argument following a thawing in local-central government relations
over the last few years. Many local authorities believe they have entered a
more mature relationship with central government, where even the poorest authorities
would be given at least some additional freedoms (for example more discretion
over the use of income from civil penalties such as fines for littering). Councils
can enjoy even greater freedoms if they gain a good or excellent score in the
CPA, including, the Government promised, exemption from capping. It now appears
to have reneged on this promise.
“The Government is clear that the current trend in council tax rises is not sustainable,” the Office of the Deputy Prime Minister says. “Although we are not capping council taxes for 2003/04, local authorities should be aware that we are prepared to use our targeted capping powers in 2004/05. In exceptional circumstances, we do not rule out the possibility of capping authorities categorised as ‘good’ or ‘excellent’ in the current and future Comprehensive Performance Assessments.”
CPA in Doubt
Richard Harbord, an independent consultant to local authorities, says the threat
of capping has put the development of the CPA into doubt. “The Government
gave an undertaking as part of the CPA that excellent authorities would not
be subject to capping. If you are an excellent authority you will be questioning
why you are putting resources into this area,” he says.
Sir Sandy Bruce Lockhart, vice chair of the Local Government Association, says councils feel let down. “The Government promised more financial autonomy for the councils independently proven to be good and excellent at the end of last year,” he says. “If this approach becomes the norm, councils would simply lose faith in talk of partnerships with Whitehall, and the damage to central and local relations would be very hard to repair.”
Mr Harbord feels declarations that the council tax will be Labour’s poll tax are “a bit extreme”. “A lot of people feel that while the council tax is not brilliant, it is more acceptable than the poll tax and works quite well, generally speaking. Much of the crisis has been caused by central government not giving enough support to local authorities to run their affairs historically.”
Long-Term Funding Issues
In a nod to councils’ concerns, Mr Prescott acknowledges the need to address
long-term funding issues, such as the level of council precepts and the revaluation/rebanding
of properties. There is also a suggestion that the Government is ready to help
raise councils’ income for next year by allowing them to keep some of the
receipts from business rates.
“Central government seems to get nervous when people complain about their council tax but really everybody should sit tight and wait to see what happens this year,” Mr Harbord says. He continues: “It wouldn’t be an unusual strategy but none of this is likely to help the overall situation, improve levels of service or solve authorities’ financial problems.”
Seamus Ward is a freelance journalist