Thursday, 14 February 2013

Unintended Consequences

For the past five years, the yellow-controlled Town Council has been very careful in setting its Council Tax, keeping to an increase of 2% a year and planning the Town Council budget accordingly – even though that 2% represents only around £2 a year on the Council Tax for a Band D property. So for 2012-13, a precept of £541,500 was calculated increasing the Band D Council Tax by £2.05 to £104.22.

However and meanwhile – the blue-yellow Coalition Government decided as part of their localisation agenda that Council tax benefit should be determined locally. So they gave the funding to councils to manage at their discretion, keeping back just 10% because, after all overall spending levels must be reduced, setting just a few priorities so that elderly and vulnerable people should not lose out, because after all, localisation should only be taken so far.

The yellow-run Northumberland CC decided that no one should lose out on council tax benefit, so they raised council tax levels on 2nd homes and topped up the government grant. Effectively they modified their council tax base so that more was to be collected on 2nd homes and less on homes of people eligible for council tax benefit. Which averaged out fine across the whole of the county – but unfortunately town and parish councils work out their share of council tax based on just the few properties in their area. So – the parish councils with lots of 2nd homes (mainly in the north of the county) found they had a higher tax base and could collect more money without putting their share of council tax up. But the parish and town councils with lots of council tax benefit claimants in their area found their council tax base cut sharply – by as much as 15-20% in Blyth and Ashington – so that they would need to increase council tax sharply just to keep their income levels the same. So the localisation of council tax benefit ended up as a regressive tax – hitting the poorest hardest – at local level up and down the country, not just in Northumberland.

“Oh dear!” the blue-yellow Coalition Government said “this won’t do” – and they gave all the Councils a special grant to cover the unexpected council tax deficits of parish councils in their area. So yellow-run Northumberland CC got an extra £600k which they agreed to pass on to the parish and town councils this year – because after all, it is an election year – though they could make no promises about future years (and neither would the blue or red leaders).

The reduction in the Morpeth council tax base meant that Morpeth Town Council were £41,387 short on their planned £541,500 precept assuming a 2% council tax increase – so they were promised a £41,387 grant from Northumberland CC. And – though they could have reduced their overall budget, or increased the council tax by more than 2% (which is after all only around £2 a year on a D-Band property) – the yellow-run Town Council decided to blow the whole £41,387 grant this year to keep the tax increase down to 2% even though this possibly means an increase of 10.4% next year just to keep the Council’s income levels the same, because after all this year is an election year and who knows? Something might turn up next year. On the other hand, Pegswood PC agreed to increase their council tax sharply keep their £20k in reserve for next year.

So – that was all alright and on 24th Jan, Morpeth Town Council agreed a precept of £500,113 – an increase of 2% - and informed the County Council who actually collect the council tax by the deadline of 26th Jan. 

Unfortunately, the yellow-run County Council Executive were also worried that what with the new benefit rules and having to chase 2nd home owners for more council tax, they might not be able to collect as much as they should. So on 28th Jan, they agreed to increase the allowance made for non-collection from 0.5% to 1.8%. The unintended consequence of this is that now Morpeth Town Council will have to increase council tax by 3.5% to collect £500,113. But no, this won’t do for the yellow-run Town Council who intend to stick to the 2% increase by hell or high water (even there’s just £1.50 per year difference for a Band D house) – so they are calling a special Full Council for 20th Feb to reduce their precept to £493,580 (and taking the extra £6,533 from contingencies next year) if the Northumberland CC Full Council meeting on 27th Feb confirms the Executive recommendation to increase the allowance made for non-collection from 0.5% to 1.8%

So – don’t say no one explains what is going on!

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