Skip to main content

Council tax capping – a challenge is issued

In which a gauntlet is prepared, with a view to a rapid trajectory towards the ground, and we consider the chances of its retrieval.

In which a gauntlet is prepared, with a view to a rapid trajectory towards the ground, and we consider the chances of its retrieval.

Rate capping is, of course, the ability of the Government to prevent council tax increases which its considers excessive.  It has been an option since 1984, but was reconstituted on the basis of a general formula in 1991.  Then it became a talisman in the endless, sycophantic boundary dispute between central and local government, and in 1997 the new Labour government pledged to end “crude and universal rate capping”.  This it did, replacing it, of course, with sophisticated and selective rate capping.  Sir Michael Lyons recommended its appeal, but nothing happened.  Most years, a few authorities try their luck and get a slap in the face.  There are two processes.  “Designation” caps this year’s budget increase, and “nomination” is a yellow card capping next year’s increase.  In 2004/5, six authorities were designated and eight nominated.  In 2005/6, nine authorities were designated.  Two were designated in 2006/7.  In 2008/9 three were designated and four nominated, and in 2009/10 one was designated and one nominated.  Police authorities are especially susceptible.

The coalition Government thinks this is all very unfair.  Localism is its mantra.    It will legislate in the upcoming Bill.   But it has been rather clever.  The Programme for Government says “We will give residents the power to veto excessive council tax increases.”  To explain what this means, the CLG issued a consultation paper in July, and consultation has just closed.  The basic idea is this.  Each year Parliament will approve a set of “principles” – a formula defining the maximum acceptable percentage increase, subject to a permitted threshold allowing smaller authorities to make a noticeable increase without penalty.  If a precept or council tax determination exceeds the principles, council tax billing proceeds as usual but the authority in question must arrange for the billing authority to hold a referendum, and pay for it.  The council tax bills will contain factual information, and poll cards will be enclosed.  The referendum will follow the process for “mayoral referendums”, that is to say referendums to decide whether to adopt the elected mayor system.  The timescale, and the questions to be asked, will be specified.  The regulations will say what the authority must, can and cannot do.  It may not campaign, although individual members may.  If the referendum rejects the increase, the authority has to set a new budget, at the “principles” level, and pay the billing authority for recalculating the council tax and sending out a new set of bills.

What a cunning move.  The government will not be to blame.  Any authority seeking to escape a 25% cut in government grant – RSG -  can try to reduce the impact of the cuts by increasing the council tax (by an awful lot, because council tax amounts to a much lower proportion of the authority’s income than RSG, so long as it wins the referendum.

The estimate cost of a mayoral referendum depends on who you ask, and on the size of your authority.  The Deputy Leader of Great Yarmouth thought it would be £40,000.  Tower Hamlets estimated £250,000 for a stand-alone referendum and £70,000 for adding the process to a local election.  The cost of rebilling, following capping, for the Lincolnshire police authority in 2008/9 was £380,000, and for the Surrey police authority in 2009/10 it was £626,000,

Come on if you’re hard enough!  Will any authority want to pick up the gauntlet?  An authority with no way out from savage cuts in services and jobs has three options: fudge and pretend and get caught out later, make the cuts, or go for a referendum.  At first sight, the idea of spending hundreds of thousands of pounds, and risking even more, on asking people whether they want to pay more tax in a recession may not seem too bright. 

Some authorities have held voluntary non-binding referendums of a kind into their council tax proposals.  In Bristol in 2001, and in Croydon in 2001 and 2002, the lowest increase offered got the most votes.  But you never know.  In Milton Keynes in 1999, 46% of the vote went for a 9.8% increase, and only 30% of chose an extra 5%.

Mind you, there is a difference between a voluntary referendum and the Government’s proposals.  There are no rules of engagement in a voluntary referendum.  How would the rule that the authority cannot canvass but the members can work in practice?  It is one thing keeping neutral and silent when you are asking people if they want an elected mayor, which is essentially a political issue.  It is a bit different asking them about a data-intensive subject like budgets, cuts and council tax.  Will officers be able to brief members, for example? 

Perhaps we will never need to find out.