District Matters

Facing up to our community leadership

January 2020

The green waste charge has generated a great deal of heat and comment. It is, however, merely the tangible manifestation of a number of much deeper issues.

One of the fundamental drivers of the pressures that the public sector as a whole is under is the inescapable fact that the economic performance of the UK since 2007 has been dreadful. If our economy had grown at pre 2008 rates, the economy would have been about £300 billion larger. Tax take would have been about £110 billion bigger, assuming the proportion of GDP collected as tax remained constant.

In other words, our lacklustre economic performance has constrained our capacity to spend on public services.

People who assume that ‘austerity' is to blame should be aware that the size of the state as a proportion of GDP has remained unchanged since 2007.

The distribution of spending on public service, however, has shifted considerably. The amount spent per person, other than on health and pensions has been reduced by 21%. Stratford District Council has been protected from this squeeze by the New Homes Bonus. Because a great many new homes have been built in the District, we have benefited from this far more than most councils.

Unfortunately, after the coming financial year (2020/21) this funding will be taken away from district councils and reallocated, most probably to Social Care provision which is a County Council responsibility. By 2023/24 this will leave a £5.3 million hole in our budget. What makes our situation more challenging is that, because of the intervention of the general election, we only have a one year settlement. Under normal circumstances we would now have had a settlement for four years so enabling us to plan with a degree of certainty.

Then we come to the constraints Central Government place on us regarding raising money. The Council is capped on the amount by which it can raise council tax, to 2% or, perhaps for 2020/21 to only £5. Increasing council tax by 2% raises about £163k in revenue compared to charging £40 for a green bin which raises £800k a year.

The rules we operate under are very clear that we cannot just add, the discretionary service of green waste charge to council tax.

A further constraint is that our Head of Finance specifies a minimum level of reserves we must hold. This is £2.5 million. If we drop below that in any year of the Medium Term Financial Plan (MTFP), then he will not ‘sign off' the budget – a legal requirement. With the proposed MTFP, including the charge for green waste, we are showing reserves of £3.1 million in four years' time (2024/25). If we do not charge for green waste, our income would be reduced by then by £4 million. We would then have to find alternative ways of increasing revenue by £4 million or of cutting costs by £4 million and ultimately reducing services.

Finally, in 2024/25 there will be a need to draw on reserves to the tune of £3.2 million. As reserves at this time would only be £3.1 million, it is obvious that we will need to find another £3 million or so through revenue raising or cost savings decisions. It is true, we do currently have a relatively high level of reserves, but these will need to be used to support spending over the next few years. You can only draw on reserves once. Once they are spent, they are spent.

The challenges for us in the medium term are far from over. This year's MTFP is merely the start of period of very difficult decisions, if we are to maintain current services. My view has always been it is responsible to take tough decisions as early as possible. This is what we are doing. It is far preferable to assuming that, like Mr Micawber, ‘something will turn up'.

Stepping back to look at the big picture, the challenges we face as a District Council are perhaps an extreme, version of the challenges faced across the public sector. Economic growth is insufficient to underpin increased spending, so, it's either pay more or get less. It really is that simple. Not only will councils have to make ever tougher decisions but residents will also have to think very clearly about their priorities and what they are willing to pay.

The days when being a councillor was about spending money and only giving good news are well and truly over. As councillors we all need to face up to our community leadership responsibilities and be prepared to explain to residents the realities we face.