District Matters

Public sector budget brings difficulty

March 2019

I am well aware that this column will not be an easy read; however, if you want an overview of the challenges we are facing over the medium term, then stick with it.

It is the time of the year when public sector budgets are set. This year, we at Stratford-on-Avon District Council (SDC) have set a budget that is roughly neutral in terms of deficit or surplus. This requires an increase in Council Tax of 1.5%. I am very aware that when residents receive their Council Tax bills they will find the total increase much higher. This is because the Police are raising their precept by £24 on a band D property, which equates to 11.77%, and Warwickshire County Council is raising its precept by 4.99%. In percentage terms, the overall increase is 5.52%. SDC collects all the money but retains only a small portion of it; £139.12 out of a total of £1,799. (This does not include parish councils, where the average precept is £61.)

Business rates are our other main source of revenue. Business rates are set by central government but, again, SDC collects the money. We collect almost £55m in business rates but keep only £5.2 million; the remainder goes to Warwickshire County Council, with £27.3 million going into a central pot for redistribution across the country.

Grants from central government in 2019/20 will be £299,000 and will disappear altogether in 2020/21. Our other major source of revenue is the New Homes Bonus, which will be £4.5 million in 2019/20 but will, we expect, reduce to £1 million by 2023/24. Although our reserves are currently £9.2 million, over the next five years these are forecast to reduce to £2.6 million. In reality, our capability to use reserves to fund our activities ends in 2023/24.

There is a Fair Funding Review being undertaken by government this year which will, in effect, give us a picture of the income that we can expect from central government, including business rates and New Homes Bonus.

It is inevitable that we are going to become ever more dependent on money raised through local taxes, including business rates, and charges. Indeed this is the strategy of the government, not to raise overall taxation but push it down to local level. This has been particularly noticeable with the Police precept, where it has been increased by £36 in two years.

This raises some rather significant questions; central government is fond of asking us to take on more responsibilities without providing the funding. In other words, it expects local residents to foot the bill. As we are democratically elected councillors then, if our local electorate says “enough is enough" regarding taxes and charges, how are we going to reconcile central government's demands with the wishes of local taxpayers?

The underlying tensions will be between a set of national standards common throughout the land, or differences in provision dependent on the willingness of local taxpayers to fund spending. Local communities may also have a different set of priorities to national government.

These tensions will, I feel, only increase and I am far from certain that the ramifications have been thought through.

Underlying this is the situation where taxation as a percentage of GDP is at a 49 year-high, and there is survey evidence that resistance to further increases in taxation is growing.