Wednesday, 18 December 2013

The Great Council Tax Lie

The government has just announced its funding settlement for next year, entitled:
'A fair deal for councils and fair bills for taxpayers'.

It is a lie - it is not fair at all.

If you live in the north of England and have ever moaned about your Council Tax, read this.

At our end - Council Tax
County Durham has 237,000 properties. Not all are liable equally to Council Tax - smaller properties pay less, larger properties pay more. 85% of County Durham properties are in Council Tax bands A, B or C ... 60% of them are in Band A. Thus, although County Durham has 237,000 properties, their money-raising potential is reduced because they are generally low-value properties.

This is not the case throughout the country.  Take, for instance, Surrey.  Surrey has just 23% properties in Bands A, B and C, of which just 1.5% only are in Band A.  Thus Surrey County Council's council-tax-raising potential is high because it has generally high-value properties.

When calculating the tax-base, therefore, Councils tend to use a notional number of 'Band D equivalent' properties to indicate their council-tax-raising capacity.
Durham - with a population just shy of half-a-million - has 129,047 Band D equivalent properties (one Band D property for every 3.8 people).
Surrey - with a population a little over one million - has 493,987 Band D equivalent properties (one band D property for every 2.2 people).
In raw terms, therefore, £1 on the Council Tax raises almost twice as much revenue for the County Council in Surrey as is does in Durham.
Put another way, the Council Tax a Band D property pays in County Durham has to meet the needs of nearly four people - in Surrey, a Band D house has to pay for the needs of just over two people.

At their end - Government Grants
All this would be bad enough, but those four people in County Durham need much more care than the people in Surrey,  In County Durham there are generally more elderly people, more people out of work, more deprived families, more ill and disabled people etc. than there are generally down south.  So, while the money-raising capacity of taxable properties is much lower in County Durham, the needs they have to meet are much higher.

In the past, the government used a formula-funded grant to meet these needs, but this government has changed all that.  'Needs' are no longer paramount.  At one point government grants supplied four times as much of the County Council's revenue as the County's Council Tax receipts.  No more.  By 2017, the government will have more-or-less halved the grant-funding to County Durham - a total cut of £223 million a year on 2010. 

Instead, the government is allowing Councils to keep half of the business rate - which is all well and good, apart from the fact that County Durham's industry is weaker than business in other parts of the country.  Thus, in 2014-15, Surrey is expecting to get £140 million from the business rate - County Durham (half the size of the population), just £32 million (less than a quarter of the revenue).

If you're happy for the weak to go to the wall, I suppose this is fine and dandy, but is it 'fair'.

In the middle - why is my Council Tax so high?
I am often asked why our Council Tax is so high.  I hope this article goes some way towards explaining.

At the one end, because we are generally a poorer society than down south, our properties yield less per £1 of Council Tax, but have to fund a greater need.  At the other end, we face a government which refuses to acknowledge need, and wants regions to provide their own revenue via the Business Rate.

By any moral yardstick, this cannot be regarded as 'fair'.  It produces the scenario we face at the moment - of a Council forced to cut its services to make ends meet.

The Street Lighting changes which have caused so much complaint in the local newspapers will save just £1 million.  The Garden Waste collection charge which has created so much anger will save another £1 million.
By 2017, the Council has to save £100 million - a cause for sober reflection.

So, ask yourself - do *you* think that the government's funding settlement is 'fair'?

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