Council tax ice age set to continue, says government
In today’s government spending plans for 2015/16, it was announced that the “council tax freeze”, due to come to an end next April, would be extended for the next two years.
“This settlement supports those local authorities who have kept council tax down since 2011-12 by continuing to provide for previous council tax freeze grants in their 2015-16 settlement. This is worth £833 million to local authorities. The Government will also make funding available in 2014-15 and 2015-16 for local authorities who choose to freeze their council tax, and plans to set the council tax referendum threshold at 2 per cent for 2014-15 and 2015-16” (SR Doc, Para 2.24).
In practice the council tax freeze has been driven by government making grants to authorities who agree to freeze. An upper limit is also set on increases by a requirement on the authority to hold a referendum if they plan an increase greater than 2 per cent.
Note that Eric Pickles has become very cross when some councils set increases of 1.9 per cent, even though they were within the prescribed limit. These authorities lost the entire subsidy from central government, which was in any case declining, by increasing their rates at all, so it is no surprise that they were strongly incentivised to fill the resultant gap.
But will the council tax tax ice-age hold? In fact there are strong signs that the freeze is becoming steadily less tenable, as the number of authorities willing to hold the line has continued to decline.
- 2011-2012 all 421 principal local authorities signed up to a freeze, and the government paid them £675 million to sweeten the pill.
- 2012-2013 359 authorities (85 per cent) accepted the freeze.
- 2013-2014 312 authorities (61 per cent) accepted the freeze).
Government support has been reduced to £362 million in the current year, down by 46.7 per cent in nominal terms since this policy began. As inflation has continued to rise during this period, and the number of local authorities taking the money has declined by less than the fall in funding, it is a certainty that government support has been getting less generous. The figure of £833 million in today’s announcement, which seems to be intended to fund two years of support, represents a 14 per cent nominal increase on the actual spend for 2013-2014.
Local authorities are already groaning under the pain of cuts and, as my previous post outlined, the freeze will be part of a double whammy that also includes shrinking general government funding for councils.
There is little public support for a period of austerity so protracted that it now appears more like a prison sentence than a spell in hospital. If the OBR predictions for CPI are correct, today’s announcement would amount to a 9 per cent increase in the budget for compensating councils who adopt a freeze, but this calculation already assumes that the number of councils freezing will not increase. In fact, the number is likely to fall further, which ironically may mean that there is enough government subsidy floating around to keep some at least some councils freezing until 2015.
” Fairness” watchers will also want to know whether government money will be going to well-off councils to hold down council tax bills for well-off people.
…and those who wrongly believe in the popularity and certainty of ice ages would do well to bear in mind the fate of the woolly mammoth.