council tax referendum

A reply to Fraser Nelson: the only thing astonishing is how little power local authorities have

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Catherine Staite

Fraser Nelson’s article on Birmingham City Council last Friday was a very disappointing offering from an experienced journalist and a reputable paper – more Daily Mail then Daily Telegraph. 

It was riddled with inaccuracies.

Birmingham City Council does not have ‘astonishing power’. What is astonishing is how little power local authorities have, even in big cities.  Central government has as iron grip on local government. Money – how it is raised and spent – and policy – the thinking which underpins those choices – are the two key levers of government and central government controls them both.

The average amount of local authority income derived from Council Tax is 16%.  Council Tax is a regressive tax based on 1991 property valuations and bears no relation to the real costs of providing local public services.  LAs cannot increase CT by more than 2% without a referendum, for which they must pay.

The remainder of their income is made up of rents, fees and charges (local authorities can’t make a profit) and business rates (which central government gathers and re-distributes to a national format).  The remainder comes from grants from central government. BCC’s take from Council Tax is only 7.5% because of poverty and property values, which means it is disproportionately dependent on central funding, which has been cut by 35% since 2010.

The gap between rising demand and falling resources is getting wider by the minute in Birmingham, just like it is in Chicago.  The difference is that Chicago can run a deficit of billions – and has done so for the last ten years.  BCC has to balance its books.  It is still obliged to deliver over 1700 statutory duties – from trading standards to disposal of the dead to the protection of children. Year by year it has less and less room to manouvre.

What is really astonishing is that Birmingham and other local authorities still manage to deliver very good services. A recent Ipsos Mori poll showed satisfaction remains high.  That is because authorities have protected frontline services in spite of losing 15% of their jobs since 2010.

Splitting up Birmingham City Council would make no sense at all. The comparison with Manchester is entirely spurious.  The geography and demography of the ten unitary authorities in the Greater Manchester area is very different to Birmingham but the success of that area is built on collaborative upscaling not on separatism. They have banded together to create a Combined Authority. It’s the only way to get the economies of scale and critical mass to compete, bring growth and deliver infrastructure.

The West Midlands is not made up of unitary councils – it is a mixture of unitaries and two tier areas – encompassing counties and districts.  This makes it harder for Birmingham and the wider West Midlands to emulate Greater Manchester’s collaborative progress.  In Birmingham, some services are run at a neighbourhood level, and a district structure helps support better engagement and differentiation but there is nothing to be gained by splitting the city.

Birmingham is a global city, competing with Chicago, Melbourne and Guangzhou and dividing it up would be a nonsense.  Last week senior people from Birmingham City Council were in China, drumming up business for the city.  Would Beijing be interested in talking to Kings Heath District Council? I think not.

Blaming Birmingham City Council for the architectural failings of the 1950s is like blaming David Cameron for Suez.  It’s entirely pointless. Most cities have some 1950s and 1960s monstrosities but Birmingham is being very successful in transforming the city centre. The Bull Ring works, New Street Station is being transformed and whatever Prince Charles thinks about the new library, I think it is truly amazing.  It is beautiful and original.  What is more important is that it works.  Hundreds of thousands of people have flooded through its doors and librarians have had to work hard to keep up with the huge rise in demand for books.  That is the real measure of its success.

People hark back to the happy days of Joseph Chamberlain who as Mayor in the 1870s and thereafter transformed the city and created the legacy of civic splendor, including the University of Birmingham.  The difference between then and now is that he did have ‘astonishing power’ because he had control of both the money and the policy.  In spite of the herculean efforts of Lord Heseltine, central government controls the big money for skills, growth and infrastructure.  It is to the credit of Birmingham that they have done so much with so little.

Poverty is indeed a problem in Birmingham but not one which the city council can solve. National policies drive national poverty which is then concentrated in big cities. Birmingham is super-diverse and has a high proportion of young people.  Ethnic minorities and the young have been disproportionately effected by the recession.  Central government’s cuts to benefits to vulnerable people are shunting the costs of poverty onto local government at a time when they have few resources with which to respond.

Child protection is a stark example of this phenomenon.  Most child abuse has its roots in poverty, drug and alcohol addiction, domestic violence and mental illness.  Local government cannot solve all those ills alone.  Every serious case review and every inquest highlights a very simple lesson.  Children can only be protected when all the key agencies work together – schools, GPs, mental health services, the police, the hospitals – as well as children’s social care.  Cuts in public sector funding have a knock on effect on child protection.  West Midlands police cannot attend all the case conferences they should.  It is in those circumstances that children fall through the net.

Somehow it is always the Council that gets the blame.  They do hold the ring in a complex network of agencies, professionals and responsibilities – but they cannot always be expected to hold the blame.

Catherine Staite

Catherine Staite is the Director of INLOGOV. She provides consultancy and facilitation to local authorities and their partners, on a wide range of issues including on improving outcomes, efficiency, partnership working, strategic planning and organisational development, including integration of services and functions.

The Council Tax Freeze, Part 3: Who’ll Be On This Year’s Roll of Shame?

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Chris Game

East Cambridgeshire, East Hampshire, East Northamptonshire, South Hams, South Ribble, West Devon – anything you reckon they might have in common, apart from ‘compass point’ names that for most of us require translation to make much sense: Ely/Newmarket, Petersfield/Alton, Rushden, Totnes, Leyland, Tavistock/Okehampton, if you were wondering.

No? OK, let’s add Surrey, Cambridgeshire, Huntingdonshire, Epsom and Ewell, Tonbridge & Malling, Tunbridge Wells.

Top of the DCLG indices for least deprived local authorities? Nice try, but no cigar.  No Labour-controlled London or metropolitan boroughs? Getting warmer. Conservative heartlands?  Almost there. Ministers’ favourite councils? Oh dear – back to freezing, but freezing’s the clue as well as the direction of travel.

Far from being Pickles’ pets, they were on what the Daily Telegraph took to calling the ‘Roll of Shame’ – the 35 councils that decided, in the face of frequently fierce ministerial pressure, not to freeze their 2012/13 council tax rates. 

They did the math, and calculated that the offer of one-off central funding equivalent to a 2.5% tax increase, but creating a potential budget gap from 2013/14, was not in their residents’ longer-term interests. So they chose to set their own budgets – insofar as these things are possible nowadays – and raise their tax rates by between 2.5 and 3.5%, the latter being the point at which a referendum and its attendant costs would have been triggered.

Unlike the previous year, when the Government’s financial incentive ran for the four-year funding term and all councils took the money and froze, this time one in ten rebelled – and the biggest single party group were, yes, 16 Conservative councils, for many of whom featuring on a naughty list must have been an  interestingly novel experience.

There were, hardly surprisingly, nearly as many Labour councils – though again not those that might have been at the top of most people’s guess lists: no London boroughs, only St Helens among the mets, Leicester, Nottingham, Darlington, Stoke, Preston, Luton, York. But, with the possible exception of the three Teesside unitaries (minus Hartlepool) – Middlesbrough, Redcar & Cleveland, and Stockton-on-Tees – this was no more a co-ordinated, politically driven anti-Government protest than among the Conservative rebels.

Rather, it was councils and their finance officers doing the sums and concluding that this tax freeze offer simply did not constitute for many authorities the advantageous deal that Ministers had tried to claim – before switching their sales pitch to blustering to councillors about how freezing was a moral duty, regardless of its costs.

One of the things that will make the coming few months interesting, at least for detached observers, is that the terms of the Government’s 2013/14 tax freeze offer, announced this week, have changed once again, and can be headlined in one of those ‘Good news, bad news’ games.

This year freezers will receive a grant equivalent to just a 1% tax rise, instead of 2.5% (bad news); but they will also get an extra year’s baseline funding, “to ensure that there is no cliff-edge in funding in 2014/15” – apart, that is, from any already incurred this year (good news); but the referendum threshold comes down from a 3.5% rise to one of just 2% (bad news) – or is it?

Two observations occur to me. The first is to recall all those statements when the Conservatives were in opposition about how damaging capping was, because it took the power of decision about local spending and taxation out of the hands of local voters and handed it to remote central bureaucracies.  As we enter the third year of tax freezing by ministerial arm-twisting, it’s really hard to see it as anything other than local budget setting by remote central bureaucracy.

Second, there must be a likelihood of at least a few councils seriously considering the referendum option, and making the case for restricting the speed and severity of service cuts in the general community interest – except that there seem to be so many rather substantial details still to be determined about how these referendums would actually work: the form of ballot; wording of the question(s); timing; all- or part-postal, or maybe included with annual tax demand notices; restriction to council tax payers – to name but a few.

A further non-detail, in addition of course to the cost of the whole thing, is the very principle of having a one-off referendum on a single year’s proposed tax increase, which must have the effect of making long-term planning even more difficult than it is already.

There was a question in the DCLG’s council tax referendum consultation back in 2010 that asked specifically about whether, with the abolition of capping, there was any reason why authorities should be required to calculate a budget requirement each year. The possibility of being able to frame a referendum around a medium-term financial plan, including staged council tax increases over a number of years, might be a more attractive proposition to some councils, and it’s a topic that would seem worth revisiting.

Chris is a Visiting Lecturer at INLOGOV interested in the politics of local government; local elections, electoral reform and other electoral behaviour; party politics; political  leadership and management; member-officer relations; central-local relations; use of consumer and opinion research in local government; the modernisation agenda and the implementation of executive local government.