Councils miss out on £2.8bn

Rob Whiteman, chief executive CIPFA

Councils would have an extra £2.8bn to spend on services if council tax had risen in line with inflation under the coalition government, according to new research.
The Chartered Institute of Public Finance and Accountancy (CIPFA) made the claim this week in its annual council tax survey.

It said the figures raised questions over the coalition’s policy of incentivising councils to freeze council tax levels.
 CIPFA chief executive Rob Whiteman said: “CIPFA believes that we urgently need a debate on our council tax system and more broadly the way we fund local services.

“We must candidly address whether enforcing a virtual freeze on council tax over an entire Parliament is sustainable, and what the government and local authorities can do to update it to better fund crucial public services.”

CIPFA’s survey showed that the average Band D household’s council tax is only set to increase by 1% during 2015-16, from ££1,467.94 to £1,483.92 – just under £16.

It said this is a result of the government’s council tax freeze grant and referendum cap on local authorities’ setting of council tax rates.

The institute’s research found that if council had risen in line with Retail Price Index inflation since 2010-11 then council tax would now be £168 higher for an average Band D property – or £1651.74 per household (see table).

The £2.8bn this would have reaped is equal to the entire road maintenance budget for the United Kingdom or the Public Health budget for English local authorities in 2014-15, CIPFA said.

CIPFA’s council tax figures

Whiteman said: “Although it is welcome news that action by the government has seen households saving money on council tax, it is also important to look at the cost of this.”
Responding to the survey, communities secretary Eric Pickles said: “Under the last administration, council tax bills more than doubled, pushing the typical bill to a £120 a month from hard-working people and pensioners.

“Council tax became a big worry for those trying to balance family budgets. This government has given families greater financial security, by taking decisive action to keep council tax down, cutting bills in real terms.

“I welcome the news that so many councils have signed up to the council tax freeze this year, and it speaks volumes that only one local authority wants to take a council tax hike to taxpayers in a local referendum.”