Parishes face council tax referenda debacle

Last week I talked about the Council Tax Reduction Scheme. I talked about some of the problems it has caused for districts, with hundreds of different schemes about to come into force, and the headaches district treasurers are having apportioning their transitional grants out to the parishes.

I also touched on the problems that towns and parishes have been presented with, including having to get their heads round all of these numbers in time to set their precepts.

Towns and parishes have got worse to come though, I fear. The strong rumour round the campfire before the Autumn Statement and the local government settlement was that referenda were about to be introduced for towns and parishes who wanted to raise their council tax, just like the referenda that are compulsory for district level councils and above who wish to increase council tax by more than 2%.

Parish councils have never been capped and they have never had the referendum requirement. So up to and including budgets that were set recently by parishes and towns they can whack up their council tax as much as they want, double it, treble it, do whatever they want to.

They are under loads of political pressure not to, with the government saying everyone should freeze or reduce council tax, but there is nothing actually stopping them. The leader of one of my councils was a bit peeved last year because she reduced district council tax by 2.5%, but many towns and parishes in the district increased their precept, which meant that the majority of the residents in the district never even noticed the reduction because the parish increase swallowed it up.

Nevertheless, it is every parish council’s sovereign right to set any council tax it wants, including a big increase, for example to fund a major project or simply to safeguard future funding streams. So, given the strong rumours in December that 2013/14 was to be the year Eric Pickles introduced referenda requirements for parish councils, everyone was quite surprised it didn’t happen.

It must come sooner or later. Everyone is now assuming that next year (2014/15) will be the year. Some of the parishes in my district have deliberately increased their precept this year, even though they are supposed to reduce it because of the transitional grant that has been paid to them for the Council Tax Reduction Scheme. They’ve gone the other way and increased it. When I have asked why, several of them have specifically said that they think this will be the last year they will be allowed to do so without a referendum and they want to get their council tax up to a sustainable level. If I was their treasurer I would be saying absolutely, you should do that.

You can see where that gives them a huge problem next year. Districts are supposed to be passing on annual transitional grant to parishes indefinitely. We’ve all tried to figure out the best way of doing it, and we’re all faced with the very distinct possibility that this grant, which is already only 90% of the amount it is supposed to cover, will go down year upon year. (As I argued last week, 60% of the grant will be an unspecified amount included in RSG, which most of us only expect to reduce year-on-year.)

If we as districts pass on less transitional grant to parishes in year two, which my two councils are both indicating they will do, it is an automatic council tax increase at the parish level for any parish that cannot significantly reduce its budget requirement and precept. If the capping rules are introduced to parishes next year, then through no fault of their own, because they are not getting as much grant in year two from their district council, lots of parishes will automatically be forced into holding a referendum for something that they haven’t caused themselves. They would be expected to put up a strong case for the council tax increase in order to persuade their parishioners to vote ‘yes’- and yet the only case would be ‘government policy’. For the many whose residents vote ‘no’ to a council tax increase the parish would have to set a lower budget/precept, probably forcing local service cuts.

It would be a ludicrous, huge waste because referenda cost public money. We’re not getting the funding we need to cover the Council Tax Reduction Scheme, it looks like it’s going to go down; many parishes, through no real fault of their own, are setting higher precepts to cover their needs; and then there might be referenda introduced for the parishes themselves. It’s a labyrinthine mess affecting the whole country. Surely the government will sort it out ahead of next year’s budgets? Stay tuned for updates.

Steve Bishop is Strategic Director for South Oxfordshire and Vale of White Horse District Councils