Tax collection rates down, budget uncertainty up, says Audit Commission
0Changes to arrangements for council tax and business rates mean local authorities face more challenges when setting budgets, according to a report by the Audit Commission.
A report released by the public spending watchdog released yesterday showed that the English average collection rate for council tax was 9%, 0.4% down on last year.
This resulted in a loss of £94m over what would have been collected if collection rates had been maintained at the level they achieved in 2012/13.
The commission’s report said: “The new arrangements mean councils face more risk and uncertainty when setting their budgets.
“Any changes to the number of people eligible for council tax support or to the rateable value of business properties, and failure to collect all council tax and business rates due, now have a greater financial impact for councils.”
The Local Government Association said that the drop in the collection rate for council tax reflected the government’s cutting of funding for council tax support to subsidise residents on lower incomes.
LGA chair David Sparks said: “This cut has left local authorities with little option but to reduce discounts for people on low incomes, some of whom have found it a struggle to pay.”
However, he pointed out that collection rates for local taxes are much higher than those achieved by central government, and called for more control over rates by councils.
He said: “If councils were able to set council tax discounts locally, we could ensure they are targeted at those who need them most.”
In contrast to council tax, the amount of business rates collected in 2013/14 was, at 97.9%, 1.8% higher than the amount collected the previous year – a rise equivalent to £445m.
The rise followed changes allowing councils to retain a larger proportion of business rates growth locally.
However, 68 councils (21%) suffered a loss of business rate income totalling £36m, the commission said.
Sparks called for authorities to be given the ability to take into account whether a business is up to date with business rate payments when deciding whether to grant it a license to operate.
Jeremy Newman, Audit Commission chairman said: “Around one third of councils’ income comes from council tax and business rates.
“While collection rates are high, when we consider such large sums of taxpayers’ money, even a small percentage shift can produce substantial changes in the income councils have to deliver their services.
“With £4.55bn uncollected and individual councils’ tax arrears ranging from £11.1m to £105.2m, there has to be room for improvement for many councils.”
Despite the reduction in collection rate, the amount of council tax collected in 2013/14 still increased by 2.7% in real terms from the previous year.
The commission said this could be due to council discretion on levels for low income residents, new powers to increase tax on empty and second homes, and increases in overall levels by 123 councils.