Chancellor George Osborne has just announced that the coalition government’s council tax freeze in England will be extended to 2012/13 and will include the devolved administrations providing they abide by the same rules that he has set English councils (Scotland has already ‘enjoyed’ a council tax freeze for several years funded by its SNP government).

Put simply, the chancellor’s rules are that if a council limits its annual spending increase to 2.5% and does not increase its council tax the government will provide additional funding to bridge the gap.

Of course 2.5% is below the rate of inflation so in real terms councils are being asked to spend less money each year.  But that’s another story.

A typical headline that greets these initiatives is Chancellor throws lifeline to hard-pressed council tax payers.  I’ve invented that one but you’ll be familiar with the style.

These ‘freezes’ are typically said, in today’s easy cliché, to be a win-win-win situation:

  • The government wins because it helps keep inflation down and gets the credit for helping people (invariably characterised as ordinary decent hard-working people) in hard times
  • The council wins because it shares the credit for keeping the tax down
  • The council tax payer obviously wins because their tax doesn’t go up.

The truth is slightly more complex.

Take a look at the statistics.

Assume for ease of calculation a council with a yearly spend of £1,000,000, 75% of whose spend is currently funded by central government.  The £1,000,000 is unrealistically low (think 10 or 100) but the 75% is not untypical.

If that council accepts the government’s offer of 2.5% extra money and doesn’t increase its council tax, this is what happens over five years:

 

Year 1

Year 2

Year 3

Year 4

Year 5

Council spend

£1,000,000

£1,025,000

£1,051,000

£1,077,000

£1,104,000

Additional spend funded by central government

     £25,000

      £51,000

     £77,000

   £104,000

Total central government funding

  £750,000

 £775,000

   £801,000

   £827,000

  £854,000

% funded by central government

75%

75.6%

76.2%

76.8%

77.4%

In other words, the percentage of the council’s spending funded directly by central government creeps inexorably upward.

In the short term you might say ‘So what?’ and councillors certainly find it convenient not to have to raise the council tax.

But all concerned would do well to remember the old saying He who pays the piper calls the tune.

Scottish councils have already found this, with their council tax freeze linked to a concordat with the Scottish government that includes a single outcome agreement in which they and their local partners have to agree with the government how they will help deliver their national priorities.

A quick glance across the water to the Republic of Ireland gives a taste of what could eventually happen.  As Wikipedia (not always right but near enough on this occasion) puts it

Following the abolition of domestic property rates in the late 1970s, local councils have found it extremely difficult to raise money…[National government] is a significant source of funding at present…The dependence on Exchequer has led to charges that the Republic has an overly centralised system of local government…numerous studies…have recommended the reintroduction of some form of local taxation/charging regime, but these are generally seen as politically unacceptable.

To mix my metaphors, as the link between taxation and democratic representation is weakened councils will inevitably become more emasculated and increasingly the hand maiden of central government.

Not a good idea.


Years ago when private prisons were introduced in the UK I remember thinking (naively as it turned out) “Are there no limits to a public service that can be privatised?”

Well on a short break in the Republic of Ireland I came across a new example for me that may be difficult for Brits to get their heads around.

The council empty the bins.  Right?  I mean they may do it themselves or they may contract it out, but they’re responsible.  In Ireland, wrong.

Driving through the rolling green countryside of Wicklow I was struck by the number of bright green and lilac wheelie bins at road ends.  “Well the green’s obviously recycling” I said, “but why lilac?”

I was wrong.  The green bins belonged to Access Waste Recycling, the lilac (slightly perversely) ones to Greenstar Ltd.

As a householder, you contract with one company to have your bin emptied weekly.  You can pay per kilo or per lift, by an annual fee or buying a tag each week to fit on your bin.

Now, anyone dipping into this blog will come to realise I’m not advocating a particular course of action but you have to admit it’s a different model than the one we’re used to.  And if I’ve understood it correctly (Irish readers’ comments welcome) the service is a commercial one without subsidy.  The workers are certainly not on the public payroll.