Mike Schofield: The Council Tax precept scam

Mike Schofield of the Is It Fair? campaign examines council tax hikes and their causes.

Have you ever looked closely at your Council Tax (CT) demand to see who gets your money; what proportion they get, and what percentage increases have been added to the different elements since last year?

In what are known as two-tier Local Government areas, your CT will be shared out, in varying amounts, between the County Council; the District or Borough Council; the Police Authority; the Fire & Rescue Authority, and – if you have one – your Town or Parish Council. In Local Government jargon, the amount paid to each of these bodies is known as a precept.

Figure 1 (click to enlarge) shows a typical example of how the money is divided up in most places in the country.

[Note: If you live in an area with a single tier of local government, i.e. a Unitary or a Metropolitan Authority, or if you live in London, fewer bodies share the money. And, in a few places, the Fire Service charge is included in the County charge. Also - with a few exceptions - there are usually no Town or Parish Councils in single tier areas.]

Each body sets its own precept every year and the total of all the precepts determines how much your total CT bill will be. 

The District/Borough Council is responsible for collecting all the tax and then distributing it to the others.

Because there have been some horrendous increases in CT in recent years, and in an attempt to limit the increases in the individual precepts, the Government now specifies a maximum percentage increase that can be applied. This is known as a cap. Currently (2008), the cap is 5% and applies to the precepts demanded by each body – with the exception of Town and Parish Councils!

This means that Town and Parish Councils can increase their precept by whatever percentage they wish.

Being well aware that the cap does not apply to Towns and Parishes, a growing number of District Councils are offloading some of their non-statutory duties onto Towns and Parishes in their area – but keeping the money that they would have had to spend on these duties.

This has resulted in many Town and Parish precepts rocketing and, in a growing number of cases, now being as much or even more than the precepts demanded by the District or Borough council.

In a growing number of places, these uncapped increases add, considerably, to the total increase in the CT bill and push the total increase to over the 5% limit – to 6%, 7% or even more.

The Government has been aware of this state of affairs for years and even documented it in a Green Paper issued in 2000 where, in section J15 is stated:

“…there are a few towns and parishes where the parish precept is larger than the council tax due to the district council. In these cases, it is illogical that taxpayers should have protection via the Government’s reserve capping powers from excessive council tax increases made by the district, but no protection from excessive increases in the [parish] precept.”

The problem was also recognised in a Department for Communities and Local Government (DCLG) document issued in March 2007 where is stated:

“Parish precepts in 2007-08 will total £299 million. This represents an increase of 6.7% over the 2006-07 figure of £280 million.”

The chart on the right shows just one example of how the Parish precept for one village in Hampshire has increased over the years.

Successive Government Ministers have done nothing to correct this non-capping anomaly. Indeed, when Phil Woolas was the Local Government Minister, the Isitfair council tax protest group asked him about this, and he responded by stating that the Government had no plans to cap Town or Parish precepts.

And so it has been. Nothing has changed since Woolas made that statement and, through its inaction, the govt. has continued, tacitly, to support this underhand way of getting around the 5% cap. 

The result? More and more non-statutory functions (but not the funds to finance them) are being off-loaded onto Towns and Parishes. Towns/Parishes can’t be forced to take on these extra responsibilities but some do – possibly unaware of the financial implications. Either way, it seems that many of the Districts keep the cash that they had previously been spending on the transferred functions; still increase their precept by just under the 5% cap, and the Town/Parish (i.e. the Town/Parish residents) pay again for the cost of the transferred services through huge increases in their local precepts. 

This is double-taxation, as admitted by the Government - in J18 of this Green Paper and in a DCLG document dated May 2002:

The BBC picked up the non-capping issue on the Politics Show from the West of England as long ago as April 2004 and, even though they presented it in their usual Government-friendly manner, they did include a quote from Charles Vernon, the Mayor of Malmesbury, who said:

"The strange thing about local government finances is that every parish can raise a precept which is not capped."

St Annes, Kirkham and Lytham, in the Fylde Borough Council area, face hikes of between 16 and 21 per cent in their Town/Parish precepts – while Fylde will still be increasing its share of the CT for 2008-09 by 4.99% - conveniently just under the Government 5% cap. Fylde Council leader, John Coombes, has admitted that the plans are a new method of charging taxpayers more but without breaching the Government's five per cent capping rate. Councillor Liz Oades, leader of the opposition, said:

"The town and parish councils will now be charging for parks and cleaning the streets, but unless Fylde lower their rates people are going to be paying for the same services twice."

See the Blackpool Gazette and an updated article here.

In Bromyard Parish, in Herefordshire, there are plans to increase the parish precept by 63% to repay, over the next 48 years, the initial cost of acquisition plus interest to buy what is described as:

“a clapped out Grade II building from Herefordshire County Council for some £590,000.00, which increases to £614,150.00 when you add the cost of legal fees and disbursements.”

This hike in the Parish precept, alone, will add £50 to the average CT bill in the coming year - before including proposed rises from Herefordshire Council; the Police Authority, and the Fire & Rescue Authority.

See the Hereford Times here, here and here.

There are other possible ramifications from these activities. While it is certainly the case that many Town/Parish councils currently decline to pay themselves allowances (as allowed by existing legislation) - as they take on an increasing number of functions and responsibilities, many Town and Parish councils are now considering taking up this option –– in a move that will push CT bills even higher!

That said, a significant number already do pay allowances. In the majority of cases, the current amounts may be small compared to the allowances paid to members of other authorities, but this is the thin end of a potentially large wedge.

For example – for 2008/9 - the members of Wootton and East Hunsbury Parish Council in Northamptonshire were proposing to award themselves a 500% increase in their allowances, to be funded by a 16% increase in the Parish precept and which – if adopted - would mean each Parish Councillor could collect a £4,000 allowance.

It was only after local people protested and said they wanted the village “de-parished” that the Parish council did a U-turn and agreed to pay themselves £750 each – as had been recommended by an independent panel. The increase in the Parish precept was pegged back to 3.14%.

If the items are still available on the web, see the Northampton Chronicle here, here and here.

And – amongst other startling statistics – of the thousands of complaints lodged with the Standards Board for England in the year ending 31 January 2008 about possible mis-deeds by members of Local Authorities, more than 50% have been about Town and Parish Councils.

See the Standard Board's statistics here and, covering slightly different periods, here, for a quietly released government announcement on February 15th 2008. The law has been changed so that new Town and Parish councils can be set up without seeking prior Government approval, which has, up until now, been a requirement. It makes you wonder why – does it not?

So - the floodgates have been well and truly opened. There will be thousands more Councillors; £millions more in allowances and expenses, and the possible additional burden of their pensions because they can all choose to join the gold-plated; index-linked; taxpayer-funded, final-salary Local Government Pension Scheme.

Are you ready to be ripped off?

Comments

[Dave B]

If councils were made self financing it might be easier to just vote out the ones that are feather-bedding themselves. As it is, so much of the councils actions are financed and dictated by central government, it can be difficult to see where councillors are responsible.

[Cllr Tony Sharp]

Quite right Mike. Also, as more councils are being bounced by their officers into Joint Waste Authorities, we will see people paying for their waste collection and disposal twice. Once to the council that originally handled it (as they will continue to charge) and once to the JWA who will have the right to microchip bins and enforce Pay as you Throw. And residents will be able to do nothing about it as the JWA will be outside democratic political control.

[Mark Wadsworth]

Council Tax is a hideous mixture of poll tax and jealousy surcharge - i.e. CT is lower in Labour areas because the government gives them much more central funding, as highlighted by Eric Pickles recently, despite the fact that they spend up to twice as much as Tory/LibDem councils.

That said, CT only pays towards a quarter or so of local government spending, and accounts for about 4% of total tax revenues.

I get more upset by the tens of thousands that Mrs W & I have to pay in income tax/National Insurance and VAT than the £2,400 we pay in CT, which, as we are tenants, merely serves to depress the rent that we have to pay.

In other words, if they scrapped CT and had local income tax instead (which is what the SNP and Isitfair and Julia Goldsworthy of the LibDems are calling for) then our landlady could hike the rent by £2,400 and we'd pay even more income tax. So for tenants this would be a double whammy, and for landlords is would be a God-send.

[Britax]

As a member of the Isitfair campaign group I resent our group being associated with local income tax. WE ARE TOTALLY OPPOSED to any system of local income tax. If you Mr Wadsworth would care to read what our suggestions are they can be down-loaded from our web-site www.isitfair.co.uk

[Christine Melsom, Isitfair]

I cannot understand where this idea that Isitfair supports Local Income Tax has come from. We are not in favour of local income tax,and as far as we are concerned no one has produced a viable solution. Present suggestions are still discriminatory and unacceptable to us.

[Mark Wadsworth]

The strapline on the Isitfair? website reads...

"Council Tax must be scrapped - taxation to pay for local services should be related to everyone's income. The services are used by the people, not by the properties".

It is 2 years since I exchanged emails with Colin Aiken (is he still with you?) and he said "We've tried a couple of surveys on CT reform. Ability to pay was the key factor, and the two preferred options was to use general taxation or introduce LIT".

So how do you want to finance local government?

[Mike Schofield www.isitfair.co.uk]

Mark, Ability to pay is the key phrase but LIT as proposed by the Lib Dems is not what Isitfair would like to see. We believe it would be a bureaucratic nightmare. If you haven't seen them, there are documents, exploring possible alternatives, on the Isitfair web site at http://www.isitfair.co.uk/MichealBoon/mb_page.asp

And - yes - Colin is still with us.

Regards,

Mike S.

[Matt Wright]

Some of the stats interesting but would be good to have the whole picture because its important people understand the full story. The public don't understand the con trick that is increasingly being perpetrated by this Govt.

Just some observations - Can't speak for England, but some facts here in Wales. Community/Town councillors (parishes) receive no pay at all. I find that the public (fed on the usual media stuff) can't believe this, but its true. Also, shock horror, many of these councillors care about their communities.

Next observed fact. Only one fifth to one quarter of the budget of our county councils here come from council tax. Again people are amazed (Council tax is a small part, in some cases it probably barely funds one statutory dept in a county council). In other words councils are reliant on the hand-outs from Govt (via Welsh Assembly) for the greater part of their income. These monies are being reduced when set against inflation and the extra duties placed centrally. By the way the budget of the Welsh Assembly has doubled.

Next fact - around 40% of the money received from the Govt to the council comes with strings attached. It can only be spent as the Assembly Govt instructs and according to set rules. Want a new road or properly maintained roads? No chance, money can only be spent on cycle tracks or bus lanes because thats politically correct and part of the mentality of Cardiff. I can take you to roads that are falling to bits and have a brand new cycle track next to them that nobody uses!

We have a situation where the Assembly Govt have doubled their budget and taken control of 40% of the budgets of the local authorities. Centralisation gone beserk from a Labour-led Govt in Westmisnter and Cardiff. What do Labour do when they fight council seats. Well if its a Labour-led council they hide all this and if its a council led by anyone else they then blame all the problems above on that council. They have even had two different template leaflets to help their candidates go through this pretence.

[Mark Wadsworth]

Matt Wright, excellent research! If more people knew LL the background then we could have an 'informed debate' at least (and end up disagreeing just as heartily, no doubt) over how this could be reformed.

[Cllr Tony Sharp]

Mike and Mark, I had an exchange of emails with Christine Melsom in August last year and this self same point about LIT came up because of the words used on the Isitfair website.

As I wrote to Christine at the time:
"It was the conclusion I drew from the comment on the website saying “taxation to pay for local services should be related to everyone's income. That is often the line taken by those who support the LIT concept."

It might be helpful if Isitfair revised the wording on their webiste to make clear their opposition to LIT.

[StevenAdams]

Frankly, most of that article completely misses the point. Sure, there are some rogue parishes about, but even the total national parish take only amounted to one quarter of one small county council's annual budget. Important: yes. The item to focus on in local govt finance? No.

In Buvkinghamshire, all of your figures above are reversed. Despite having a low overall spend, the woeful central grant forces the council to fund 80% of its business from the CT... rather than the 25% quoted above. Sure, the govt says we're wealthy and can afford it, but then why cap us? The inevitable result is under funded services.

[Mark Wadsworth]

StevenAdams, you have highlighted the 'jealousy surcharge' element of the Council Tax!

I recently moved from a Labour controlled council to a Conservative council area in a similar sized and the council tax bill is £2,400 as opposed to £1,400. Which is fine by me, actually, because the lower council tax boosted the value of the home I sold and depresses the amount of rent we have to pay.

[StevenAdams]

I think govt calls it 'Equalisation' (now Equalisation Mk II), a ridiculous system whereby a formula figures out which parts of the country needs how much govt support, and THEN govt ministers can subjectively decide to take arbitrary amounts from one area and give to another area... cynical political interference at its worst.

To top this off, the govt abandons councils like Bucks with an appalling grant, which is soooo bad it labels us a 'floor' authority and therefore doesn't allow us into the supported borrowing system open to the rest of the country - decimating our capital programme in the process (road maintenance, school and building maintenance and development programme etc etc).

Horrific governance... thoroughly horrific. The quicker this bunch are ejected, the better.

[Mike Schofield]

Can I try to answer some of the points raised:-

In response to Tony Sharp re. "It might be helpful if Isitfair revised the wording on their webiste to make clear their opposition to LIT." Our updated web pages - currently under development by our volunteers during evening and weekend time - should remove any anomalies.

To Steven Adams - Re. what you call "rogue councils" These represent the thin end of the wedge and the examples I mention in my piece, I believe, could not even have been dreamt of a few years ago. And - There is absolutely no way in which council tax accounts for 80% of what is spent where you live - or anywhere in the country. You have either misinterpreted the figures - or they have been presented to you in a skewed manner.

To Matt Wright: The leader of our county council (Hampshire) has told us that he and his people only have direct control over 6% of the money they spend.

To Mark Wadsworth - You amaze me! You are happy to pay £2,400 a year - out of income that has already been taxed at least once !

Regards,

Mike S

[StevenAdams]

Mike Schofield:

with regards to the proportion of the top tier budget funded by council tax (cumulatively) it is 80% as mentioned, and that's not unusual. Perhaps that doesn't account for districts/parishes/NHS or other public bodies spending in the area, but it is the case for the county.

To put that in context, our central settlement 'rise' often equates in cash terms to something like £1-2million pounds, versus a total budget (less pensions and similar) of circa £650million (we are a very small county).

[Mark Wadsworth]

Mike S, yes, that is exactly what I am saying!

The monthly total rental value of where I live is £2,500, but as I have to pay £200 a month CT, the rent that landlady can charge is depressed to £2,300.

If The Tooth Fairy offered to pay everybody's CT, then my landlady would be able to put up the rent by £200. So I would be no better off.

But of course, it's not The Tooth Fairy who would pay. It would be The Income Taxpayer who would pay. As we have an above-average household income, by definition, our Local Income Tax bill would be more than £2,400.

So we would be worse off.

This is the equal-and-opposite position to the 'asset-rich, cash-poor' person's point of view.

[Alan.S]

Yes Council tax is unfair as it taxes the property and not the individuals who use the Council services. For example in my house there are 3 people in employment and one housewife whereas next door there are two pensioners - is it fair that we pay the same tax for the same services ? No, its not.
The Conservatives attempted reform to make all adults pay their fair share of the tax bill with their Poll Tax but the public rebelled against it. I would expect local income tax to have the same result.
The problem is that Council tax payers do not like the system but no-one has come up with a system that will be accepted by everyone. And No I do not have the answer either