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Taxing Times

Mark_wallace In his first post for this site Mark Wallace of the Taxpayers Alliance looks back at a tumultous fortnight for local government - and exposes a £322,565 PR bill by Lambeth Council to relaunch their Council housing.

It would be a vast understatement to say the last couple of weeks have been a turbulent time in the local government finance debate. What with the news breaking of potentially massive losses for council taxpayers in the Icelandic bank fiasco, it seems an age ago that George Osborne laid out his proposals for a freeze in council tax in his speech in Birmingham.

The two issues – the Osborne tax freeze and the Icelandic bank disaster – are not unrelated. In fact, both have shone a spotlight on that crucial question: how can councils save money?

Osborne’s proposals combine large savings in Whitehall and restraint in spending at Town Hall level, and offer the prospect of at least some welcome relief from the continual rise in council tax. Obviously, a tax cut would be even better but a freeze is still far preferable to the recent interminable series of rises that have been the main feature of most councils’ tax policies for years. Finally a politician has openly recognised that local authority savings can be made.

Sadly, sixteen London Boroughs and a scattering of other authorities across the country immediately came out against the proposal, saying spending restraint was impossible. It was an unedifying display of the lack of initiative and kneejerk big government attitude that still infests so many council chambers, to the detriment of taxpayers.

In reality, there is clearly flab in council budgets that can be trimmed to provide a tax freeze or even cuts. For example, Lambeth is opposed to the Osborne proposals. The TPA’s research, though, reveals that they spend £1.3 million a year on publicity alone, while the number of staff earning £50,000 or more has risen from 16 to 275 in the last ten years, boosting the middle management wage bill from £1.1 million to £18.1 million in a decade. In the council meeting on Wednesday it was revealed that the bill for PR consultants for the launch of the organisation in charge of the council’s housing stock was a whopping £322,565.

Osborne’s proposals are an opportunity to get a cultural change in councils that could get into the habit of making savings. They will encourage the public, the media, councillors and council staff, and a lot more waste will come to light.

Of course, some councils may not want to look for savings – due to ideology, partisan opposition or sheer defeatism. Whereas a week ago that was perhaps an option for some, the Icelandic fiasco now means that like it or not, some councils are going to have to look for savings pretty damn quick.

Make no mistake - the loss of hundreds of millions of pounds of taxpayers’ money in the collapse of Iceland’s bank is not a good thing. Far from it, it is a disgrace that your money and mine has been unwisely risked without our permission and lost as a result. They have played fast and loose with our money and have ignored clear warnings that Icelandic banks were not on a sound footing. The Finance Directors responsible should be sacked – and we will be watching closely whether any of them get bonuses this year.

This shocking loss may, however, shine a welcome light into some dark corners of Town Hall accounts. For those councils who have lost money destined for service provision, there is now a very real and pressing motive to find savings and cut unnecessary spending.

Taxpayers and the wider economy cannot sustain an increase in council tax, and the LGA’s call for “Government money” to plug the gap draws a false distinction between local taxpayers and the people who provide central funds. A payment from central Government would fall on the shoulders of local taxpayers, too, and is therefore just as unacceptable.

For that reason, savings must be made – and I am certain that if they are open-minded about ditching fringe activities, every council will be able to make them. The money paid to financial consultants who have messed up so badly with the Icelandic banks would seem a primary candidate to start with.

Whether councils identify savings voluntarily under their own steam, are given an incentive to do so under Osborne’s proposals or are compelled to by losses incurred in the Icelandic bank collapse, it is important that those savings are publicised to other councils so they can follow suit. Of course, in the new age of austerity it cannot be emphasised enough how such information should be shared – lavish conferences are emphatically out, and blogs like this one are the obvious replacement.

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