Saturday, January 31, 2009

Black Clouds on Council's horizons

Over the last few days, Councils across Wales have been debating and agonising over what level of Council Tax to levy in 2009-10. Its not been easy. On the one hand there's the desire to deliver good public services and the advice of officers to raise the necessary money. But there's also the knowledge that their constituents will be living on lower incomes in the coming year and cannot afford increases beyond inflation. Personally, I believe inflation will be around 1% through the relevant year, so an increase in Council Tax of 2% seems entirely reasonable. Where I live in Powys, the Council opted for an increase of 3%. This is going to mean difficult decisions for councillors. But nothing compared with what I expect it to be over the next few years. Tomos Livingstone has written a good piece in today's Western Mail on the background to this issue, though relating it to the National Assembly.

Britain is in a place that she hasn't been before. Our Government is borrowing (and printing) money as if there's no tomorrow. But there is a tomorrow, and this money has to be repaid. Even worse, some of the capital funding anticipated in future years in being rushed forward to bolster what's called the financial stimulus. So that's another financial hole down the road. The Chancellor of the Exchequer will have no option but cut back public spending significantly, probably from 2010 onwards - irrespective of which party forms the Government. The Pre-Budget Report projections are now fantasy, and the revisions we will hear in Darling's budget speech in March are going to be horrific.

Since the Assembly 'block grant' (as calculated by the Barnett Formula) is about 5% of the Chancellor's budget allocated to devolved services. So the cutbacks will feed directly into the Assemby's budget. And it gets worse. The Social Security budget is bound to explode as a result of the recession, and that isn't devolved - so there will be even less money for the services that are. And if Obama demands a bigger contribution from Britain towards the war effort in Afghanistan, the Defence budget will grow above inflation as well. And when the Assembly Government is faced with a huge hole in its spending plans, guess where it will find itself forced to cut back most to balance its 'impossible' budget. You got it - local government. The instinct will be to raise more tax - and the only way that the Assembly Government can raise taxation is indirectly, through the Council Tax. And it gets worse. Because only a relatively small percentage of council spending comes from the Council Tax element of Council funding, gearing will exaggerate the impact on Council Tax bills.

Next time we have one of our Conservative 'team meetings' here in Montgomeryshire, we will hopefully have a debrief on last week's Council Tax debate. I'm going to be saying that we've seen nothing yet, and its time to have a root and branch look at Council spending. And its time to start thinking about it now.

5 comments:

Anonymous said...

Here we go again! Lembit Opik just can't shut up. See today's Mail on Sunday. Shooting himself in the foot yet again. How many more times have we got to put up with his dross? When the next fiancee dumps him?? Today's article shows yet again that he doesn't get it and probably never will. People just want him to go away and shut up for a very very long period. It seems the man is on a suicide mission re his parlimentary seat.

Jeff Jones said...

First of all Glyn the Western Mail as usual was a little behind the curve. The IFS green budget has been out for a number of days. if you go to the IFS website you can read the whole document and the very useful summary. For weeks Public Finance and the LGC have been warning that the next few years are going to be very tough for local government whoever is in power in Westminster. You are wrong to argue that since inflation is only 1% councils have to use thsi measurement as a guide to the setting of council tax. The inflation faced by local government is not the same as the rpi.Local government in the near future will also face the beginnings of a near perfect economic storm in my opinion.Revenues are falling because of the recession, council pension funds will soon need another injection of money because their deficits are growing and we also have the cost of equal pay to factor in. Then of course you have the potential of fines in 2013 if your local council does not reach the recycling targets set by the EU. Wales is way behind the game despite the spin from the Assembly when it comes to major recycling centres which even with a fair wind require at least 6 years from OBC to operation. That is of course assuming that they can get the banks to lend the money which as an article in today's Observer shows is becoming very difficult to achieve. The Manchester recycling scheme which coasts £400m is on hold for this reason. The problem with this year's local authority budgets is that too many are again looking at the short term rather than producing a long term strategy. Your description of budget making in Powys shows the dangers of a council with no political direction. You cannot decide a budget by just writing amendments on a piece of paper during the debate I'm afraid. If I were an officer in Powys who believed in the future in the area I would frankly despair at the way in which certain councillors seem to treat policy making as if they were in the UK Parliament in 1776.

Glyn Davies said...

Anon - Personally, I really do not care about his 'private life' stories - but I do not think his writing a regular column for the Daily Sport is damagng to Montgomeryshire.

Jeff - I do not disagree with anything you write even where you suggest that I am wrong. Its just that I believe Council Tax should be set from the perspective of taxpayer's capacity to pay as well the amount needed to deliver the service - and rpi is relevant to this consideration. In Powys, the population is older than average - so incomes have fallen as a result of base rate cuts. I also agree about the need for a long term approach - which is why I want the Conservative group to begin a review of Council spending now, to deal with what is coming. Also, I should add that the only group which was all over the place on its approach to next year's Powys budget were the Liberal Democrats. The other main groups, including the two independent groups were consistant.

Anonymous said...

Surely you mean you DO care that his column in the porno rag is damaging to Montgomeryshire?

Glyn Davies said...

Anon - Thanks for the correction. I don't know how to edit a comment - but yes I do care.