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Council Tax

Volume 478: debated on Thursday 26 June 2008

On 27 March I made a statement to the House on council tax capping for eight authorities. I announced the start of a process that could lead to capping, and said that in the following weeks we would listen carefully to the representations made by the authorities concerned. Those eight authorities were Portsmouth city council, and the police authorities of Bedfordshire, Cheshire, Leicestershire, Lincolnshire, Norfolk, Surrey and Warwickshire. All eight authorities were ‘designated’, and the Government proposed maximum 2008-09 budget requirements for each authority under the Local Government Finance Act 1992.

All eight authorities exercised their right to challenge their proposed maximum budget requirements and made written submissions in support of their cases. I met a delegation from Portsmouth city council and was joined by the Minister for Security, Counter-Terrorism, Crime and Policing to meet delegations from each of the seven police authorities to hear all of the cases in person.

Having carefully considered the representations all authorities have made, both orally and in writing, and having taken into account all relevant information I can now confirm decisions on how the Government intend to proceed in each case. In putting forward their challenges, no authority has, in the Secretary of State’s view, presented strong arguments as to why an excessive increase was necessary. Furthermore, no authority has demonstrated that the pressures identified acted disproportionately upon them to any significant extent compared to other authorities. We intend therefore to take action in all cases.

After careful consideration, taking account of both service and tax impacts on residents in the areas concerned, the Secretary of State has decided on the following actions:

to ‘designate’ Lincolnshire at £100,638,000 compared to the original proposed cap of £94,926,000. The authority will therefore have to reset its budget and precept;

to cancel the designation of the police authorities of Cheshire, Leicestershire and Warwickshire, but nominate all three authorities for 2008-09, designating them in 2009-10 and 2010-11. This ‘designation after nomination’ will provide protection to council taxpayers by limiting the authorities’ capacity to increase council tax in 2009-10, and allow the authorities a phased return to setting non-excessive budget requirements. We intend to limit increases in the budget requirements of these authorities to the equivalent of an increase of 3 per cent. in council tax precept in both 2009- 10 and 2010-11. This firmly protects taxpayers but avoids the need for re-billing; and

to cancel the designation of the police authorities of Bedfordshire, Norfolk and Surrey and of Portsmouth city council, but nominate them with a proposed notional budget requirement for each authority for 2008-09 at the level of the maximum budget requirement originally proposed when they were designated. For Bedfordshire police authority the proposed notional budget requirement is £95,790,000, for Norfolk police authority £137,901,000, for Portsmouth city council £148,530,000, and for Surrey police authority 189,622,000. Nomination and setting a notional budget for Bedfordshire, Norfolk and Surrey police authorities and for Portsmouth city council will limit these authorities’ capacity to set excessive increases in future years by measuring for capping purposes future budget requirement increases against their 2008-09 notional budget requirement. This will provide their council taxpayers with extra protection in future years.

My officials are writing to all authorities today informing them of these decisions. Subject to approval of an order I am laying before the House today, Lincolnshire police authority will need to re-set its budget requirement and precept. This means that its residents will be re-billed for a lower council tax.

The three authorities subject to designation after nomination will have an opportunity to challenge their proposed designation for 2009-10 when they are notified in due course. We intend to start this process at the same time as we commence consultation on the provisional local government finance settlement later this year.

The four authorities nominated in 2008-09 and set a notional budget requirement have 21 days from receipt of the notification in which to challenge their proposed notional budget requirement.

In taking this necessary action, I recognise that local government generally has done a great deal to ensure that they do not place unnecessary pressures on their council taxpayers. More than 98 per cent. of authorities did not set excessive increases—and the average Band D council tax increase in England for 2008-09 is 4.0 per cent., the lowest increase for 14 years and the second lowest ever.

There is no excuse for excessive increases in council tax, and authorities should be in no doubt that the Government will use its full range of capping powers to deal with excessive increases and protect council tax payers in future years.