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Local Government Finance

Volume 557: debated on Wednesday 30 January 2013

Local government has been at the forefront of the coalition Government’s transparency agenda, opening up the books, its spending and its meetings to public scrutiny and ensuring councils are fully accountable to their local residents, rather than Whitehall and regional quangos. We intend to go further with the transparency code to free up more data, and ensure it is reused and republished for creative and innovative ends.

However, we want to ensure all bodies that help set council tax are transparent and fully accountable to the people.

The Secret State

Some parts of local government are not so open as elected local councils. There is a secret state in our country: a regime of local bodies which help set council tax, but have minimal presence or public profile. Such largely unelected council tax levying bodies include:

Internal Drainage Boards

Integrated Transport Authorities

The Environment Agency

Garden Committees

Joint Waste Disposal Authorities

National Parks Authorities

Inshore Fisheries and Conservation Authority


Pensions Authorities

Harbour and Bridge Boards

Port Health Authorities

Crematorium Boards.

The Government intend to bring forward legislative proposals to increase the accountability and transparency of levy increases which are raised on billing authorities by levying bodies, and ensure there are stronger democratic check and balances on their council tax increases.

Council tax referendums

We will ensure that in future, excessiveness will be determined with reference to the basic amount of council tax—that is, the band D amount including levies. We also intend that the legislation can be applied in response to council tax increases set in 2013-14.

On 19 December, I announced the trigger points we are proposing to set for council tax referendums in 2013-14. We propose that a 2% referendum principle will apply for all principal local authorities, police and crime commissioners and fire and rescue authorities. This would mean that if an authority or commissioner wished to raise their relevant basic amount of council tax in 2013-14 by more than 2%, their local electorate will have the opportunity to approve or veto the increase in a binding referendum. Further details were outlined in the written ministerial statement of 19 December 2012, Official Report, column 103WS.

At present, the legislation determining excessiveness requires a comparison to be made between the relevant basic amount of council tax for the year in question and the year immediately preceding that year. The relevant basic amount is the band D council tax adjusted to exclude levies. A consequence of this is that some authorities are seeking to increase their overall council tax bills by a substantial amount through levy increases without being accountable to their local residents and having to hold a referendum.

Such levy increases often stem from poor policy decisions by the unelected bodies. For example, in Manchester city council, their proposals for higher council tax this year are driven, in part, by a badly drafted, long-term PFI agreement signed by the Greater Manchester Waste Disposal Authority, pushing up the waste levy on council tax due to the cost of rubbish disposal being well over the current market rates.

Another consequence is that a referendum principle based on the relevant basic amount affects the amount a local authority can raise through council tax in cash terms, which can be to the authority’s detriment if its council tax requirement includes a large proportion of levies. Metropolitan authorities have made representations expressing their concern and requested that the calculation of excessiveness should be based on the basic amount of council tax, rather than the relevant basic amount.

The Government therefore intend to bring forward legislative proposals to ensure that levying bodies are accountable to the public. The future determination of excessiveness will be based upon the basic amount of council tax (i.e. the actual band D amount). This will bring all revenue raised through council tax—including levies—within the scope of the legislation. Council tax payers will want to see this change which will ensure that unelected levying bodies do not have a disproportionate effect on council tax levels. As now, we intend that the referendum principles should be determined on an annual basis to reflect prevailing circumstances and should be subject to the approval of the House of Commons.

Local authorities should be on notice that we will pay close attention to increases in their basic amount of council tax in 2013-14 and we are prepared to take action in response to any large increases. Authorities should have no doubt that we will consider setting principles in future years which are specific to authorities that increase their basic amount of council tax in 2013-14 by more than 2% without having sought the approval of the local electorate in a referendum.

These proposals will increase the accountability of large numbers of unelected public bodies for their money-raising and spending decisions; and secondly they will encourage these bodies to focus on better deliver and value for money.

Following the current period for representations, the final principles for 2013-14 will be included in a report to be put before the House of Commons for approval alongside the local government finance report in the coming weeks.

Council tax freeze

More broadly, local authorities should be signing up to this year’s council tax freeze offer.

Over the last two years, the coalition Government have worked with councils to help freeze council tax bills for hard-working families and pensioners and this has seen council tax bills in England fall by 4.4% in real terms. Under the last Administration, band D council tax bills rose by £751 (+109%) across England as a whole.

This Government are setting aside an extra £450 million over the next two years to help local government in England to freeze their council tax in 2013-14, which will be the third successive year in which a freeze scheme applies. The cumulative impact of three years’ worth of council tax freezes represents up to £227 off the council tax bills of an average band D home.

We would encourage every eligible council to participate and receive the extra Government funding to support the freeze.