CALL FOR CLARITY ON COUNCIL TAX 'CONFUSION'

First published by: Local Government Chronicles

Official guidance on Council Tax referendum

Calculations have been described as “confusing” and ministers have been asked to issue a clarification. Some finance directors have warned the new rules on Council Tax could see authorities trigger a referendum even if they put up Council Tax by less than 3.5%.

The issue centres on the government’s decision to calculate increases based on the “relevant basic amount of Council Tax”, which excludes from the Council Tax requirement the ‘levies’ councils pay to outside bodies such as the Environment Agency or the London Pension Fund Authority, rather than “basic amount of Council Tax”, which is the amount charged to residents of the borough.

The LGA’s Special Interest Group of Metropolitan Authorities has suggested that the approach which is a complete change on previous the previous method of calculating tax rises – could hit councils with larger levy payments than others, such as those who have set up joint delivery bodies with neighbours for services such as transport and waste.

Sefton and St Helens MBCs, which both pay a levy to the Merseyside Waste Disposal Authority, have calculated they would trigger a referendum with increases of around 2% while Tonbridge & Malling BC have calculated their trigger point would be “a fraction over 2.9%” because of drainage board levies. “We have been to DCLG about it and we got what I see as a rather confusing answer from them,” Stephen Jones, the LGA’s head of finance, said.

Former local government minister John Healey has called on Mr Pickles to clarify how the referendum system is to work. “The new system is beset by confusion and uncertainty. A clear public statement of the way the system works is essential and urgent,” he said. “In practice the trigger point for a referendum will not be 3.5%, it is likely to be lower and to be different in every local authority,” he said.

At a conference last month, Steve Freer, chief executive of the Chartered Institute of Public Finance and Accountancy, said the levies problem “just demonstrates how complicated and complex” the situation is. However, the body believes the exclusion of levies is the right approach in order to avoid councils triggering a referendum simply because a levying body increased its charge.

DCLG argues the removal of levies from the calculation is justified because a reduction in any levy on a council should be passed on to Council Tax payers. In effect, this means that councils which experience a reduction in levy payments cannot chose to reinvest that saving in services without it lowering the amount by which it can raise its Council Tax.

In a letter to Mr Healey, housing minister Grant Shapps wrote: “If, instead of taking the burden of a levy off taxpayers when that levy is reduced, an authority chooses to increase its own expenditure to “soak up the slack”….a referendum would then be required, and I am entirely happy that this outcome is justified.”

DCLG has also sent councils a note warning them to check their calculations carefully: “Authorities which are planning a Council Tax increase just below the [threshold] should take care to ensure that they do not inadvertently increase their relevant basic amount of CouncilTax by marginally more this level.”

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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