Tuesday, February 8, 2011

All the merger talk but who is going to pay?

With HDC, Fenland and East Cambridgeshire District Council Conservative Group Leaders talking together about something that could become a merger of all three District Councils there needs to be a proper examination of the this idea from the Huntingdonshire/St Neots point of view.

Firstly, what is needed to establish is each Council's size. I did this from taking the Council Tax base for 2010/11. These are:

HDC: 58580
Fenland: 30772
East Cambs: 29220
The Total being: 118572
This means 49.4% of the Council Tax Base for any new authority would come from Huntingdonshire.

What of the Council tax rates at the Band D average?

HDC: £124.17
Fenland: £241.56
East Cambs: £135.36

Both East Cambs and Fenland have higher Council Tax rates. With Fenland significantly higher the Council tax rates would be higher for Huntingdonshire under this a new authority. But by how much?

To work out how much each Authority raises in Council Tax I just multiply each Council Tax base by the Band D Average. The results are below:

HDC: 58580 x £124.17 =  £7,273,878
Fenland: 30772 x £241.56 = £7,433,284
East Cambs: 29220 x £135.36 =  £3,955,219

Between the 3 Councils there is a total take in Council Tax of: £18,662,381. Divide this by the total Council tax base of the 3 Councils and this equates to a Council tax of £157.39. How would this effect the Council Tax in each District?

Fenland is currently paying £241.56. They would pay £157.39. A saving of £84.17.
East Cambs is currently paying £135.36. They would pay £157.39. An increase of £22.03.
HDC is currently paying £124.17. We would pay £157.39. An increase of £33.22.

Effectively the Council Taxpayers of HDC and East Cambs would be subsidising the Council taxpayers of Fenland.

The Hunts Post reported:
Fenland Council leader Alan Melton said:

"If this merger was to go ahead it would make major cuts in bureaucracy and management costs. It will produce significant savings for Council Tax payers - we are talking millions of pounds."

"This money could be returned to the Council Tax payers by way of lower bills or better services or a combination of both."

Of course he would say this because from the figures above Fenland Council taxpayers would benefit from the subsidy from both East Cambs but mainly from HDC.

Lets take Cllr Melton at his word. The money could be returned to Council Taxpayers by way of lower bills. As significant isn't defined in financial terms I feel I should put a numbers on this. The current band D average for HDC is £124.17. I would call significant £30 off the Council Tax bill. This would make the band D average £94.17. From the data above I multiplied each Councils tax base to find out the total savings needed for a arte of £94.17 over all three Councils.

HDC: 58580 x £94.17 =  £5,516,478. Further savings of £1,757,400 a year would need to be found.
East Cambs: 29220 x £94.17 = £2,751,647. Further savings of £1,203,572 a year would need to be found.
Fenland: 30772 x £94.17 = £2,897,799. Further savings of £4,535,485 a year would need to be found.

To produce a significant reduction in the amount of Council tax for HDC residents £7,496,457 a year would have to be reduced. Most of which needs to be saved by Fenland District Council.

I say further saving because there are other factors to be considered in these calculations. These are assets, reserves, current loans and unidentified savings which need to be made. For example Fenland DC has little in reserves, has unidentified savings of £4.5 million needing to be made and a very high Council tax.

A merger would be get Fenland DC out of trouble. The HDC council taxpayer will be the cash cow that bails out this authority. It is Fenland DC that got itself into this situation. A merger may sort of inherent financial problems in all three District Councils but these need to solved before entering a merger not after!

I would like to see personal guarantees by all the local politicians in this debate. If all Council taxpayers will not enjoy a significant cut in their Council Tax because of this merger then the local politicians would pay the difference out of their own pockets!

A different approach is to decide the Council Tax levels now and all three authorities cut their budgets to get to this level without using reserves. I've said £94.17. This would mean a significant Council Tax saving for HDC council taxpayer.

Merging would get round the need for Council Tax referendum in each authority. In this age of referenda shouldn't each authority hold a referendum to see whether the residents agree with the merger between each authority.

No comments: