0% rise is what the County Conservatives said!

Looking through the 2011/12 budget process I found this:

Last year the Conservative run Cambridgeshire County Council was indicating a 0% rise for this year. The Conservatives need to explain why they are busting what they said a year earlier. Now the Conservatives are looking to introduce a 2.95% rise. So the Conservatives were looking at a 5 year freeze and after year one this is has been given up. This is also against the Conservative 2010 manifesto and against the coalition agreement.

Another reason for the 3.5% rise!

Another reason for an increase in Council Tax by 3.5% is the introduction of a budget to fund "cover for staff side representatives" This just adds £50,000 to the council tax bill. Another addition to the costs which mean we have to pay a 3.5% increase.

How HDC uses statistics

In the cabinet report on the budget there is a set of statistics. The report says:

9.2 The following table shows the current number of properties in each tax band and demonstrates that 66% of properties have tax levels lower than band D.


To the left are the all England averages. To the right are the Huntingdonshire figures

As can be seen whilst 66% of HDC properties are in bands A to C, the national average is 67%. 

The inclusion of these statistics are pretty useless. None of these statistics are unusual. Indeed HDC does better than the English Average for Council Tax. So HDC is better off. Again HDC looks to throw around statistics for no real reason at all. The only reason I can think of is these statistics show that many of the Council Taxpayers pay below the band D average. But that is true nationally as well as locally. So I still don't see the point!

What is happening to the reserves?

In the report to cabinet on the 2012/13 budget, the minimum level of reserves held by HDC has risen from £3 million to £4.5 million. An increase of £1.5 million.

I do have to scratch my head as to why there is an increase in reserves?

The fundamentals haven't changed. The economy is bad and the same goes for Europe. So not much has changed. The reports says:

7.0 RESERVES
7.1 Overview and Scrutiny felt that it would be prudent to increase revenue reserves even further than the uplift from £3M to £4M proposed in the draft budget. The Proposed Budget/MTP is therefore based on not allowing reserves to fall below £4.5M.


(What the OSP actually said: Given the identified risks and the unknown factors the Panel questioned whether the proposal to increase the Council’s minimum level of general reserves from £3M to £4M was adequate. Reference was made to the fact that the New Homes Bonus represented 25% of the Council’s predicted income in 2015/16 and this could pose a significant risk. Having noted that the Auditor had previously suggested the Council should reduce its reserves, Members were generally of the opinion that it would be desirable for the Council in the current economic climate to hold greater reserves. Whilst this would place a burden on the savings programme in the short term, the Panel agreed that the a minimum level of reserves should be set at £4M and that this should be reviewed in two years and, if it was reasonable, should be increased to £5M. It was also agreed that this should be tested and considered in the forecast report each year and built into the draft budget if necessary.)

So what was agreed in this section of the OSP minutes? Well, the Council should hold greater reserves and the panel agreed the minimum level of reserves should be set at £4m and should be reviewed in 2 years and then should go up to £5m if needed.

When the Cabinet is informed that: "Overview and Scrutiny felt that it would be prudent to increase revenue reserves even further than the uplift from £3M to £4M proposed in the draft budget. The Proposed Budget/MTP is therefore based on not allowing reserves to fall below £4.5M. "


The OSP were looking at leaving any upgrade of the minimum reserves for 2 years. This view have been changed by someone to mean reserves have increased again to £4.5 million now rather than in 2 years time.


7.2 It is very difficult to theoretically calculate the appropriate level of reserves but the following factors are all relevant: 


The new rules that require a positive referendum result before a Council can increase its tax level above the limit set by the Secretary of State has the potential to make it very difficult to replenish reserves once they are used. Reserves therefore need to be sufficient to allow a savings programme to be introduced to replenish reserves before they run out.


That argument is the same as under the capping regime. No real increase in reserves during capping. Only after capping has ended. Accepting the Councils argument means the District Council has not had the right level of reserves under the old capping regime. 


The level of New Homes Bonus is forecast as £6.1M by 2016/17 and although a risk provision of £0.9M has been made there is still potential for significant variations depending on how quickly the world, European and UK economies recover.


The Council has made a risk provision of £900,000. In effect padding out the estimations. What this argument is saying is the even with £0.9m of padding there still needs more money put aside in reserves. The Council's argument just doesn't stand up. If more money is needed then the risk provision should go up. This would cause problems for the Council. Increasing the risk provision reduces the forecast for the New Homes Bonus. This means more savings or higher Council Tax is needed to be found.


2013/14 sees the planned move to the localisation of Business Rates to replace the current Formula Grant regime. There is potential for volatility in the new starting point as well as the variations thereafter. Individual items that could have significant revenue impacts include Planning Inquiries, higher than planned pay awards, significant rises in homelessness, reduced Government spending allocations to Local Government and falling income levels due to recession.


Yes this is all very worrying. Yet none of this argument actually means more reserves. Indeed it is more of an argument for not spending any reserves and saving the whole lot. What increasing reserves does is allows the management not to worry about managing.

There in no valid reason to increase reserves from £3 million to £4.5 million. Even the reason to increase from £4 million to £4.5 million has been found to be false. Indeed minimum reserves should be less than £3 million. Much easier to increase reserves rather than properly manage the finances. 


Of course if this money didn't go to reserves this would allow money to be used to keep the Council Tax down for this year. There is no reason for a 3.5% increase for the next year. 

South Cambs announces Council Tax freeze!

With Conservative run HDC hiking Council Tax by 3.5% it comes as a bit of a surprise that neighbouring South Cambs District Council is keeping freezing its already low Council Tax rate.

With Council after Council freezing their Council Tax for next financial year, the Conservatives need to explain why HDC won't be accepting the freeze money.

Is HDC deluded?

In the report to cabinet on the 2012/13 budget, it says the following:


9.8 The Council believes that local residents will wish to preserve these grants, recognise the Councils need to meet unavoidable inflation (there will be no pay rises again in April) and preserve valued services as far as possible both this year and in future. In order to do this the plan is based on increasing Council Tax next year by £4.34 per year for a band D property (£3.86 for Band C and £3.38 for Band B). This represents a percentage increase of 2.6% of the average District Council tax level, and 3.5% of this Council’s lower tax level.


Of course the Council believes that local residents will wish to pay more for services. That is how it works. Where are the consultations to back up this belief? I can't find one. So this is really a delusion because it hasn't asked the residents.

HDC believes that:

Local residents will wish to preserve these grants. 
Of course residents will want to preserve these grants. 


Recognise the Councils need to meet unavoidable inflation.
I don't recognise the need to meet unavoidable inflation. If something goes up in price then either change providers or cut services. Yes, it is that simple.


Preserve valued services as far as possible.
The Council has not defined what it considers as "valued services". Are these "valued services" what the public wants? or what the Council itself has decided are "valued services"? Take CCTV for example. The public decided through a consultation to scrap this service. The Councillors decided this service needed saving. 

In order to do the above plan this is based on increasing Council Tax next year by £4.34 per year for a band D property.
This is where Council thinking always goes wrong. Just because the Council believes the arguments, as set out above, then the people will pay for these services. I don't think they will. Otherwise the Conservatives will be pushing for a higher rise and a referendum to boot. 


I feel HDC is deluded it if feels people will pay more. If it does then put the whole thing to a vote at a binding referenda.

Is the Council tax freeze really good news?

For the short term it will be good news to Council Taxpayers. In the medium to long term this is plainly wrong. As can be seen in the picture below the current Council Tax Special Grant runs out in 2014/15.

This will mean a cut of £200,000 for the year 2015/16 and beyond. The one off council tax freeze announced by the Chancellor is just that - a one off. Say HDC gets £200,000 for holding the council tax down. All this will do is hold down the Council Tax rise for 1 year. In 2012/13 the money for this Council Tax  freeze will end. So HDC will have a choice. Either cut a further £200,000 from its budget or increase the Council Tax by 5%.

Keeping down Council Tax by this means is a fallacy. It is the same as using reserves to keep down Council Tax. Local lessons with some of the the Town Council rises that were instituted under the Liberal Democrats and the massive hangover by the binge that HDC undertook by using reserves should be learnt. The underlying budgets go up which means Council Tax has to rise or services have to be cut. As the Government is putting £800 million to keep Council Tax rises down to 2.5% next year it will take double that (£1,600 million) the year if this continues.

The only way to cut Council Tax is to cut the cost of the Council. Cut services, cut jobs and drive down costs. Balance the budget each year (which means no use of reserves) and this will keep Council Tax rises down. All George Osbourne has done is put off rises for later years. This one will come to bite the Chancellor on his bum just before the next election.


It should be noted the Town Council receives no Government grant or funding.