The £3m grant that would cost our council £5.4m

At the Conservative Party conference this autumn ministers announced a new gimmick: a council tax freeze grant. If councils agreed to keep council tax at the same rate as the previous year they would get a grant worth the equivalent of a 2.5% increase, for one year only.

On the face of it a clever way to show that Conservatives care about the squeezed middle classes in the face of increased inflation. Yet the harsh reality is this scheme doesn’t make financial sense for councils, and is yet another way the government are slashing budgets for local services. And in the long run it would likely lead to even greater council tax increases.

It’s absolutely clear to me that Greens were voted the largest party on Brighton & Hove City Council because of our commitment to public services and resisting the Tory agenda of “small government”. Residents expect us to use our Green values to fight for the fairest possible settlement in the face of unprecedented cuts from central government.

The tax freeze grant is another attack, a wolf in sheep’s clothing, which we oppose.

Why is it bad for the council? Because it would over 2 years cost us £5.4m, and more over the longer term. Let’s explore that in detail with an imaginary council called Picklesville with a £100 of income this year from council tax.

For the next year the councillors in Picklesville can either take the government’s grant worth a 2.5% increase or go with the Green option of a 3.5% increase.

If they take the government route they will receive £100 + £2.50 = £102.50 (£2.50 being the 2.5% grant from government).

If they go the Green route they will receive £100 + £3.50 = £103.50 (£3.50 being the 3.5% increase on council tax).

The next year the Picklesville councillors again need to decide on council tax. If they went for the government grant, that is now gone. So to catch up in the face of continued reductions in their formula grant (the other main source of income for councils other than charges) they decide to put council tax up by the maximum allowed, which is 3.5%. However because of last year’s freeze the starting point hasn’t moved. So they will receive £100 + £3.50 = £103.50 (£3.50 being the 3.5% increase on council tax over the previous year).

If they had gone the Green route then, still facing huge cuts in formula grant, they also decide to increase council tax by 3.5% so they receive £103.50 + £3.62 = £107.12 (£3.62 being the 3.5% increase on council tax over the previous year), quite a bit more than the other option.

These are of course hugely simplified numbers, but if you think in millions of pounds you can see that just freezing for one year (which every council already did for this financial year) leaves councils way behind each year, even if they keep increasing council tax. For Brighton & Hove accepting the one year freeze grant would mean £5.4m less income over 2 years. As we need to find savings of about £35m for the next two financial years, that £5.4m is money we can ill afford to give up.

With inflation running at over 5% and councils not allowed to increase council tax beyond 3.5%, council income is falling further and further behind the increasing costs our service providers are experiencing, even if we do increase tax by as much as we’re allowed.

The difference for the average council tax paying household in the city will be 57p a week, but the council can collectively use all those extra pennies to great use in protecting services and jobs the Tories would rather we axed. I’ve challenged the local Tories to list the extra £5.4m of service cuts they would propose if we adopt the grant as they are advocating.

Brighton & Hove is not the kind of place where we want to give up on the elderly, marginalised or vulnerable – those most in need of help. We believe in civilisation, in public service and the greater good.

A £3m grant that loses us £5.4m is not a good deal, how could it be? Accepting it would be agreeing to more Tory cuts, and acquiescing to the cynical politics of the Coalition government. As a Green, I resist.

(For the next 6 days you can watch the BBC Politics Show’s take on this here from the 38 minute mark)

UPDATED 26/11/2011: Revised figures now show the lost income from taking the grant would be £5.4m (this post originally had the figure at £4m). I also have clarified the difference in cost to be 57p per household (previously I referred to tax payer which is imprecise as council tax applies to properties and not people).

Local Government Chronicle has also shot a hole through Tory rhetoric that “Greens are the only ones” taking this approach, their survey shows 20% of councils (2/3rd of which are Tory led) are likely to reject the freeze grant. Furthermore many who said they would take the grant admitted it would lead to higher tax in future years. Exactly as I have said all along…

UPDATE 5/12/11: This interesting piece shows that most of the freeze grant has been taken from local government pensions funds. Completely unethical especially given the government rhetoric about the funds being a ‘burden’ which need more contributions.

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