Tag Archives: finance

The great local government squeeze

 

The government is dramatically cutting funding for local councils. You may be aware of the headline figures but these don’t adequately reflect the depth of the devious ways in which this money is being clawed away from local services and kept by the Treasury in Whitehall.

 

For example over 4 years Brighton & Hove City Council’s Formula Grant from central government will be reduced by 33%. But that’s just the start of things, the public face of the reductions.

 

Now begin the cuts by hook or by crook: Because academies don’t have to use local authorities for services, councils will lose some funding there, but not in a way which actually reflects the number of academies in our area – it’s a flat cut across the whole country.

 

Next the government cancelled the trading element of the Carbon Reduction Commitment. This would have ensured that the scheme was overall cost neutral. Now it will be costing Brighton & Hove over £200k next year which is going straight to funding the Department for Energy & Climate Change’s budget savings targets.

 

Council Tax Benefit is next, where the government is cutting 10% off the funding and leaving councils to either make up the gap themselves (somehow) or decide how to deliver reduced benefits to our residents. The depth of harm this change will bring is shown by the finance directors of all councils in Sussex unusually having jointly written to the government expressing their concern.

 

There’s also the case of the “missing business rates income”. Law requires that local authorities are paid from a ring-fenced fund made up of all the business rates collected. Every penny collected from business rates should be re-distributed to local government. However after the spending review it became clear that the total amount paid to local authorities in England will be much less than the total amount of business rates collected. The missing amount is estimated to be £2.5 billion pocketed by the Treasury and Brighton & Hove’s share of this would be about £12.5 million.

 

In the future there’s more to come. The government are proposing to introduce reform of local government finance. At the moment all business rates go into the (supposedly ring-fenced) national pot which is then redistributed to councils through a formula. The proposals are that councils would get to keep their business rates with a few caveats:

 

  • Ministers have promised that the first year of the new system will not differ significantly to the last year under the formula. So there will be a system of tariffs and top-ups to try and balance council incomes in line with what they received the year before.

 

  • Councils will be able to only keep new business rates income if that growth exceeds inflation and a nationally set growth target for England. Failure to exceed that target will result in councils not just standing still, but actually losing funding. Yes, losing funding. Business rate income which doesn’t exceed the target plus inflation will be clawed back by the Treasury, on top of the £2.5bn they’ve already sliced from business rate funding for local government.

 

All councils will have choices about how to face these cuts – will they prioritise results or appearances? Will they take the tough longer term thinking or try to take short term quick fixes which will swell into bigger problems in a few years? Will they go for redundancies or reduced pay? It will be incredibly tough and councillors of all political stripes will have considerable soul searching to do before budget setting meetings.

 

But we must never forget that this is all being imposed on us by a cynical Conservative/Liberal Democrat government who continue to pump out misleading nonsense. Government claims of reserves groaning with spare cash, acres of spare land and wasteful spending keep emerging to be debunked. but only after the headlines have splashed. Councillors will be able to decide the nuance of the cuts, but the size and speed is all of the government’s making.

 

What is their agenda here? It certainly isn’t to empower local government when they cut our budgets at every turn and don’t even trust us to set business rates ourselves. I think quite simply the government are trying to push as much of the pain of their mad budget cuts onto local government. In this way they can deflect the blame for service cuts onto councillors rather themselves. Almost as criminal as the Coalition’s actions is the Local Government Association’s extraordinary passivity in most of this. Do councils need to form a new collective to properly voice their anger in this time of crisis?

 

The government are destroying local government by starving it of resources. People’s quality of life will visibly suffer from this, the vulnerable will be put at risk and public services will be a wan shadow of their former selves. Welcome to localism.

 

Letter to Eric Pickles asking for end of second home tax discounts

This week I wrote to the Local Government minister, Eric Pickles MP, requesting that councils be given the option to end council tax discounts for second homes. At the moment councils can choose the level of discount for second home owners, but only down to a minimum 10% discount. Even this 10% costs Brighton & Hove City Council £177k a year in lost revenue. I believe we certainly shouldn’t be encouraging second home ownership with tax discounts, particularly when so many struggle to find affordable main homes.

Ideally there should be complete local control over land taxation (which is effectively what council tax is) but failing that we should at least be given discretion over the discounts. Tories claim to believe in localism and that they are devolving power and autonomy down to councils. Yet they are imposing massive, unnecessary reductions on our budgets whilst failing to give us any meaningful new powers or freedoms in relation to how we generate income. Ending the nationally imposed 10% minimum discount would be a small step in the right direction.

You can read the formal press release and the full letter is copied below.

 

 

Cllr Jason Kitcat
Brighton & Hove City Council
Kings House, Grand Avenue
Hove BN3 2LS

The Rt Hon Eric Pickles MP
Secretary of State for Communities & Local Government
Department for Communities and Local Government
Eland House, Bressenden Place
London
SW1E 5DU

28th September 2011

 

Dear Mr Pickles

 

SECOND HOME COUNCIL TAX DISCOUNTS

I am writing to ask that you give councils the opportunity to opt out of providing second home council tax discounts if they so wish.

As you will know councils face challenging financial times due to your government’s imposed budget reductions, demographic pressures and inflation, particularly on energy costs. Furthermore given the desperate shortage of affordable homes, we believe some councils including Brighton & Hove City Council would, given the powers, opt to eliminate second home council tax discounts. This would signal our desire to discourage second homes being maintained, and rather that they should be available for people use as their main homes.

In Brighton & Hove it currently costs the council £177,000 in lost revenue each year to provide the second home discount (see below for breakdown of this figure). We believe these funds should be used to protect existing services rather than subsidise reduced costs for second-home owners.

I know you passionately believe in localism so ask that you give local authorities the discretion on whether to offer a second home discount on council tax.

I look forward to your response.

Sincerely,

Cllr Jason Kitcat

Cabinet Member for Finance & Central Services

 

 

Breakdown of lost revenue from second home council tax discounts in Brighton & Hove (2011/12)

 

  Band A B C D E F G H Total
number of discounts 191 228 269 213 198 68 49 7 1223
CT payable £988 £1,153 £1,318 £1,482 £1,812 £2,141 £2,471 £2,965  
10% x number of discounts £18,877 £26,289 £35,448 £31,577 £35,876 £14,561 £12,107 £2,075 £176,810

 

The bank bailouts were a rotten attempt at appeasement

As the stockmarkets go on a rollercoaster, and the US squeaks past a technical debt default, the world feels like an uncertain place. There are many difficult decisions ahead, but also some of the choices before national leaders seem pretty stark and obvious.

Using ‘the deficit’ as a reason to impose ideological cuts was a choice taken by the Conservative and LibDem coalition. They’ve had plenty of opportunities to re-consider, including the awful spectre of serious rioting in our capital.

There’s no excuse to go on the rampage, looting or arson. But growing inequality, declining social cohesion and fewer opportunities for many are known to have a devastating impact on communities. How many people with hope, with prospects of a decent job, go out rioting?

Perhaps cyncism over politics, such as Blair ignoring the massive Iraq peace marches, has accelerated the move in some minds from peaceful protest to more radical action. But rioting and direct action are not the same thing. There are motivations at work but there’s palpable anger at hand over inherent unfairness in the current system. Similar violent outbursts occurred in deprived parts of France but similarities drawn are at best inconclusive. Many argue there was little politics in these riots, just consumerism. Perhaps, but that has political ramifications too.

The situation, put simply, is this: The economy is weak, our education system is not fit for purpose, those who complete a degree find it won’t necessarily get them a good job and meanwhile we are vulnerable to rising energy costs as well as a massively indebted Western world.

In this context the bailouts of the banks, and the financial system as a whole, was in my view no better than appeasement in the worst sense of the 1938 Chamberlain-Hitler Munich Agreement.

Of course there were no painless choices, then as now. Politicians faced a set of bad-looking options. I can see why Brown and Darling in 2008 were desperate to avoid having to explain why savers and investors were suffering for the failings of banks.

But… are we really any better off now? We still see questions being raised about the financial viability of not just banks now, but whole countries. The system has not been fundamentally fixed, it just continues to unravel. How could it be different?

In the UK a Green-led action plan to right things would be:

  1. Reverse reductions to key areas of government spending including Police, NHS and local government.
  2. Close tax loopholes, clamp down on tax avoidance and ensure highest earners pay their fare share.
  3. Redirect massive government funding from defence and road building to preparing the UK for a carbon-free future: Wind power, electric trains & cars and a huge programme of energy efficiency for homes as well as offices. This will create jobs and skills.
  4. Reform the local tax system to use land value tax which encourages efficient land use and bringing empty properties into use. This will help to rebalance the UK’s runaway property market.
  5. Regulate banks far more strictly in terms of their risk exposure, how they lend and push for a ‘Tobin Tax’ on currency speculation transactions.

Those five points won’t right all wrongs, but will get us moving in the right direction.

At the moment much of the current government’s actions are taking us backwards, away from a better society and reducing our readiness to face the challenges we know are ahead.

Quality of life matters. I don’t think our current national political leaders are looking far enough ahead to fix what’s broken.

There’s lots of work to do and debating water cannons does not get us to where we need to be.

Letter in response to budget queries

I submitted this letter to The Argus in response to this spread of letters on the budget process. Unfortunately The Argus haven’t yet chosen to publish it, so here it is:

Sir,

How quick the Conservative and Labour councillors are to criticise, yet it is both their parties who argue the devastating budget cuts being imposed on us are necessary. Greens disagree and we are campaigning hard to change national policies which will harm the poorest and most vulnerable residents of our city. We face a 33% cut in the council’s formula grant over 4 years.

Conservatives are being disingenuous in claiming they had no plans for a 2.5% council tax increase. On 17th February 2011 the Conservative administration’s cabinet voted for a Medium Term Financial Strategy which included a 2.5% council tax increase for the next three financial years. Will Jan Young and Cllr Ann Norman withdraw their statements to the contrary?

Let’s be clear, the discussion currently underway is about the next council budget for the financial year 2012/13. It is highly misleading to suggest the underspend from the last financial year (2010/11), which in their dying days Conservatives had already programmed into the current year’s budget (2011/12), should have anything to do with the next year (2012/13)!

It will be up to all councillors to vote on what the next budget will be, including council tax. We understand the challenge everyone’s finances are facing: We are being careful with every penny. The proposed 3.5% increase is below inflation and will cost a Band D taxpayer 85p more a week compared with this year’s tax rate. Meanwhile the council needs to reduce its spend by up to 15% in the next two years.

Our whole budget approach will be to face that challenge in the most open, inclusive and sensitive way possible. I encourage all The Argus’ readers to participate in the consultation process when it starts later this year.

Sincerely,
Cllr Jason Kitcat
Green Cabinet member for Finance & Central Services
Brighton & Hove City Council

UPDATE: The Argus have now published the letter.

The truth is out there: Debating the council budget

The response from the opposition parties to our budget process proposals and associated press release has been… interesting.

Firstly the Conservatives have been denying they ever planned 2.5% increases in council tax. They’re now claiming they probably would have continued with a council tax freeze. This is not only financially improbable given the 33% cuts to Brighton & Hove City Council’s formula grant funding imposed by central government, but it isn’t true.

At a Cabinet Meeting on 17th February 2011 the Conservative administration approved a report which explicitly included plans for a 2.5% council tax increase from 2012/13 through to 2014/15. Noting this plan was part of recommendation 2 of the report they all voted for, details are online here. Will they retract their claims to the contrary?

Two other points the Conservatives are making also deserve clarification. They make much of the £2.5m underspend delivered in the year 2010/11. However this money isn’t just sitting in a slush fund waiting to be spent. Much of it was allocated by the Conservative administration in the 2011/12 budget before they lost power. What is left of it is there to deal with the risks involved in the huge changes and funding reductions we have to face in the current budget year. That historical, one-off, underspend has essentially no significant bearing on planning for next year’s budget to cover 2012/13.

Tories also are making noise about how much the council spends on funding Union representatives. Yet they were the ones who increased the funding (reasonably in my view) to support work on ‘Single Status’. This was a complex and fraught issue to resolve historical and current pay disparities between male and female employees doing similar roles. There are still a few matters to resolve in that area but any administration would need to have reviewed the union and HR provisions as this work wrapped up. What is notable is that the Green administration have chosen to be more open in spelling out those funding streams, whilst the Tories buried them in the whole HR budget pot.

Meanwhile Labour are banging a drum about how we have broken our supposed pledge to “resist all cuts” by even planning to deal with the imposed service reductions. We are strongly challenging government’s policies and we are the only party locally to be opposing the consensus that the cuts are necessary. However we recognise that central government can force certain things on us, so we did not pledge to “resist all cuts” – I’ve checked every Green leaflet I have a copy of, as well as our web site – as far as I can see we never said “resist all cuts”. Will Labour, specifically Cllr Gill Mitchell who keeps repeating the line “resist all cuts”, either show us the Green leaflet they are quoting or retract their statements?

What Greens did say was that we would “resist, to the greatest extent possible, the service cuts and privatisation imposed [on us]”. And we will…

UPDATE: Labour are also claiming we pledged to “stop the cuts” in a Huffington Post blog, again we never pledged that. I have checked all our publications and our website, the only time that term arises is in relation to the “Stop the Cuts coalition” who we worked with and our attending a “Stop the Cuts” march. Our manifesto is online Labour, so pick something that was actually in it to bash us with!

Towards building the first Green city budget

Building a fair, balanced and progressive budget is one of my key responsibilities. The process for approving that budget has to be as open and inclusive as possible. That’s my personal preference, and also the best way to make decisions on the incredibly difficult choices ahead.

So at next week’s Cabinet meeting I’ll be presenting a report setting out our thinking on the budget process. In summary we’ll be seeking to invite cross-party involvement throughout the process, not just at the end; and we will be reaching out to citizens, unions and the third sector to feed into our thinking too.

We want to give council departments the space for longer term thinking and more sustainable changes than annual ‘salami slicing’ of budgets. So I’ve asked for them to present two year, rather than just annual, spending plans. I’d go for longer if I had greater certainty about what central government will do with our funding in future years.

The previous Conservative administration had budgeted on 2.5% annual council tax increases for the coming years. The Green administration are seeking to move that to 3.5% per annum. This is equivalent to 85p more per week for a band D property. At 3.5% the rate is below all the measures of inflation recorded by the Office for National Statistics.

Greens believe council tax is an unfair tax, but Government does not allow us to use fairer alternatives, such as land value tax. We do not take decisions to raise the tax rate lightly, and we are committed to spending the money raised carefully. That extra 1% will help us to protect key services from the cuts.

Meanwhile the council will be seeking spending savings of up to 15% over the coming two years, while also dealing with significant pressures from increased costs in a number of key services. Our principles in judging how to meet these challenges will be:

  • To prioritise services for the young, elderly and vulnerable
  • To promote efficient use of public money
  • To support partnership working with public, private and third sector organisations

I want to emphasise the importance of the public engaging in this process, as a first step to greater community involvement in budget setting as we begin to pilot more neighbourhood decision-making. I know it’s going to be hard, but I passionately want to see more citizens discussing and understanding the council’s budget.

We also will be seeking to publish carbon budgets of some form. It is early days but, as with our program of public involvement in budget-setting, we hope the carbon budgeting will improve significantly each year.

While we will inevitably disagree on some proposals, I hope all parties will work with us constructively to face the challenge ahead of us. The Coalition government have imposed on Brighton & Hove huge, unnecessary cuts to our funding. All councillors are united in their passion for this city and I hope we can collectively move from tribalism to constructive working to come up with the best possible outcomes.

My priorities for finance & central services

I’ve been in post as Cabinet member for Finance & Central Services on Brighton & Hove City Council just over a week. In that time I’ve had to absorb a huge amount of information from the range of areas my portfolio covers and meet some of the officers responsible.

Last Thursday I met most of my heads of departments to introduce myself and set out my key priorities for the portfolio.

I have three top priorities for Finance & Central Services:

  1. Openness & Participation
    I want to push the council to be as open as possible in everything it does, and significantly improve citizen participation in our decision-making.
  2. Excellent Customer Service
    Expectations for customer service are, rightly, higher than ever. I believe the council can rise to the challenge and give our service users excellent customer service. In doing so we won’t just deliver great service, will improve people’s faith in the council.
  3. The Budget
    We need to meet the challenge of the central government funding cuts being imposed on us, whilst staying true to the Green Party’s ambitions and principles. No easy task.

In terms of things I’ll be doing to deliver those principles, the local manifesto is my starting point. This actually surprises some people, but yes party members democratically approved the manifesto and we plan to work to it!

There are already loads of great ideas bouncing around the council offices, and I’ve got plenty of things I’d like to see put in place. We’re going to get stuck in, and I look forward to keeping you updated here on my blog.

A Green view on the 2011/12 budget council

What an extraordinary night we had at Brighton Town Hall last night: Adjournments as the rowdy public gallery expressed their displeasure. Possibly a record number of ‘points of order’ being made by councillors as speeches got nasty, tetchy and overly personal. They mayor was always going to have a difficult time managing the meeting, and all things considered, he did reasonably well – though Greens wanted to see more public allowed in the gallery.

I won’t report the meeting blow by blow: You can watch it on the webcast, the extensive coverage on Brighton & Hove news (see related posts at the bottom of that link for more) and The Argus’ multimedia coverage.

In essence the Tories repeated the usual nonsense that the cuts were inevitable and they were all terribly responsible for implementing ‘savings’. They attacked Greens for being profligate and irresponsible with money. Yet it was the Green Alternative Budget which spent less money than the Tory budget, and put more aside into reserves, putting us in a better place for future years.

I tried to speak to our desire to reduce the number of high paid council officers in favour of protecting frontline services and increasing wages for the lowest paid workers. Our amendment to this affect had already been blocked from getting onto the agenda, but the mayor then tried to stop me even talking about the idea saying I couldn’t talk about job losses. Rather bizarre given the Tory budget was proposing to remove 250 jobs from the city!

It was excellent news that the joint Green and Labour amendments were passed through, saving some important services and eliminating the worst of the Tories budget gimmicks. These joint amendments (which I’m disappointed to see Labour claiming as ‘the Labour alternative budget‘) changed about £2.7m in the overall budget. Which, compared to the only £20,000 or so we changed last year through a last-minute Tory concession, is a big achievement. But in the context of the overall budget there were still about £23m of service reductions included.

This was a secretive budget process: papers presented late, officers restricted from talking to us about the detail we desperately needed and cabinet members not even attending some scrutiny meetings. Other councils take a much more open and cross-party approach to their budget setting.

Greens chose to vote down this Tory-cuts budget, and we had thought Labour would do so too — but they blinked at the last moment and abstained, letting the Tories push their budget through. Which is a terrible shame. We wanted to call another budget council in a week. We would spend the intervening time finding much more detail on what the proposals before us entailed. We would involved the unions, voluntary organisations and public in examining the books which we would have thrown open. Then we could have set a better, fairer budget.

Yes, it’s a better budget thanks to the joint Green & Labour amendments. It was appalling that Tories wanted to hand out a 1% tax cut (worth only 20p a week to the average tax payer – and nothing to those on benefits who don’t pay council tax) plus a 5% reduction in parking permits whilst slashing services for the young, elderly and vulnerable. How can they morally justify cutting provision for orphans (for example) whilst spending over £1 million on removing a cycle lane?

So some of that madness was averted. But with details on posts previously claimed as ‘vacant’ so deleted being revised to not vacant but still deleted, there was clearly much more we could work through if we had the time and information.

Labour’s last minute change of heart on this was bitterly disappointing, and it was plain on the face of many Labour councillors that this was not how they thought they would be voting. Tories jeered as their budget passed. They had repeatedly accused opposition parties of not understanding ‘value for money’, otherwise we wouldn’t be putting money back into services with our amendments. Putting money into a service doesn’t mean it has to spend every last penny – quite regularly departments underspend as demand fluctuates or they find more efficient ways of doing things. That is quite separate from just lopping great chunks off budgets to the detriment of services and their users.

The Tory cuts budget passed as Labour blinked, but the blows have been softened by the joint Green/Labour amendments passing. Greens stood firm in our opposition.

On the joint Green/Labour budget amendments

At tonight’s budget council meeting I will be proposing our Green Alternative Budget, setting our the Green vision of what we do if we were in charge.

However I recognise that, for now, we’re 13 councillors out of 54. Which is why, once the Green Group of Councillors had agreed our budget priorities, I (with our convenor Bill Randall) have sought to find common ground with Labour (who also have 13 councillors). Together we have produced joint amendments to the Conservative budget which reduce the harm of some of the changes, protect key services and support the council ahead of future cuts.

Due to negotiations going on for some time, they haven’t been presented as well as the Green budget, but I can point you to the amendments on the council agenda, and this spreadsheet excerpt laying them out as figures.

I’m pleased that we’ve been able to put tribalism to one side to improve what is a ghastly Tory budget implementing unnecessary cuts by the Tory-LibDem coalition government.

It’s a shame though that Labour present them on their website as the ‘Labour budget’ and not the joint work that they are. Also note that, at the time of writing, many figures on the Labour page are wrong. Refer to the amendments or the spreadsheet for the actual financial details.

The Green Alternative budget 2011/12

As Green finance spokesperson I’ve spent nearly every non-working, non-sleeping hour in recent weeks working on the budget. Understanding the detail of the Tory proposals and pulling together our own Green budget. The fruits of that work, which depended on the expertise of all the Green councillors, were published last night in our alternative Green budget. I’ve posted my introduction below, you can download the full doc here [PDF].

Introduction to the Green Alternative Budget 2011/12

Cutting local government budgets is an ill-considered policy which will harm the most vulnerable. It runs contrary to the views of the Green Party, many leading economists, fairness and common sense. Cutting spending while the economy is fragile risks a further downturn and reduces services for those most likely to need them. The national deficit does not justify the cuts Conservative local government minister Eric Pickles is gleefully imposing on us all. This deficit is by no means the largest it has been in modern times, it is not an emergency.

In the course of an economic cycle, a government shouldn’t spend more than it has, and should leave some aside in case of troubled times. The previous Labour government’s failure to properly regulate the financial sector and rein in military spending left the UK more vulnerable to economic turmoil than it otherwise could have been.

Greens, including Caroline Lucas MP, will continue to make the case that the national approach to cuts is not the right one. But locally, elected councillors have a legal duty to set a balanced budget. The alternative would be to have un-elected council officers making the decisions on spending for our city’s services.

This leaves us the incredibly difficult task of minimising the harm caused by these budget reductions imposed by the Conservative and LibDem government. Council resources are far more limited than some commentators would have us believe. Their budgets are being centrally reduced whilst being given no new powers to raise funds.

This alternative budget sets out how a Green-led council would have addressed the challenges this city faces differently. It was produced in the very limited time the Conservative council administration allowed opposition parties to review the budget papers ahead of the vote. Information about this budget has been deliberately withheld to the very last minute. In forming this budget we have battled a culture of secrecy to understand the detailed financial plans for council services in the coming years.

However, whilst not perfect,  it is my view that the proposals here reverse the worst of the Conservative proposals, reduce the harm to the young, older people and the vulnerable whilst also leaving the finances in reasonable shape to face the further budget cuts we know the ministers in Whitehall will impose over the coming years. In a sense, it is the best that could be made of a bad job.

[Download the whole thing]