I have a friend who works in a senior position in the Finance department of one of the Home Counties. It is a Conservative-controlled authority though has been, until recently, fairly non-political in outlook. He has worked for the County for over twenty years. I met him at the weekend. I have never known him so angry or in despair at what is going on in his authority at the moment.
Last week, the County Council passed the 2007/08 Budget allowing for a rise of 4.4% in its Council Tax precept (residents pay both a County and a District/Borough Council Tax precept adding up to the one figure). This followed an initial officer proposal for a 4.9% rise. My friend tells me the change is entirely political in nature and the shortfall will mean potentially damaging cuts in services. I was told that the County Councillors had been asked by Conservative Party HQ to push for a lower tax rise in order to provide the Conservatives with some "good publicity" in the run-up to the May local elections. Unfortunately, my friend suggests, the "publicity" from closed libraries, youth centres and adult education centres may not be exactly what the Tories are looking for.
What has angered my friend is that the Members of the County Council have callously disregarded officer recommendations and warnings on the state of the Council's finances and have put the political objectives of the Conservative Party before the services local people need.
Now, of course, the crisis in local Government goes far beyond one authority. The centralisation of powers started by Margaret Thatcher and continued by both John Major and Tony Blair has done untold damage to the democratic health of the nation. On top of that, the very funding of local Government itself has remained an unresolved and festering problem.
The abolition of the "Poll Tax" in 1991 and its replacement by the Council Tax was the most obvious political result of the toppling of Margaret Thatcher the previous November. However, the Council Tax was a political expediency rather than a thought through method of finance. In effect, local authorities and residents were subsidised by Government so that for every pound spent by a local Council, roughly 72p came from central Government and only 28p from local sources. Houses were "valued" by a series of bands reflecting the property values at that time and there was a commitment to a five-year revaluation which has occurred for non-domestic premises.
Sixteen years on and the Blair Government has, if anything, made matters worse. Terrified, one imagines, of the political backlash, revaluation of domestic properties in England remains off the agenda. On the other hand, the funding of local authorities, under the control of John Prescott and now David Miliband, has been used to systematically re-distribute funds from south to north. This has led to the Daily Mail and other anti-Labour papers claiming the "Sovietisation" of parts of Britain as large numbers of the workforce in the north are directly or indirectly employed by the public sector (and supposedly inclined to vote Labour).
My friend's authority has suffered years of low levels of central Government funding and, unable and probably unwilling to raise Council Tax, has repeatedly cut staff costs (though not consultancy costs) to the bone. The fact, however, is that my friend's authority employs only 35 approved social workers instead of the required 70 because it simply cannot attract qualified staff on the wages it is able to pay.
The irony is that while there are pockets of deprivation in his county, there are also areas of enormous wealth with house prices well into seven figures. Unfortunately, the lack of a revaluation means the rise in house prices over the last sixteen years has not been taken into account. IF the top band for Council Tax is still set at £320k, then a house of that value pays the same Council Tax as a house of £1 million which is grossly unfair.
Apart from a comprehensive revaluation of property, there also needs to be a re-structuring of the tax bands themselves taking into account regional variations in value. I'm aware that rising property prices do not always equate to rising personal incomes but we have to start somewhere. If then we make the median value for property at say £200k we could say that a house value £1 million would pay five times the Council Tax base for that area.
Let's say the base itself is £1k per year for the median house, that means the £1 million house in that area pays £5k per year in Council Tax and of course the house valued at £100k pays only £500 per year.
Now, this isn't fair...the current system isn't fair. Local Income Tax (LIT) isn't fair either. There is no fair system of local Government finance because the country isn't homogenous. Newham (where I live) isn't the same as Kensington & Chelsea. The needs are different, the potential amounts of money which can be raised are different. It''s time politicians of all parties stopped seeking some holy grail of a fair funding system of local Government and accepted the fact of inequality and the need for redistribution.
The one thing which I think needs to be done is to take the funding decisions out of the hand of politicians. A wholly independent Local Government Finance Commission would have the remit of looking at every local authority and making a balanced assessment of present and future needs based on submissions from the authorities themselves. Clearly, wealthier areas should raise more from within their own populations while poorer areas will need more assistance from central Government. The inequalities already exist, the current system accentuates them while we should be seeking to mitigate them.
As always, I welcome any opinions.