Sunday, 22 January 2012

In response to Jude Robinson...

Jude Robinson, Cornwall Council's only Labour member, has written a post arguing that Cornwall would be wrong to freeze council tax this year because it would create bigger problems in the future.

Rather than me try to summarise and get it wrong, read her post here and then come back and let me tell you why I disagree with her.

Welcome back.

In essence, this argument boils down to who pays for the necessary increase in council tax that needs to be imposed in order to protect essential services.

That increase - after taking account of efficiency savings - is 2.5%.

That Labour argument appears to be that it should all be borne by the taxpayer through a council tax increase.

The Liberal Democrats say that we should take account of the Government's offer of a grant equivalent to 2.5% of council tax - about £6 million. If we took that grant then we could freeze council tax for another year, saving local people anywhere from £20 to £60+.

Jude is quite right to point out this government grant is for one year only and will disappear next year. So what do we do next year? Ideally, we keep council tax as low as possible again whilst guaranteeing not to cut front-line services. How much of an increase in council tax this will cost can't be predicted yet. But if it takes an increase of more than 2.5% then we should consider that.

A higher increase might sound bad - but combined with this year's freeze it make sense in terms of money.

Suppose a family's council tax this year was £1000. Next year, with a 2.5% rise it will be £1025. The year after, with another 2.5% rise it would be £1050.63.

So over the next three years:

According to the Lib Dem plan, a family might pay £1000+£1000+£1050.63 = £3050.63

According to Jude's preference, a family might pay £1000+£1025+£1050.63 = £3075.63

So Labour would cost you £25 more but wouldn't have a single extra penny in the bank - so there would be no extra services.

We cannot predict what level of council tax we will need in 2013/14 to keep the current level of frontline services, but I hope that this shows that for the coming year it makes sense to accept the Government grant and freeze council tax. Cornwall cannot afford to look a £6 million gift horse in the mouth.


Leo Penbloedh said...

how is this arrived at "That increase - after taking account of efficiency savings - is 2.5%"?

RedCornwall said...

Yes but you neatly sidestep the issues that the £6m grant is for only one year and that a 'normal % increase' this year is compounded with the percentage increase needed in the following year.
You cannot avoid the difficult issue that yearly increases are required because inflation is always a positive number...things cost more year on year, so the cost of providing the SAME service in 2013/14 is (based on current and anticipated inflation rises in region of 4%) likely to be more next year.
But the £6m we receive this year by freezing is NOT available next year so a potential raise in the council tax has to account for the rising cost of not only this year, but the loss that you incur this year by not having raised it in the previous year. The more years you freeze the worse the problem becomes.
That may be fine if the council is suffering no cuts and is able to make efficiency savings year on year enough to compensate, but loaded on top of the swinging cuts you have colluded in during the course of this parliament is simply creating a public service time-bomb. (Remember the state our schools and hospitals were in after 18 years of the Tories?).
You either do not understand basic public sector finances or you are trying to purposely trying to mislead the public. Which is it?