Increases in precepts are not the answer

January 13, 2017 3:30 PM

In 15th December last year, the government announced that councils would be allowed to raise the social care precept by more than 2 percent, in response to claims of a crisis in social care funding. But the Times reported this week that the precept increase may bring in £500 million less than promised, as councillors do not want to raise council tax in the same year when many of them are up for re-election. Ironically, this week the Police and Crime Commissioner in Kent, who ran on a low-tax platform, announced his desire for a 3.3% increase in the police precept now that he is in office.

In 2015, when the option to charge the social care precept was announced in the Autumn Statement, 95% of councils took the option in the first year. But with elections for county councils to be held this May, councillors know that tax hikes are unpopular – with good reason - and that tinkering around the edges of the tax code will not bring in a sufficient amount to justify the move.

This attitude is understandable, especially when one looks at the trends in council tax increases. Only two county councils up for re-election have announced a cut in the past 5 years, and most have raised council tax, year-on-year, almost relentlessly for 20 years.

There is a great deal to be done to address the huge problem of funding adult social care, but this ill-thought through tax increase is not the answer. We need real reform of how local councils raise and spend money, giving them greater fiscal responsibility. Councils should be able to experiment with what services they offer, making them much more responsive to local concerns.

Allowing councils to keep business rates is a good first step, but a local income tax – to replace a portion of the national version – and a local sales tax should also be considered as part of a broader package of tax reform. According to the OECD, the UK was highly unusual in the disparity between local taxation and local spending: in 2014 just over 25 per cent of UK state expenditure was at the local level – but with less than five per cent of tax collected locally.

It is very encouraging that our elected officials know how unpopular poorly-thought through tax increases are, and also encouraging that voters will use their vote to prevent them. But government, either local or national, needs to get to grips with fundamental reforms and stop trying to put the problem off by minor tweaks and more borrowing against the taxpayers of tomorrow.

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