Local referenda can curb council tax hikes

Voting in council elections can seem in equal parts very important and utterly pointless. 


It’s important because the elected officials that have the biggest impact on our lives don’t sit in Whitehall, they sit in the town hall. When your bins are collected. Whether that new housing development gets approved. Parking charges for the high street. How much council tax you pay. All of these are the purview of your local politicians. But voting for them can feel pretty pointless. In some places, it’s hard to tell if the party in charge matters at all. Either way, you can usually be sure your council tax will go up. 


In the last 20 years, council tax has more than doubled on average in England. Over a third of local authorities are now charging over £2,000 for a Band D bill - the highest being Nottingham City Council at £2,226. The average Band D council tax bill in England is now £1,898. Just a year previous it was £80 less at £1,818. You only have to go back to 5 years to find a time when average bills were less than £1,500. Increases have been relentless, and almost across the board. 


When every town, city, and county is different, why does council tax seem to go up by spookily similar amounts? Perhaps it’s because, via some expert formula, councils have worked out a magic number for exactly what rises they need to keep services running? No chance. It’s because, since the days of the coalition government, there’s been a cap on how high council tax can be raised without triggering a local referendum. In other words, councils tend to put it up as much as they can get away with, while avoiding a local plebiscite they might lose. 


To date, there has only been one referendum held so far, by Bedfordshire’s Police and Crime Commissioner. The cost of which was estimated at £600,000. The proposal to increase the policing precept (which makes up part of council tax) was overwhelmingly rejected by the electorate. Beyond that, and a few authorities like Surrey flirting with the idea, councils have dodged the process and communities have not been asked to vote on excessive rises.


But hold on. The level of council tax has a huge impact on our lives, not least our household budgets. Yet sneaky councillors use loopholes agreed many miles away in Westminster to avoid their rises ever going to a vote. Parliament sets these rules, designed to give democratic control over ‘excessive’ council tax rises, then watches silently while local authorities limbo under the threshold and dodge the votes. As a result, excessive rises happen anyway, just over a longer period of time. 


Taxpayers are becoming increasingly infuriated by the situation. Recent polling by the TPA found the vast majority of people oppose council tax increases (by a 4-to-1 margin), with working class voters considerably more opposed. Council tax was only second to the BBC licence fee in a league table of Britain’s most unfair taxes. They have noticed that the referendum lock is not working. 


The issue is rarely discussed because MPs are determined to turn a blind eye. They set the limit, but also don’t want to be blamed for starving local authorities of cash. Limits on what is considered excessive are set unreasonably high. While the threshold remains high, taxes will continue to increase by perverse percentages. Councillors will continue to avoid local plebiscites. Worst of all, council bosses will nonetheless continue going cap in hand to taxpayers by demanding money from central government - which doesn’t require the same democratic consent as if they added the amount to local council tax charges. This ridiculous situation has to change. 


But what should be done? The principle of local referenda is excellent, and there’s no better mechanism for balancing a genuine need for funding and endless pleading for more cash to waste. An arbitrary cap on council fundraising might constrain councils who need an uplift (especially due to inflation); while removing limits would open a can of worms on council spending which may end up seeing yet more profligate councils go bankrupt. 


The simple answer is to adjust the current threshold. In 2015-16, before the endless addition of allowances for things like social care, the limit on rises was set at 2 per cent. This figure allowed for an inflationary uplift (set quite deliberately at the same level as the inflation target for the Bank of England) and had worked perfectly well for a number of years. 


It means that councils can still raise funds to cover plans laid out at election time - with natural cost increases due to inflation covered, without the need to fork out for a local vote every year. It allows for council tax to be frozen in real terms, limiting the impact on struggling families as we emerge from the covid pandemic. Critically, it catches the above inflation rises which have become all too common and are hammering hard-pressed taxpayers while avoiding democratic oversight. Put simply, reverting to the 2015-16 limit would put an end to the ludicrous almost automatic 4.99 per cent rises we see currently. The local authorities relying on these large increases by stealth would have to think again. More accountability for those councils could only be a good thing. 


Of course, this would still allow councils to increase tax as much as they liked. They could increase by 5 per cent if they wanted - if they could get the consent of local voters. Some are already ready and willing to put it to the electorate - Warwick council previously planned a referendum on their 34.2 per cent increase to finance their council’s ‘climate action fund’ (before covid threw a spanner in the works). Rises could continue, to fund social care or policing or whatever councillors decide, as long as residents agreed. 

The debate around local government finance is marred by a lack of scrutiny. MPs say it’s nothing to do with them. Lobbying bodies like the LGA will insist more money is needed but whine about councils’ financial dependence on central government. Councils will plead poverty one day, then waste tens of millions on failed energy firms or a shambolic house building scheme the next. Councillors will justify bills rising with arguments about social care costs rising, then whack up their allowances and dodge a local vote. All the while, voters are left out of the loop before being hit by the bill. A simple change, like putting the clear threshold back to 2 per cent, would put local voters back in the driving seat.

This website uses cookies to ensure you get the best experience.  More info. Okay