Capping in 2005/06 – avoidable or inevitable?
Speech to LGA Finance conference,
10th December, 2004.
Thank you and thanks for the invitation to speak today. And thanks for staying!
The speech is a bit provocative given the consensual nature of today’s meeting and I did wonder if it was appropriate. I checked with one of your advisors who said “No, No, stick to your guns!” So then I really worried and wondered if I could claim that I’d left the speech at home.
However, it’s been pointed out that my secretary and the council’s finance officers have copies of the speech and that it can be faxed, e-mailed or even transmitted to my 3G phone.
So I ask, really, do you want an efficiency review in the hands of someone who’s not even caught up with 1980’s technology, never mind the 21st century’s.
First, a bit of consensus. All of us are ambitious for our cities and towns.
We want to see more done to tackle problems and to take our communities forward.
Often, we see that in terms of providing more service and improving what we do.
Nottingham’s ambition is to develop further to provide jobs for our deprived communities, and build on our Regional and European status.
Nottingham’s neighbourhoods need help.
Our children are achieving record levels of attainment, but we’re still behind.
We want to reduce the gaps in life expectancies between communities.
We want to improve our housing and housing services – our tenants have voted for an ALMO and the investment that comes with it.
And we want to improve community safety. I watched a Nottingham focus group consider our ambition and finances on Wednesday. 9 out of 11 said “law and order” was the top priority.
The focus group may not be scientific but I think we all recognise the concerns.
The public told us during the 2003 elections how the street scene and tackling anti-social behaviour were their biggest concerns.
We launched a campaign and a programme - “Respect for Nottingham”. More street cleaning. Neighbourhood wardens. A clamp down on begging and on-street prostitution.
I’m sure many of you respond to your public’s concerns in similar ways.
Broadly speaking, Wednesday’s focus group, asked to balance out the new budget, wanted the services, did not want any cuts and hoped we could square the circle by efficiencies.
We have to be bolder.
Last year, we made efficiencies and dropped services to meet all the cost pressures.
All the extra tax paid for extra education, social services, improved access, investment in a reduced number of swimming pools and “Respect for Nottingham”.
Savings to meet extra costs – investment in the people’s priorities – underpinned by a new performance management regime.
Much of it cross-referenced against what I and my colleagues learned from other authorities as a CPA peer member inspector.
Education. Health. Tough on crime. Prudence and investment. A modern budget.
Can’t you hear the new Labour mantras!
Ambition! Hope! And an absolute bloody tragedy when we got designated.
We thought we were going to be OK.
We knew we’d all been warned against setting high increases.
We’d complained about possible problems at every sensible opportunity.
But we knew, and we had a plan B, should we be warned.
And we listened for a further warning. None came.
65 other authorities got a letter – we didn’t.
Over 40 other authorities were invited down to London to justify themselves - we weren’t.
We checked using other channels – still OK.
It made sense – the Gov’t said they’d take more than one year into account.
In the end, they didn’t. We didn’t know.
Neither did we know that 2 officials within the ODPM, one based in Nottingham and one based in London, had failed to share our full set of figures on our future plans correctly.
And we were designated.
A cock-up.
Something I’ve since discovered you can say on BBC breakfast radio.
The requirement - re-bill to return £180,000 at a nett cost of £250,000. Ridiculous. And ridiculed in the local press and in Parliament.
And all our attempts to get us off the hook – including an appeal to that sense that we’d not received natural justice – was just a useless waste of time.
There was no opportunity to employ our plan B.
Four other Districts were capped as well. Maybe they were trying to make statements – as I recall they were authorities who’d all changed hands politically. There may have been some merit in their case.
Nottingham wasn’t trying to make any point; or protest or challenge about rights and local democracy.
But once in the trap, there didn’t seem to be an awful lot that was effective in terms of getting out.
So my advice is don’t try to get capped, cos you don’t have the powers to resist, unless you give a financial value to making a political protest.
And if I sound like some kind of New Labour enforcer in saying that, well I know that you can make your own judgement.
The shock for me is that Nick Raynsford has said –
- in a press release;
- in a letter;
- in today’s speech,
set an increase in Council tax below 5%. We had no such statement last time.
Getting capped is just an awful waste of your time, your energy and particularly your nervous energy.
And it hits your collection rates and your cashflow. Hence the nett cost of £2 per bill-payer.
In the first month after the re-billing, our collection rate halved.
We’ve recovered. Our collection rate is now higher than last year, but we’re below the revised target we’d set ourselves.
Local and Central government need a better way of working than this.
We can recognise that in last week’s statement, the Government have moved from their position in the 2004 Comprehensive Spending Review. Nick Raynsford has acted.
We can acknowledge that the extra money is that it is mainly one-off, so has to be fought for again next year.
The extra grant is good, but we need a sustainable solution, and the Lyons review needs to give us that.
Did we hear much encouragement this morning from the 3 parties?
The message from Nick Raynsford was clipped, precise and left you wondering if the Gov’t does have the courage to move on in a significant enough way.
We know we want more bands to make the Council tax proportionate, and we remain hopeful.
We want the business rates back but are less hopeful.
At a consultation event for last year’s budget, local business reps told me that I should find more money to raise educational attainment, deter crime against business premises and provide better shopping environments.
Confident, of course, that I can’t actually ask them for the money.
We need a new responsibility and commitment from local business. We need the non-domestic rates back.
We’d also like it to be easier to raise new taxes to target issues – perhaps a tourist tax; in Nottingham’s case a Workplace Parking Levy.
But again I have learnt that national civil servants are a bag of nerves on the impact of these ideas. Plainly something from the texts of the classics upsets them.
We are grateful to Ken Livingstone for showing the way in making bold changes.
And yes, we’d like an honest assessment of the Local Income Tax, as a replacement for part of the national Income tax. In truth, the buoyancy of the tax does have its appeal.
75% locally raised, instead of 75% handed down.
We heard some concern for local government from Eric Pickles, followed by a silence cos they announce their policies next year.
The giveaway for me was when he shared a concern that there’d been a 33% increase in - that oil tanker – grants to local government. This is money that provides for schools and our existing services.
Really, how are we going to cope with their planned reductions in public spending, whether launched by lasers or by fireworks? I suspect not so much a rocket, as a Catherine’s wheel.
We heard a kind of boldness for radical change with Local income tax from Edward Davey, matched by a long list of the issues Council tax faces – the kind of list that could deter you from any kind of radical change. Can you really complain about the impact of Council tax changes if the Local income tax is to be more radical?
If only “axe the tax” wasn’t so “lax on facts”.
The slogan invites people to think they’ll make a complete saving.
And this from advocates of public expenditure. Until they switched to orange.
Couldn’t the slogan be “replace Council tax by 3.75% increase in income tax”?
I know it doesn’t scan and the clipart would need to be a bit bigger.
But then we could have a fairer debate. Even if the increase is claimed to be lower than our own calculation for Nottingham of a 4.5% increase – which we will now check.
I know. I know. I’ve been provocative.
But you know the arguments anyway.
Part of local government’s problem is that the debate has become focussed on our levels of tax rather than –
our willingness to reform the way we work; and
the extent of our ambition for our cities, towns and communities.
Who amongst us would ever describe themselves as “stand still”? Local Gov’t in recent years has been anything but.
And yet every year we start off by saying we need so much money to “stand still” – often over-looking that “stand still” includes expanded commitments to education and social services.
The tax take as a proportion of GDP has stood still and if anything has gone down. Yet the debate in the country is latched onto direct and indirect taxes.
You could argue that pensioners as a whole are the fastest growing group in terms of wealth, and increases in state pension and all the extra provisions such as the winter allowance has cost the Gov’t over £6 billion per year in real terms. Yet people are driving at the unfairness of a capital-based tax cos of the impact on pensioners.
Advocates of a new localism can struggle to hold the line. Check their web-sites – they still end up condemning the national gov't for allowing local councils to apply wildly ranging increases on charges for car parking - which "clobber the motorist". Look it up - July 7th, 2004.
Is it any wonder that the Gov’t reacted the way it did?
Parties complained about tax increases.
The capping powers existed.
The Audit Commission said why not use your reserve powers when they exist?
The Gov’t used them.
Average increases fell from 12.9% to 5.9%.
There were other factors I'm sure,
but can you really argue it didn’t have an impact?
So we face another year of council tax capping.
Our problem is not that the Gov’t doesn’t generally believe in more public services delivered locally.
The turnover of local public authorities is growing faster than inflation.
Nor it is necessarily that they’ve tried to dictate a framework – in that we all recognise that Britain’s future lies in a better educated public to take on the jobs that add value in a modern, developed economy; that we want better health and care for our people, in particular the elderly; that we need a shift to better public transport.
And I think the local Transport plan was an example of a system that have more reasonably reflected a negotiation between national and local gov't.
However, the rewards for good work were taken away in this year’s settlement!
And the systems of recognition for good work can go wrong. Nottingham’s tram started this year – highly praised by the permanent secretary. Our municipally owned bus company was awarded bus company of the year and we spent all of our budget for integrated transport, on integrated transport. All this, and we were downgraded this year – cos we “over-programmed”! Seriously, get a life!
There is something about minimum standards that authorities like Nottingham appreciate - when we're challenging the consensus, we fear being undercut by other authorities who’ll say – ‘let us build you a new road – faster cars and more car parking is better for the environment’.
It’s not that the Gov’t doesn’t want to spend more. It’s just that they highly direct it.
This year, even though our grant is increasing at twice the rate of inflation, by supporting govt priorities, our costs rising at three times the rate of inflation.
Problems include –
pensions;
Equal Pay;
fragile funding.
So the space for our other local priorities – what we’d call developments - is limited.
Now I appreciate that the gap between increases in costs and increases in grants might be what is expected from us in efficiency. But like many of you, we’ve been on a programme of dropping services and more efficient working for some time.
Some of Gershon sounds exciting. I too would like to re-engineer processes so that people can do more of what they need to do themselves. I talk about it on the doorsteps all the time.
We worry that Gershon will be another cause of serious friction between local Gov't and national Gov't. We’re grateful therefore to hear some positive news about the way that the local government taskforce is making.
I've actually tried to join in with the modernisation agenda. I've been a peer inspector for 3 authorities in 2002. And I think there's been real benefits.
But has the modernisation agenda really been applied to national gov't?
I don't see Ministers having to deal with reports describing their departments as "weak" or being condemned for being insufficiently joined up.
Well if Gov't won’t challenge themselves to the level they challenge us, perhaps we should run our own corporate assessment on them.
The 10 year vision may also be a source of friction.
It talks about national Gov't being joined up when dealing with local gov't.
You hope. You wish. Oh please.
And then you think 4 letters – D.f.E.S.
Can education really be run without regard to its impact on our local societies.
To re-cap – as it were –
In the medium term, we need Balance of Funding review to deliver proposals that give us something sustainable, even if the spending is in a national framework.
We need better exchanges of information to help local authorities avoid the cap unnecessarily.
Relying on your Government Regional Office talking effectively with ODPM is not enough. (And it begs the question of the ability of any other regional organisations developed to deal with schools’ complaints on future financing.)
Can the LGA commit to developing an effective information exchange and warning system?
So to answer the questions –
Is capping avoidable? Yes.
Is capping avoidable, at a price you may want to pay? Yes. Unless you choose to make a political protest. However much it smarts, you do want to be just on the right side of the limits; you don’t want to get involved in sorting capping out.
Is capping inevitable? Yes – someone will get caught – unless the LGA and others can determine some kind of system whereby they can keep councils together such that none of us unwillingly stands out.
But the surprise in all of the points made on the announcements is that Nick Raynsford has now said 3 times, set a Council tax increase below 5%. Nothing like this was said last time. And I think this is very significant.
Ends.