YORK householders look increasingly likely to face a council tax rise this year as cash-strapped city bosses try to balance their books.
The “Fairness Commission”, set up to advise City of York Council on its budget process, has recommended the tax be increased by between 3.5 per cent and six per cent, arguing: “It is unfair that the poorest suffer from budget cuts while the relatively well off are protected from council tax increases.”
Council leader James Alexander, while stressing that no decisions have yet been taken, warned that accepting Government money to freeze this year’s tax would mean higher increases or tougher service cuts next year.
But the authority’s Tory group has launched a petition demanding a freeze when councillors vote next month on the 2012/13 budget and council tax, to ‘help ease the strain on council taxpayers.’
Conservative leader Ian Gillies argued yesterday that such a freeze would enable the city to benefit from an additional £1.8 million of Government money, and claimed the Labour administration had a simple choice: “Accept the Government money or pass the financial burden on to the council tax payers of York.”
However, Coun Alexander claimed the Government was not offering a grant of free money, but a ‘buy now, pay later’ loan. “So if we accept the loan, the consequence to York council taxpayers next year would be having to repay this loan in higher council tax increases or service cuts.”
A party spokesman said he would discuss the issue with fellow Labour councillors at a meeting shortly and also talk to senior officers, after which a decision would be taken either to accept the offer or to put up council tax. If this was above 3.5 per cent, a referendum would be required, he added.
The commission, which is sponsored by the Archbishop of York, Dr John Sentamu, said in an interim report that the Government had offered to provide funding to authorities who froze council tax for a further year to compensate for lost revenue.
“However, we understand this will be limited to the equivalent of up to a 2.5 to 3 per cent rise in rates, whilst inflation is running at around double that rate,” it said.
“Furthermore the baseline for future settlements would not take inflation during 2012/13 into account either. This would mean a significant real terms cut and lead to a significant shortfall in council finances that would have to be managed though an even greater hike in council tax in future years.”
The commission advised a gradual year-on-year rise now as opposed to a further year freeze.
“To be clear, we are recommending this increase in the interest of long term fairness,” it said, adding that York currently had the second lowest council tax of all 55 unitary authorities in England.
Choice on tax is not so simple
DESPITE David Cameron’s pledge to freeze council tax bills, households in York may face a rise. Many will find this difficult to believe; after all, the Prime Minister promised £1billion in grants to help keep bills on hold.
Surely, they would argue, this is the last thing we need, with spiralling energy prices and frozen wage packets, especially when a lifeline is there for the taking.
But the grant equates to a 2.5 per cent increase in council tax and inflation is running at a far higher rate. York’s fairness commission says it has taken a long-term view in recommending the council to reject the grant and opt instead for a rise of between 3.5 per cent and six per cent.
The commission argues that it is unfair for the poorest to suffer from budget cuts. It has a point. This subsidy will not be made available again and we will see an overall reduction of 7.1 per cent in local Government funding from Whitehall by 2015. Accepting the grant could mean storing up higher rises and deeper cuts for the future.
So far, 142 councils in England have agreed to the freeze, but York would not be alone in defying the Coalition Government’s demand. More than a dozen other authorities are planning to increase council tax.
Communities Secretary Eric Pickles says councillors have a moral duty to sign up to the grants and freeze council tax to keep down the cost of living.
But this week the national debt hit £1 trillion for the first time and IMF chief Christine Lagarde warned the world faces a 1930s-style morass unless action is taken on the eurozone crisis.
Austerity is not going away and good economic husbandry has never been so vital. The moral duty of which Mr Pickles speaks may not be as simple as he thinks.
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