Referenda on Council Tax

UK legislation (Localism Act 2011) provides for a local referendum if a local authority proposes an “excessive” Council Tax increase. For the 2013-14 financial year, the principles state that billing authorities may not raise their council tax by more than 2% without holding a referendum. So – and you’ve got to laugh – near enough every council in the country has proposed a 1.99% increase this year.

It looks like public servants are getting comfortable with the Time Value of money and the effect of economic incentives. Central Government – for reasons that are unclear – intends to continue the questionable Council Tax Freeze Grant system, which in previous years offered a 2.5% payout for a zero increase in Council Tax. This year, the offer is 2% of last year’s budget over 2 years. But 1.99% over 1 year and therefore 4.04% over 2 years if the trend continues seems more palatable to Mayors and councillors than a potential 2%.

In Bristol, the last £4.5 million from the 2011/12 freeze grant is included in this year’s [2013/14] budget. This is 2.5% of required annual funding, so you should anticipate some entertainment – possibly tap dancing – from the Mayor and company when it comes time to do the 2014/15 budget.

An interesting situation will arise if the party or coalition in power after 2015 does in fact schedule a national referendum on EU membership. If I were a local councillor or Mayor who wanted to get a stonking great Council Tax increase past the Localism Act, I’d be planning to present a referendum-triggering budget. I would then wait for the government of that day – and it doesn’t really matter which party is in control – to ponder the effect on turnout when two simultaneous questions are being asked:

  1. Would you like to pay an extra 100 quid of council tax? and by the way
  2. Do you want to stay in the European Union?

No doubt a more generous scheme for Freeze Grants or similar neatly wrapped bundles of other people’s money would magically appear.

Useful link for broke Mayors: