Last week’s column was an attempt to simplify the council’s budget and make it a little easier to understand the basics of how it works.
I tried to make the comparison to a household budget to explain how the revenue and the capital budgets have to be administered.
The council’s overall budget is, of course, a lot more complex than the detail I went into last week and I’ll try to explain a little further some of the external factors that affect how much funding we have to work with in Hartlepool.
The council’s annual revenue budget is made up of two parts; the annual grant that we receive from the Government and the income that the council brings in each year. The grant that we get from Government is complicated in itself and there are all sorts of regulations that come with it.
The council’s income includes things like car parking charges, planning applications, admission costs to the leisure centres, Maritime experience etc and of course, council tax.
Around about one third of the properties in the town generate 100 per cent of the council tax from its residents, approximately one third pay some of their council tax and are supplemented by a council tax benefit and the remaining third are supplemented fully by council tax benefit.
To explode a popular misconception, the council actually receives 100 per cent of the council tax from every property in the town. Those who can’t afford to pay some or any of their council tax are paid for by Government benefits, which come directly into the council’s coffers.
I am mentioning the business rates and council tax benefits for a very specific reason. The Government has recently introduced a policy on both of these that, when implemented, will leave Hartlepool in a much worse financial position than we find ourselves at the moment.
The plan for business rates is to let councils keep the rates that they collect in their own areas rather than handing them over to the Government for redistribution according to their formula. This localisation of business rates would mean that Hartlepool would be £13million worse off overnight.
We currently get back £13million more than we collect. In fact, every local authority in the North-East will be worse off apart from Stockton who will remain about the same.
What they are saying however, is that no council will be financially worse off and they are planning to bring in a system of top-ups and tariffs to try and even things out. The problem is, they are not giving any assurances that this protection will carry on after 2013. Just to put it in context, to make up the £13million deficit, Hartlepool would need to open three new power stations or 18 new supermarkets. It simply isn’t going to happen.
The idea is that the baseline will be created next year and then councils will be encouraged to generate growth and get to keep the extra business rates that are generated above the baseline.
This sounds great in theory but in practice it will be meaningless for Hartlepool. You will be aware that we have recently been awarded Enterprise Zone status on some key employment sites in Hartlepool and the Tees Valley. This is where business growth will be encouraged over the next few years.
One of the benefits for businesses on those sites however, is business rate relief and those benefits will go to the Local Enterprise Partnership and not the council. Yet again, a Government policy is going to benefit the more affluent areas and Hartlepool along with the rest of the North-East will be left wanting.
What is more worrying perhaps is the Government’s planned changes to the council tax benefits system. They are to move the administration of the benefits down to a local level to supposedly give councils “a greater stake in the economic future of the local area”, whatever that means. At the same time as devolving the responsibility locally, they are cutting the amount they are funding it by 10 per cent.
We have a high level of council tax benefit take up in Hartlepool as you would imagine and I can’t see the numbers reducing in the near future. We receive £11million of council tax benefit presently from the Government. Under their new system, we will have to distribute a pot of £9.9million when the need remains at £11million and rising.
A decision will have to be made to reduce people’s council tax benefit or find £1.1million of savings in other service areas on top of the £15million we have got to find in the next three years.
If we reduce people’s benefits, it will undoubtedly have an impact on our collection rates and we will end up getting less money in. That’s not all, the Government is insisting that pensioners are protected, which is all well and good but that then means that every member of the working age population who is receiving a council tax benefit will face having it cut by 15-20 per cent to make the books balance.
It is all well and good for the Government to say they want people off benefits and back into work but it seems they are putting the cart before the horse. There simply isn’t the work or the number of jobs around at the moment.
I know that I said last week that there is no point moaning about these cuts anymore and we just have to get on with things but, with every new policy they bring in, the Government is making things more difficult for places like Hartlepool while the more affluent areas are not bearing their fair share of these cuts.
I will continue to make representations to the Government on behalf of the council and collectively with the other North-East councils to argue for a fairer deal. In the meantime, we will have to get on and try to put together next year’s budget under the increasing external pressures that seem to grow day by day.