Budget headache leaves councillors facing tax burden

TOWN councillors say they have been left in an appalling situation after they were dealt a major budget headache.

From April, the Government will shift responsibility for council tax benefit from a centrally-funded system to one controlled by principal local authorities, supported by grants.

However, the grants only provide for 90 per cent of the total bill and a knock-on effect of the changes is that there will be a reduction in the tax base for town and parish councils. The more recipients of council tax benefit in an area, the bigger the loss will be.

Northumberland County Council’s Executive has agreed to pass on its £600,000 grant proportionally to the parishes affected, but officers are recommending the payment is a one-off and that no funding is offered next year.

The decision will see Morpeth Town Council receive £41,387 to cover its losses for the 2013/14 financial year, but members have to decide whether to use the full grant now and stick with their plans for a two per cent rise in the council tax precept, or spread the funds over two or three years and hit residents with a bigger bill in April.

At a meeting of the town’s Finance and General Purposes Committee last week Chairman David Parker said: “In terms of sustainability, if we don’t raise the level of council tax this year we would almost certainly have to bump it up next year to get a sustainable budget.

“It is an appalling situation that we are being put in. I would hate to be in Blyth or Ashington town councils because they are in a far worse situation than we are even.”

The tax burden comes at a time when the smaller authorities are expected to take on more services from the county council, although cemetery hand-overs are likely to be delayed until 2014.

There is also the threat of precept capping in future years.

However, Coun Les Cassie urged members to stick with the original budget plans.

“We need to separate out what is known financially and is definitely going to happen versus what might happen,” he said.

“What is definitely going to happen for the next year is that we are not going to lose this amount of precept because the county council will compensate us.

“We have had a two per cent increase in council tax for the last four to five years.

“That has been sustainable in that we have been providing all the services we intended to provide, supporting local groups, doing Britain In Bloom and as we were doing these things we have been increasing the balances every year because each year we have under-spent the budget.

“In terms of what we know is going to happen in the next financial year the two per cent increase is quite appropriate and will allow us to maintain the balances or improve them a little bit.

“For the year after that there is a very high degree of uncertainty.

“I would be extremely surprised if the county council decides at the budget meeting for 2014/15 that it will not compensate the parish and town councils that are very seriously going to be hit by this reduction in the tax base.”

Coun Mark Horton agreed.

“We are safe enough with what we have got if something does happen, for example we do get capped.

“We do have some spare money and we could have ways of dealing with it,” he said.

But Coun Nic Best argued that it would be better to increase the precept by more this year and spread the grant over a longer term.

“We have not got a large amount of balances. It is just enough to be comfortable and if we had a big disaster that could get eaten up very easily indeed,” he said.

“I want to start weighing the possibilities in terms of probabilities.

“I think the position that we would take over the playing fields and cemeteries is very likely. The chances that we will get funding from the county council to do that is a lot less likely. The chances that the Government caps parish and town councils next year is moderately likely.

“I would suggest that we protect our balances because we are going to need them.

“I would suggest that we try to spread the cost so that £41,000 runs over two or three years to give a transition we can cope with, rather than depending on the county council to provide that transition.

“I would prefer to see a three, four or five per cent increase in three successive years rather than two per cent this year and 11 per cent next year and then get capped.”

However, Coun Ken Brown said: “If we spread the grant it is asking council taxpayers to pay earlier than they need to to subsidise that. That for me is the single reason why we should use the £41,000 grant now.

“At this meeting next year all the options will be discussed and we will know a lot more of the difficulties and if there are going to be future grants.

“We have got two weeks to get this right and depending on some unknowns is not a prudent way to do it.”

And Coun Derek Thompson said: “I think there is a lot of confusion and too many uncertainties. I will vote for a two per cent rise in the precept.

“We have no clue at all really about what is going on. I won’t vote for anything else because it wouldn’t be based on facts.”

The committee voted by six votes to one to recommend a two per cent increase in the precept to the full council, which amounts to around £2 a year extra for a Band D property.

Members will also write to the county council strongly urging it to pass on similar grants in future years.

The full council will meet on Wednesday to set the budget.