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Another 'Equitable' Scandal

Another Equitable ScandalFor many months, Fylde Council has been looking at ways of increasing the Council Tax.  We have previously featured this subject in counterbalance  (see Shifting Expenses and Council Funding). Now the big push is on to make it happen, and a special Council meeting on 31 October will decide whether to go ahead or not.

In 2004, Fylde Council hatched a plan for a 9% increase in Council tax each year for the next five years to put its spending on track. 

But the money Fylde Council can spend overall is limited by the Government, who use a mechanism called "capping". Government spoiled their plan by setting a  5% cap on Fylde.

Only about 50% of Fylde Council's income is raised from Council Tax. The other 50% comes from Government, some as redistributed Business Rates (paid by shops etc), and the rest from a Rate Support Grant funded from general taxes (such as income tax). 

If Fylde Borough plans to spend more than the Government thinks is reasonable, Government reduces the grant it makes to Fylde by, for example, 2 for every 1 the Borough "overspends". 

So, in the example above, to raise an extra 1 over its capping limit, the Borough Council would have to charge local taxpayers 3, making expenditure that exceeds its capping limit cost an impossible 300% higher than the real cost of doing the work.

Fylde Council is therefore very keen to remove whatever expenditure it can from within its capping regime, so as to be able to increase its spending.

Its preferred idea is to try and persuade Town and Parish Councils to implement a local tax and undertake direct maintenance of parks and open spaces using this money. 

If all the parishes agreed, this would take about 1.46 million out of Fylde Council's budget. If more services than parks were involved, it could be as much as 2.63 million.

This would allow the Borough Council to increase its spending by anything up to 1.46 million (or 2.63 million)  before hitting its capping ceiling - (because the money would be raised directly as Parish taxes that "don't count" as Fylde Council's own spending).

There are two big problems (and a lot of smaller ones) here. Firstly, there is no guarantee that the Borough Council will reduce its spending by the same amount that the Parishes raise in extra tax, and secondly, Town and Parish Councils are not eligible for the government grants, so exactly the same service delivered by them will cost 50% more than it would if the money comes through the Borough Council's books as it does at present.

Will Fylde Cut Its Spending?
Not by the full amount. They have already refused to guarantee a reduction in the 'basic'  tax, but John Coombes has said that a drop is "possible".

This so called "equitable taxation" scheme is actually a plan to increase their ability to raise income.

There are 29,530 Band D equivalent properties in Fylde, so on average, the 1.46 million equates to a Council Tax level of about 49.44 per year for a Band D property. (2.62 million would be about 88.72)

If the Borough Council doesn't reduce its spending by the 1.46 million (or 2.63 million ), the overall effect will be that people will be financially worse off by whatever it spends between that figure and its capping limit.

For example, say the Borough persuades all the Town and Parish Councils to raise the 1.46 million for parks as a parish tax, and it decides to reduce its own spending only by the odd 0.46 million, it could increase its own spending by up to the remaining 1 million without hitting its capping ceiling.

But overall, taxpayers throughout Fylde will be worse off by 1 million or 33.86 per year in additional council tax that would be paid.

In fact, Fylde's plan ("The Budget 2005/06" - page 14, under the heading "Equitable Taxation") is to "save" themselves between 0.5 million and 1 million every year for at least the next four years by introducing this measure. And of course, they will simply blame the extra charge on those Town and Parish Councils who have been silly enough to fall for this almighty con trick.

50% More Cost for Everyone
As if that were not bad enough, Fylde Council's plan will cost everyone 50% more for the exact same level of service.

Town and Parish Councils are not eligible to get the redistributed business rates or the Rate Support grant from Government. Fylde Borough Council does and, as we have seen, it makes up about 50% of their income.

So when Fylde spend 1,000 - half of it comes from the Government's tax income, and it only costs Fylde council taxpayers 500; the rest comes from national taxation.

If a parish spends 1,000 it has to raise the full 1,000 from its parish residents.

At the present time, most  Parish Councils actually look after "their" parks, but they do so as "sub-contractors" to the Borough Council who pay the bills.

This means the money comes via the Borough Council's accounts and provides better value.

Changing to a direct tax raised by a parish council will mean an overall increase in costs of around 50% for exactly the same service, just because the money is not flowing through the Borough Council's accounts.

Special Expenses
Assuming that Town and Parish Councils continue to show that they are more open, and not so stupid as the Borough Council appears to think they are, it is unlikely they will all fall for the dubious calculations prepared and sent to them by the Borough Council, (which ignore all the information so far, and show theoretical "savings" that will not be achievable if the Council's present plans to exclude certain functions are implemented).

So Fylde Council is already looking at "Plan B" - where it would charge differing rates of Council Tax itself.

It may be doing this to try and sell its preferred scheme to parishes by saying that if they don't do the local tax themselves, the Borough will implement something similar anyway using a process called 'Special Expenses'

This is a hugely complicated area of local government finance, and is taxing the brains of experts at the moment.

Broadly speaking, the idea is that Fylde Council will charge a second Council tax at differing rates depending on what facilities are located where. This will create 'winners and losers'. 

Areas with few facilities will pay less, and areas with more facilities will pay more.

However, the key thing to remember is that this would be electoral suicide for the Borough Council (so it is very unlikely to happen). At the 'State of the Borough' event held at Lowther Pavilion last week, 77% of the hundred-strong 'Citizen's Panel' voted against the idea.

More than 60% of Fylde voters live in the coastal strip, and they would end up paying considerably more than at present, because most of the facilities designed to serve the whole population are located there. (Fairhaven Lake, Promenade Gardens, the beach etc). 

More importantly, it is widely expected that the Council's auditors will rule that Special Expenses levied by the Borough Council are still the expenditure of the Borough Council, so there will be no benefit in changing to this system because they will not be excluded from the capping regime.

Fylde Council will thus get no benefit and a lot of hassle. counterbalance thinks this is just a bluff to try and con the Town and Parish Councils into direct taxation.

Furthermore, Fylde will have to justify their decision to change to this system based not on financial consideration, but on logic, and the matter could be challenged by judicial review.

At present they have resolutions in place that say:

"The expenditure on parks, playing fields and open spaces be declared general as, taken as a whole the expenditure incurred directly by the Borough together with that incurred by the parishes, the result is an equitable distribution of recreational resources"

And for Ashton Gardens, Lowther Gardens and Fairhaven Lake Gardens it says:

"Items in this category are provided for the benefit of all residents within the borough. The facilities are an attraction to visitors and as a consequence bring benefits for the Borough as a whole not just to the locality in which they are situated"

Given that the present system was implemented shortly after 1974 at the specific request of Town and Parish Councils, and that Fylde Council has these resolutions in place to demonstrate equitable distribution, it will be extremely difficult for them to show what material change has taken place to require a reversal of the view they have held consistently for over a decade.

The issue of tourism should not be taken lightly. People working at say, Bonds of Elswick who supply ice cream to the hotels and the tourism events on the coast, or those who work in the many caravan parks throughout Fylde, and in the businesses that supply goods and services to them and to Fylde's hotels and tourism industry are reliant on the capability of the coast to attract visitors. It is the provision of attractants such as the gardens that bring them here. 

In Fylde's own surveys, over 70% of users of these facilities class themselves as 'visitors' and it is thus entirely wrong and illogical to expect only part of the borough to pay for their maintenance.

Furthermore, implementing Special Expenses will become a very divisive issue and will lead to pressure for differential charging for those from other parishes. 

For example consider car parking charges. All Fylde residents presently contribute to car park maintenance costs through taxation and by paying parking charges. In this way frequent users bear more of the costs.

Removing the contribution to maintenance costs from 'out of town' taxation could mean people from other areas having to pay higher parking fees than "locals" (to compensate for what they used to pay via the Council tax). 

This is a more divisive and potentially more costly issue than sharing the cost of all facilities equally as at present.

Of course,  the real scandal in this matter is the waste of staff time keeping duplicate accounts for a year, to provide "evidence". The time wasted in officer and Councillor meetings and discussions when more valuable matters could have been dealt with, and the cost of external consultants to advise on how to prepare and present the information to con us.

But then, if Fylde Council wasn't squandering the resources it has, it wouldn't be the Council it is become. For more on this, see Cooking the Books

Dated: 23 October 2005


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