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Tax Con? or Just a Cock-Up?

Tax Con? or Cock-Up?"Oh what a tangled web we weave when first we practice to deceive"

The quote from Sir Walter Scott couldn't be more appropriate for Fylde BC at the moment.

Their ill-conceived plans for "Equitable Taxation?" and transferring open spaces maintenance to Town and Parish Councils are descending into the realms of farce and cock-up.

Town Councillor Arnold Sumner said "Fylde Borough Council want to dump their non-commercial open spaces onto us. It will mean a 300% increase in our precept and we didn't form the Town Council to rip off the people of St Annes"

He's right.

But he's only talking about half the real picture.

As we showed in 'Tax Con Returns', there are actually four tricks in play here.

The first is to get the Town Councils in St Annes and Kirkham to take over smaller parks and open spaces and charge local residents for them separately from FBC. That means FBC can spend what they were spending on open spaces on something else. (They've adopted the euphemism "Headroom" to describe this sum. A Council with integrity might describe it as "a saving to be passed on to taxpayers"). This is what Cllr Sumner was referring to.

The second trick is to classify some areas in Lytham St Annes as 'Strategic Assets' (as if there were such a thing), and spread the cost of these over all Fylde taxpayers instead of just Lytham St Annes.

The third trick is to tie the hands of the Town Councils so they have to use the same contract and conditions and inflated overheads that the Borough Council use now, so they can make no savings.

And the fourth is that Fylde will not pass on the 50% of its funding that it gets from Government to the Town Councils along with the work. So the cost to *local* taxpayers would - in effect - double because Town Councils don't get Government grants. That's not to say the cost of doing the work itself would double, It won't. The cost of doing the work will be whatever it is, but the money that Fylde gets from Government isn't being passed on to the Town Councils, so all the cost has to be raised locally. (And it's likely that FBC will simply keep all the grant it gets from Government, to use on something else)

If Fylde could pull this off, it would be  win,  win,  win,  win, for them.

No wonder they're keen.

But to make it work, a different mix of charging arrangements has to be put in place at different times, and we think that process is about to bite them back.

For example, to persuade the rural parishes to take over the costs of open spaces in their parishes in 2008, FBC lumped a new phenomenon of a charge called 'Special Expenses' onto the tax bills of folk in Lytham, St Annes, and Kirkham.

This process absolved taxpayers in the rural area from having to contribute to the larger (now designated as "Strategic") open spaces like the Promenade Gardens in St Annes. So if parishes voted to take 'their own' open spaces over, they'd 'make a net saving.' on their tax bills (because the high cost items in LSA and Kirkham had been taken out of the equation). And mostly, the parishes did just that. Out they opted.

Now it's time to persuade Kirkham and St Annes Town Councils to take some of 'their' open spaces on.

To help smooth the path for this, FBC was planning to cancel the Special Expenses charge, and re-apportion the costs of the Strategic Assets (larger areas in Lytham St Annes) so that once again, they would fall over everyone in Fylde. This would have cut the cost in St Annes and thus masked the higher (300%) cost that the St Annes Town Council would have had to raise from St Annes residents.

The final stage was to have been the creation of a Town Council in Lytham - and do the same thing there.

But it's all going horribly wrong, and now the deceptive practices that were first plotted in 2005 are having the searing spotlight of truth shone across them.

The first thing to go wrong is that Lytham folk, and most of their Councillors, said a very firm "No" to having a Town Council.

That meant that FBC had to take Lytham out of the equation and put the Asset Transfers there 'on hold' pending another go at forming a Town Council at some future date. That affected the costs and savings that FBC had been planned for St Annes, Kirkham and the rest of rural Fylde.

Time for a re-calculation.

Then FBC started to bully and push the Town Councils in Kirkham and St Annes. They hired a consultant to sell the scheme for them. They threatened and cajoled, but both Kirkham and St Annes had more expertise available to them than the rural parishes did two years ago. They saw they were being fed data selectively and not told the whole story.

With more common sense than FBC displays for much of the time, both Kirkham and St Annes realised they didn't understand the full implications of what was being proposed well enough to be able to make an informed decision in the best interests of their electorate. So they asked a lot of perfectly justified questions.

When St Annes TC got its first set of answers, they were more convinced that they needed more technical and professional advice, and they have now voted to defer consideration of the scheme until after the election in May. (see 'Tax Con on Hold?')

That means they almost certainly won't be setting a tax precept for next year that is three times their present precept and, as in the Lytham situation, that fact also affects the costs and savings that FBC had been planning for St Annes, Kirkham and the rest of rural Fylde.

So that means Fylde will have to do another re-calculation.

But Kirkham Town Council is meeting in January to decide what it will do. We think the chances are it will do the same as St Annes and decide that it needs a better and independent interpretation of what it is being asked to do.

And that means Fylde will have to do yet another re-calculation....

Now, we know our counterbalance readers are sharp, and not much misses them, so we expect by now you're asking 'Why another recalculation'?

If nothing is going to change, and Kirkham and St Annes stay the same for next year, why will the Special Expenses tax have to be recalculated?

Good question.

This is where the tangled web starts to show in sharp relief.

There are two reasons. One *might* mean a change, the other *will* very likely mean a change.

The first is the plan to create "Strategic Assets" and charge them over everyone in Fylde.

FBC can do this irrespective of anything the Town Councils do or don't do - and, as we showed in Tax Con on Hold?, Fylde BC have now put themselves in a difficult position. Having said they were going to do it (in the expectation of St Annes and Kirkham agreeing the asset transfer), they will look as deceptive as we believe they set out to be if they don't re-allocate the costs of what they now call "Strategic Assets" over the whole of Fylde.

But if they do, they will no longer have that weapon in their armoury to offset and hide the 300% increase that St Annes Town Council (and a future Lytham Town Council) might make at some point in the future. So the uncertainty surrounding Strategic Asset charging means we only rate it as a *might*.

The second, and the reason we believe there *will* be a change to Special Expenses even if nothing else changes, is yet another demonstration of the financial incompetence for which Fylde is now infamous.

Special Expenses were introduced in 2008/9 in something of a rush to help persuade parish councils to take over rural open spaces.

In the first year, the charge was called "Open Spaces Maintenance" and in Lytham and St Annes it was about £64 for a band D property. In 2009/10, it was again called "Open Spaces Maintenance" and a Band D charge was about £67. This year it was called "Special Expenses - Open Spaces Maintenance" and a Band D charge was £70.20

This figure was arrived at by taking the whole of the spending on open spaces in Lytham and St Annes and dividing it by the number of Band D equivalent properties in Lytham and St Annes.

(Band D is taken as one property. Band E counts as 1.22 properties, and so on up to Band H where each big Band H counts as 2 Band D properties. At the other end of the scale, a small (Band A) property counts as 0.67 of a Band D property)

Lytham has 7,738.1 Band D equivalent properties, and St Annes has 10,522.98. So the total for Lytham St Annes is 18,261.08

Fylde BC decides how much it wants to spend on Special Expenses (this year it was £1,281, 907 in Lytham and St Annes) then it simply divides this by the 18,261.08 Band D equivalent properties, to give a charge per Band D property of (this year), £70.19886 which is rounded to £70.20. (Then you reverse the proportionality to multiply this sum by the size factor to derive the sums payable for Bands A to H)

(The same process also happens for Kirkham - which has a different number of Band D equivalent properties)

BUT

As we know was pointed out to FBC in the first year of this scheme, there is not exactly the same amount of open space in Lytham as there is in St Annes, and the costs of maintaining the two areas were different even though there was a single charge.

Readers might wonder why they didn't charge taxpayers in each area according to what was actually spent in each?

The answer will astound our readers.

They simply didn't know.

The wonderful new accounting system. The same one that precipitated the Streetscene disaster - which in turn caused the financial black hole that led to the closure of St Annes Pool - couldn't even split the actual spending between Lytham and St Annes, (let alone give them a grounds maintenance cost per site).

They had no idea how much was spent in Lytham and how much was spent in St Annes, so they *couldn't* make a differential charge.

We recall the old fashioned, previous (that's Pre- Ken Lee and John Coombes) accounting system.

That would produce an estimates book an inch thick for Borough Councillors to approve or modify. That book was the spending bible for both officers and members. It gave not only a cost per site, but it broke that cost down in everything from staffing, (salary, wages, pension, national insurance, overtime, special allowances and so on) as far as lavatory rolls cost and, at Lowther Gardens for example, how much was spent on bird seed for the aviary each year.

But: progress at Fylde being what it is, the new system would only produce a total cost.

Perhaps this was intentional. If Councillors are isolated from detailed costs they will take less ownership of their spending and leave it to the officers to get on with it. Councillors are then left as 'naked Emperors' with a glorious "Strategic Role" and not having to bother with details or understanding, they simply approve the global sum once a year and go home.

HOWEVER

The tangled web to dump community open spaces onto unsuspecting Town Councils is now in trouble.

Because in order to separate out the so-called "Strategic Assets" from "Community Assets" (there is actually no such distinction apart from one of Fylde's making) and to be able to charge separately to Kirkham, St Annes and Lytham, they have had to go through all the spending and reclassify it on a site by site basis.

And now they have the costs.

And guess what?

You're ahead of us aren't you, Dear Reader.

The costs they have been charging us for the last three years are wrong.

That's not to say they're illegal, (though we believe they should be the way Fylde has gone about it) but they have not been accurate.

Some have not paid enough, and others have paid too much, and the day of reckoning is at hand. That's why the Special Expenses will change this year even if nothing else changes.

This fact is buried in a long and convoluted report from consultant Jennifer Cross that will be heard at FBC's Policy Development Scrutiny Committee, at St Annes Town Hall, on Thursday 6 January 2011, starting at 6:15pm. The key facts are on page 35 (of 44).

First of all, it shows that there will be an overall £80,139 increase in the total Special Expenses cost for next year 2011/12.

The estimated cost for all Special Expenses next year is £1,490,906. (up from £1,410,767 this year)

No explanation for this increase is given, but it represents an increase of about 5.7% of this years cost. Given that there is an automatic annual cost increase built into Fylde's grounds maintenance contract (which applies the September rate of the Retail Price Index from the following April - in this case 4.6%), that could account for anything up to £65k of the £80k.

Secondly the page admits for the first time - though using carefully obscure language - that FBC haven't previously been able to know the costs of grounds maintenance on a site by site basis.

The actual quote is "....now that the figures for the actual costs are known rather than using the tax base...."

So what's going to happen?

What's the effect of this on our Council Tax?

Well, we've had a look and done some estimates for our readers.

ST ANNES
This year St Annes Residents were charged Special Expenses of £738,701 (£70.20 per band D property), but next year, (assuming Special Expenses remain in existence), the Special Expenses charge will be £629,069.

If we assume that that figure includes part of the overall £80k cost increase (even though next year is lower than this year), then (using the same apportionment as the overall increase) we can estimate that last year it would probably have been about 5.7% (£33,923) lower at £595,145.

This means that taxpayers in St Annes have, in real terms, been overcharged this current year by the £33,923. This amounts to £3.22 for every Band D household.

It's likely that a similar 'overcharge' figure applies for each of the two previous years.

So, since the Special Expenses scheme was introduced, St Annes residents have probably subsidised open spaces in Lytham by something like £10 for every Band D property. We think St Annes residents can more or less kiss goodbye to this. It's not coming back as a rebate anytime soon.

But the better news is that this year (again assuming Special Expenses remain in existence), and now that they have the detailed figures, FBC will be able to put the matter right, and St Annes should only be charged £629,069 in Special Expenses. That means Special Expenses for a Band D property in St Annes will go down from £70.20 to something like £59.78.

Whoops of joy throughout St Annes.

KIRKHAM
Will be less happy. The Special Expenses charge they paid this year was £128,860 (That's £56.75 per band D property). But in Kirkham, Fylde seems to have found they had been undercharging Kirkham folk, and the cost for next year is going up - to £174,704 (That's £76.94 per band D property).

If we assume that this figure also includes part of the £80k cost increase, then we can estimate (as above) that last year it would have been about 5.7% (£9,421) lower at £165,282.

This means that taxpayers in Kirkham have, in real terms, been undercharged this current year by the £9,421. This amounts to £4.15 for every Band D household.

As with St Annes, this situation might have prevailed for the last three years since Special Expenses were introduced, but unlike St Annes residents who won't get a refund, Kirkham folk might be happier to know they're unlikely to have to fork out the three years of 'underpaid' tax.

So assuming the Special Expenses remain in existence; for Kirkham folk it means an increase of £45,844 or £20.19 next year per band D property even if nothing changes with regard to Asset Transfer and Strategic Assets.

Whoops of anger from folk in Kirkham.


LYTHAM
Folk here also look set to be dejected. The Special Expenses charge they paid this year was £543,206 (That's £70.20 per band D property - the same as St Annes) But Fylde's analysis has shown that the actual cost in Lytham for next year will be £687,133.

If we assume (as for the other sites) that this figure includes part of the £80k cost increase, then we can estimate that last year it would have been about 5.7% (£37,054) lower at £650,079

This means that taxpayers in Lytham have, in real terms, been undercharged this current year by the £37,054. This amounts to £4.79 for every Band D household.

As with Kirkham and St Annes, this situation might have prevailed for the last three years, since Special Expenses were introduced, but unlike St Annes residents who won't get a refund, Lytham folk might join Kirkhamites and be happier to know they're unlikely to have three years of 'underpaid' tax to find.

But what it does mean is that, assuming the Special Expenses remain in existence, Lythamites face a Special Expenses increase of £143,927 or £18.60 next year per band D property even if nothing changes with regard to Asset Transfer and Strategic Assets. It means the Special Expenses charge will go up from £70.20 this year to £88.80

Whoops from scalp-hunting taxpayers in Lytham

We should point out that references to Council Tax in this article are mostly about the tax that Fylde or a Town or Parish Council in Fylde charges. The article excludes any tax payable to Lancashire County Council, or the Police, or the Fire and Rescue Service.

LCC takes something like 75% of the overall Council Tax , and even a big change in tax precepted by Fylde only affects only about 12% of the total our readers pay overall.

We should also make it clear that we estimate the above figures will apply on the assumption that Special Expenses remain, and they are not abolished and re-absorbed into FBC's routine spending in whole or in part, as a General charge over everyone in Fylde.

If that were to happen, the estimated costs we've provided above for St Annes, Lytham and Kirkham and would reduce, (because roughly one third of the total cost would be borne by taxpayers in the rural parishes) who (depending on whether there is any asset transfer or not, and whether FBC continues to spend what it was spending on open space maintenance "in support of other services"), could see their Fylde Council Tax element rise by up to 25% (£40 or so)

Depending what combination of decisions is applied to:

  • Transfer of Community Assets;
  • Funding of Strategic Assets;
  • Whether FBC decides to honour its savings, or spend them on something else;

the range of potential costs is quite ridiculously wide.

For example, depending on the combination:

Lytham's overall 'Fylde' element of the Council Tax could change from its present £209.40, to £228.00; or £231.10; or £239.68; or £198.53.

In Kirkham the 'Fylde' element of the Council Tax might change from its present £206.96, to £227.15; or £230.25; or £238.83; or £269.15

In St Annes, the 'Fylde' element of the Council Tax might change from its present £218.38, to £207.96, or £211.06; or £201.64; or £215.46

In Elswick, the 'Fylde' element of the Council tax might change from its present £183.48, to  £183.48; or £186.58; or £195.16; or £226.31

In Westby With Plumptons, the 'Fylde' element of the Council Tax might change from its present £154.14, to £154.14; or £157.24; or £165.82; or £196.97

Those figures are all taken from the examples marked "For illustrative purposes only" in the Jennifer Cross report to FBC's Policy Development Scrutiny Committee, on Thursday 6 January 2011 (Pages 36,37,38, 39). There are other combinations that would produce different results. In total, there are probably about 48 combinations that could be adopted. A copy of the full report can be found as Item 5 for as long as FBC leave it on their website. You need to click on the linkword "Report" after "Transfer of Assets to Town/Parish Councils" in the centre of the window.

Whilst the report says the figures are illustrative, we believe they are close to what the actual figures would be.

Her report has incensed one of our readers who had already downloaded it and emailed us about it. Angered by what they saw in the early part of the report as an attempted hijacking of St Eric's localism agenda, they said "... I believe it is time those responsible for authorising the various consultantsí reports did what they were paid for and used their own expertise to make commonsense recommendations based on local knowledge experience, and not just pass the buck to someone else to protect their own position. Millions have, I believe, been wasted on consultantsí charges over the past few years. The town hall stands as an example. £750,000 for what? I believe a time of change may be approaching and honesty and transparency become the norm, where a proposal will stand or fall on its own merits, not on who can hide the facts and produce the best spin."

Not a happy bunny there then.

But as we're sometimes told, we are but one voice amongst thousands.

The Policy Development Scrutiny Committee will consider the report and they are asked to "comment on the report and make recommendations for consideration by Cabinet"

So, as 2010 draws to an end, and 2011 is ready to open, we wish all our readers a Happy New Year. If you live in Fylde, you can probably expect a bit of turbulence around March when Fylde sets its budget and its changed costs are published.

Dated:   30 December 2010


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