Taxing times: the prospects for Council Tax in Kensington and Chelsea
This year the Council is set to receive a four per cent increase in funding
from central Government, equal to £5.2 million. Under pressure from the
Government, the Council must pass £3.4 million directly to schools. That leaves
just £1.8 million to cope with spending pressures. The Council has been given a
range of new responsibilities too, all with additional costs. Inflation and wage
costs must also be factored into the budget. So what does this all mean for your
Council Tax?
Last year the notoriously complex formula for calculating the Government grant
changed, putting pressure on the Council's services. Then the census figures
showed the borough's population had somehow dropped by 31,200 to 159,100. As the
single biggest factor in calculating grant this was not good news for the
Council's finances either.
As a result the Council received the lowest possible increase in Government
grant (known as the funding floor) of 3.5 per cent. The small increase was not
enough to cover even the costs of inflation and a range of core services came
under pressure.
The Council managed to cut £6 million from the budget but had to balance
this with maintaining frontline services. In the end it was forced to increase
Council Tax by 14 per cent to achieve this. On top of this, the GLA also
increased its share of the money taken from the tax, bringing the total rise to
over 17 per cent.
Despite this, residents of Kensington and Chelsea currently have the fifth
lowest rate of Council Tax in the country
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Your Council still argues that the new formula does not fully reflect the
complex needs of Kensington and Chelsea, or London in fact. The Census figures
are being challenged by a number of local authorities as well as by this one.
But so far our count has been revised upwards by just 6000, despite a large
transient population that is acknowledged as difficult to measure.
While the Council continues to exert pressure on Government on both these
issues, what does this all add up to for 2004/5?
To date the Government has announced only its provisional settlement. This
four per cent rise puts the Council on the funding floor again this year, and is
the lowest increase for any borough in London. Average increases nationally are
5.5 per cent.
Funding floor defined:
The Government sets a minimum level of increase in funding and a
maximum level. Known as funding floors and ceilings, it will this
year ensure that no Council receives less than four per cent or more than
7.5 per cent. For the second year in a row, Kensington and Chelsea
Council is on the funding floor.
The Council's aim is to remain in the bottom quartile of Council Tax rates
nationally but this year faces a number of new challenges:
School spending: as an excellent authority with a three star education department, the Council
has been promised more freedom to manage its own budgets. However Education
Minister, Charles Clarke expects all local education authorities to give schools
a minimum five per cent increase per pupil in 2004/5.
The Council has argued against this principle because it constrains local
decision-making; skews local priorities; and puts pressure on the Council Tax.
Despite its opposition the Council has agreed to guarantee the increase
('passport') of £3.4 million to schools because new Government powers allow it
to rewrite the Council's Budget should it fail to do so.
Mayor's share: the strain on funds looks set to be compounded by an increase in the Precept,
the block of your Council Tax that goes directly to the Mayor of London. For the
fourth year in a row, the Mayor of London has requested more money from the
residents of Kensington and Chelsea.
His current demand for a 12 per cent increase in his share of London's
Council Tax places a further burden on the borough's Council Tax payers. If it
goes ahead as planned Mayor Livingstone will have increased his share by over
100 per cent during his 4-year term.
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New legislation and Government policy add to the challenge for the Council.
Increases in funding are not keeping pace with the new responsibilities. Taking
just a few examples the pressures become clear:
Licensing: new responsibility for liquor licensing during 2004 means increased
powers to control pubs and clubs for the Council but license fees will not cover
the costs of the service. Under current proposals net costs are set to
rise to £485,000 by 2005/6. However the Government has still to finalise its guidelines
and the Council continues to lobby for more appropriate fees that will at least
cover its costs.
School Admissions: additional staff and new IT systems are needed to ensure that
the revised statutory admissions process works effectively and that pupils are
placed in schools for the start of term.
Child Adoption: under new statutory requirements, a more rigorous framework has
been introduced. As a result five new staff are needed to review assessments and
to support adoption.
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With all these spending pressures, the Council has had to identify possible
savings. Reducing central Town Hall costs, rationalising back office library
services, running the Notting Hill Carnival support more efficiently and using
cost savings from reduced numbers of people in temporary accommodation are just
some of the proposals on the table.
These plans form part of a wide range of proposals currently with local
organisations and residents' groups for comment. The Council is confident
savings of £5.7 million can be achieved without too much disruption to
frontline services. But this still leaves enormous pressure on the Council Tax
to cover the balance of costs
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Facing the funding shortfall caused by the Government's funding formula, many
local authorities are looking for ways to bridge the gap. One option for some is
a new power that allows councils to set the Council Tax discount for second
homes at any level between 50 per cent and ten per cent.
The Council will debate this possibility for 2004/5 after signs of general
support from local residents in recent consultations. But still the pressure
remains on the Council Tax. So what else have local people said the Council
should do in 2004/5?
For the second consecutive year, the Council has consulted local people on
its plans. The 2,400 strong Residents' Panel was consulted while all residents
were invited to complete an Internet survey.
This year's surveys showed less support for a Council Tax rise, even if that
means cuts to local services. Participants also supported raising extra income
by increasing charges for services, and introducing more charges where legally
allowed.
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The Council remains firmly committed to a low Council Tax, but fears the
Government grant system could distort this ambition. The changes in the formula
means it is likely the Council will remain rooted to the funding floor for the
foreseeable future and that future grant increases will remain at a low level as
a consequence.
The challenge for the Council will be to continue improving services within a
more constrained financial environment. The challenge for residents will be to
ensure the Council has a clear understanding of the community's priorities.
Once again
we are keen to hear your views, this time on the Budget. Email best.value@rbkc.gov.uk
with any questions or views on plans for your Council tax by
20 February. Your feedback is invaluable to us.
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