Growing belief that councils have replaced government grants by charging for services is far from true.
In any given week, both of the following stories can make the news:
There appears to be some disagreement about how our councils are faring. The Centre has blogged before about how councils have had their budgets cut dramatically, and I have written about how councils do rely on fees to provide some of the services we use each day. But, the growing belief that councils have replaced government grants by charging for services is far from true.
In fact, sales, fees and charges account for only 7 per cent of council’s spending in 2013/14. Thus, while a £565 million account surplus from on- and off-street parking charges for 2011/12 seems like a large sum, it is only 0.3 per cent of local authority budgets—hardly the cash cow it is being portrayed as.
Around 60 per cent of councils spending comes from Whitehall which is set to fall 20 per cent from 2010/11 to 2014/15. Also, councils’ other sources of income are relatively immovable. Councils are under pressure to maintain council tax (15 per cent of budgets) at current levels through Council Tax Freeze Grant, and they cannot vary their business rates income in the short term.
So, sales, fees and charges are the only viable source of income to fill the gap of funding from Whitehall to maintain services, roads, and support local business in the short-term. And, since fees can only be charged at a level to recoup the costs of providing services, they provide a fair and accountable source of income.
Councils have an obligation to maintain roads and support business services and regulations. In the face of falling government grants and pressure to cut local taxes and fees, funding services is getting even harder for councils.
The stricter interpretation of fees regulations by government and courts means councils have come under fire for “overcharging” for services from parking to business licences. Following a report by the RAC, councils have been accused of making ‘windfall’ profits on parking charges. In Barnet, the council lost in a high court ruling for an increase in their parking charges to fight parking congestion and pay for road maintenance. Westminster City Council recently lost a legal battle over license fees for sex shops, because the court ruled enforcement costs could not be included in license fees. This effectively reduced them from £30,000 to £1,000 and left a funding gap for enforcing regulation of the shops.
Rather than limiting the councils’ control over their budgets—especially with charging fees that align the costs with the consumer—Government should be standing behind councils so they can develop new and better ways of funding themselves. With councils budgets falling and only one means to raise revenues to pay for services and infrastructure, councils need the confidence and the freedom to invest in their areas through mechanisms such as fees and charges.
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