Exclusive: the Treasury plans to raise the ceiling for the precepts of social protection
The Treasury plans to grant municipalities greater freedom to increase the precept of social protection for adults levied on municipal tax bills without being required to hold a referendum.
With less than a month to go before the expenditure review was released, LGC spoke to a range of finance and social service sources who all believe steps are being taken to enable councils to raise more. money than what is currently allowed through the council tax.
A senior financial source told LGC that the Treasury is considering removing the social protection precepts cap altogether so that councils can “increase it as much as they want.”
However, describing it as a ‘big step’, they added: ‘I think number 10 would politically hesitate to raise taxes on the back of [hiking national insurance] whatever the Treasury wishes. “
Meanwhile, Association of Directors of Adult Social Services President Stephen Chandler said, “I know there has been a suggestion that as part of the spending review the government will look at… a level local.
Likewise, a health source told LGC that a Whitehall official told them they believed the welfare precept would be removed altogether, which they criticized as “passing the parcel to local government.” “Something has to give, because no one expects the expenditure review to work,” they added.
In an interview with LGC, Shadow Communities Secretary Steve Reed said he expects the referendum cap on housing tax and the precept of social protection to be relaxed, which he denounces as “shifting the burden on the local government“, after the government plan Build Back Better: our social assistance plan has failed to solve many of the financial problems of the sector.
“The welfare plan actually does not provide any money for welfare – it says in black and white that they expect the rising costs to be covered by the council tax. But because of the cap , it cannot increase enough. will they hit people with another massive house tax hike, stifling local spending and crushing local economic stimuli at the same time as introducing the insurance tax hike? national? This is quite remarkable. “
The thresholds set by the Treasury this year are 2% or £ 5 on a D-Band bill for district councils – the same as for 2020-21 but lower than the 3% they were able to increase in 2019 -20 and 2018-19. Higher-level authorities can raise 5% (3% for adult social care and 2% for general expenditure), compared to 4% in the previous fiscal year, 5% in 2019-2020 and 6% in 2018- 2019.
Some authorities have reportedly asked the Treasury for more room to maneuver for housing tax increases, especially those with higher house prices, which would bring in a lot of money.
But there is concern that even with an increase in municipal taxes, councils will still struggle to meet growing demand pressures.
Mr. Chandler warned; “The numbers we have seen suggest that even with a significant increase in the council tax, this would not solve both the demand pressures today and the expected increase in demand over time.”
In recent years, ministers have called council financial regulations an increase in “basic purchasing power”, effectively relying on the assumption that the councils will make the maximum allowed council tax increase without referendum.
For example, the government increased the purchasing power of city councils by 4.6%, from £ 49bn in 2020-2021 to £ 51.3bn in 2021-2022, assuming authorities local authorities completely increase the municipal tax. But LGC’s research in March showed that only two-thirds (66%) of top-level councils opted for the maximum increase, with many fearing the impact on their local population.
“Just because the government gives local authorities the ability to raise housing tax does not mean that all councils can use this power, or even that they choose to do so,” Chandler said.
He described himself as “worried” about the 1.25% increase in national insurance linked to social care “leaving people to believe that social care was now being fixed” when “it was ‘is not related to the here and now. The vast majority of the additional funds will go to the NHS in the years to come.
“If the public saw another tax hike – housing tax and adult welfare – they would rightly say ‘what is this?’ Because they think they are going to pay higher national insurance premiums to pay for social care. But of course, that doesn’t start for a few years.
LGC understands that a recent letter from Health Secretary Sajid Javid to Directors of Adult Social Services indicates that boards will have to manage the current growth in demand for adult social services and cost pressures through the tax. municipal, social care precept and “future efficiencies”, with defined details. in the expenditure review.
Geoff Winterbottom, senior researcher for the Municipal Authorities Special Interest Group (Sigoma), said this “clearly creates an expectation that there will be an announcement about this in the spending review.” “Whether that’s the usual statement about capped increases or something broader, let’s say leaving it to the boards, we don’t know,” he continued.
Another financial expert said that the fact that the government expects the councils to finance the pressures through the housing tax “gave a very strong signal that the authorities would be able to increase their taxes. housing well above inflation “.
“Our assumption was that the maximum increase in D-band would be 2% (in line with recent thresholds) and then an additional 2% for the ASC precept,” they said. “Some authorities have speculated that the maximum ASC precept could be 6% over 3 years, which has been used in the past.
“I wonder if the Treasury will try to push it even further and give councils even more leeway to increase the council tax. They certainly have the idea that if you associate a tax increase with “social care” or “health” they seem to be more acceptable to the taxpayer. “
The Local Government Association says councils face an annual increase of £ 2.6 billion in cost pressures to keep services at their current levels, and its deputy chief executive Sarah Pickup said last week that a “back of the envelope” calculation suggested a 5% increase. to deal with existing pressures and an additional 3.5% for inflation and demographic pressures.
She added that she expected the precept of adult social care to be increased.
Mr Winterbottom said he didn’t think “a city council head would appreciate another year of (say) 5% increase in municipal taxes”. “But for us there is another problem – he just does not raise money in proportion to needs due to our low house band, while for other boards it will increase proportionately more to their power to d ‘basic purchase,’ he continued. “So we would all prefer additional funding from general taxation. We suggest that if the funding comes from the housing tax, there should be an additional adjustment to the distribution of the social care allowance or an additional allowance for better care that reflects the varying ability to raise funds from increases in housing tax. “
Paul Honeyben, London Councils Acting Director of Finance and Local Government Improvement, said: “As a general principle we would like councils to have full control over the setting of municipal taxes rather than imposed caps. at the central level. In principle, we have always opposed this as a funding mechanism for social services because it does not provide funding where it is most needed and is a central mortgage on the housing tax. We would like the precept to be ended and replaced with grant funding as needed.
A Treasury spokesperson said: ‘We have allocated more than £ 12bn directly to advice since the start of the pandemic. The expenditure review will continue to focus on supporting employment and meeting key public priorities.