Lessons from Hackney
Last night Hackney Council passed a budget with £44 million of cuts, amidst protests from anti-cuts campaigners. Having looked at their budget, I think councillors have done very well in extremely difficult situation - unlike in many other councils, no youth facilities will be closed, no libraries shut, no reduction to key services like recycling or street cleansing, no restrictions on care to be provided to our oldest and most vulnerable of residents, and the council is maintaining services such as support for victims of domestic violence and youth crime intervention work which the national government had cut funding for.
There is an irony in watching protesters who say all political parties are just the same with one breath, while with the next protesting against the Tory/Lib Dem decision to end Labour's policy of giving more money to the most deprived areas.
Hackney councillors will face an even harder job next year, with a further £26 million in cuts needing to be made. I think it is worth revisiting an article I wrote in 2009, in response to Hackney's decision to freeze their council tax.
There are good reasons for trying to keep council tax low - particularly in poor areas where it was historically amongst the highest in the country. But it is one of the few ways that local councils can raise money, as the following example shows:
If Hackney Council had decided in 2006, instead of freezing their council tax, to raise it by 1% per year, then they would have raised roughly £900,000 per year, at an extra cost to the average household of £10 per year (more for people in higher value properties, less for people in lower value properties, and nothing for people eligible for council tax benefit).
Over four years, this would mean that the average household would be paying an extra £50 per year, and the council would have an extra £3.65 million to spend on local services. This year and next year, it would also have received an extra £90,000 from central government in council tax freeze grant.
If, instead, councillors had raised council tax by 2% per year, then the average household would be £2 per week worse off (more for wealthier households, nothing for the poorest households), and the council would have approximately £7.5 million in extra revenue, including council tax from residents, extra council tax benefit and council tax freeze grant.
Now, obviously, an extra £3.5-£7 million in revenue wouldn't prevent all the cuts, and higher council tax would make life even tougher for many people, particularly lower paid workers and pensioners who are just above the threshold for receiving benefits. But, crudely, the overall impact of small annual increases in council tax would be that young professionals in the trendy bits of the borough would now be paying more taxes to provide services for people with long term illnesses to receive social care, young people to be able to go to enjoyable and safe activities on the estates, and victims of domestic violence to get support when they need it.
Labour councils are still boasting about having taken the "tough decision" to freeze the council tax. I think most councillors are doing their best now in desperately tough times, but a really tough and correct decision would have been to raise council tax while Labour was in power, in order to help protect our communities when this bunch of sub-Thatcherite extremists took over.