The great government Council Tax swindle
Where all your tax goes

By Alex Perkins, Liberal Democrat Canterbury City Council Leader

The great local tax rip-off. Every year the City Council collects millions in business rates from all the local companies in our area. But none of it stays in the district – it all gets sent straight to the government. That may surprise some people – but not as much as what happens next.

The government then hand it out to all the councils across the country based NOT on who collected most, deserves most or does their utmost to support and assist the businesses that generated it – but on a formula, which is essentially kept secret.

They call this the rate support grant. It amounts to a lot of money. The basic idea is that we use it to pay for nearly all of the services we then supply to local people. The local council raises any additional money that is required by charging local Council Tax on homes in the district. The actual sum of money handed out by the government in rate support grant changes every year. This makes it very hard for the council to set a budget - but everyone is in the same boat.

This year the government announced that all local authorities would get a 3% increase in their grant. This was because they had set us new targets for things like recycling and licensing which we have to meet and cost lots of extra money.

Then they gave us an increase of just 1.6%. They are not inclined to give out explanations on these matters. They are basically a law unto themselves. So basically we have been short changed. The obvious response would be to raise the difference by increasing council tax proportionately.

We collect all the council tax from everyone in the district. But we don’t get to keep much of that either. 80% goes straight to Kent County Council to pay for things like roads and pavements. About another 10% goes to pay for the police. So the local City Council ends up with only about ten percent of your council tax. So that’s none of the business rate and just 10% of the council tax that Canterbury City Council get to keep. The rest is taken away from us and spent elsewhere.

We had assumed that the government had deliberately underfunded us with the intention that we should simply increase council tax by an equivalent amount to pay for all of the new services and targets that they now tell us we must deliver. And remember – the government have only just announced that we are one of the very few “excellent” local authorities in the country. Clearly this means that they consider us to be efficient and cost-effective – it said so in their report.

But then comes the silly bit. Having forced us to increase our expenditure by setting high targets and giving us new jobs to do, and then reduced the amount of grant they give us to pay for it, they then announced that any council that increases local tax by the amount needed to meet the targets they themselves had set will be capped!

We have written to the government to ask exactly what the point of all this is. They have not replied.

See also LibDems call for council Tax to be scrapped