The UK – like most areas around the world – is in total lockdown at the moment. This has had a massive impact on local authorities which have had to offer grants (though, centrally funded) to businesses. The business rate relief and businesses closing down will have a huge drag on finances.
So how do the councils usually look at solving this?
They will find ways in the short term to finance their expenditure and make staffing cuts where possible in order to maintain their level output. But the cost of all of this will need to be funded – usually most of this money comes from either grants or tax.
The councils charge council tax on every occupied property; with penalties applied to many properties which are vacant. These can be quite onerous – thus forcing owners to occupy the properties or face large monthly bills.
The other large income provider is the business rates charged to local businesses.
They can also raise funds by increasing penalties – such as parking fines and fines for other things such as putting your rubbish in the wrong recycling bin…
3 ways your council is likely to try and reclaim lost revenue
- Look to regulate various areas of the property market in the local area
- Introducing licensing schemes for properties under the guise of creating safer housing for people in the private rental sector. There is mandatory licensing of properties which pose a different set of risks – such as increased fire or safety risks – which attempts to ensure property of a certain standard is provided. This is suitable for large HMOs (houses of multiple occupation).
- Where this is not really applicable is on smaller properties – where some councils are now extending their licensing requirements. This is really a cash grab – and with most councils already behind on reviewing the mandatory licenses, I wonder how they will get to these extra applications before the renewals are due.
- Look to bring in further council tax increases
- Council tax in most areas over the last three years have seen 3-5% compounded increases. This has been used to plug the gap in government funding (or lack of) in social care. So as usual income tax, VAT, corporation tax, inheritance tax and capital gains tax is not enough – these increases to council tax have meant substantial increases for every house in the country.
- Pushing private investment in student accommodation
- Students are exempt from paying council tax, so it pays local authorities to relax planning restrictions around student accommodation – one in creating spaces for students that may then attract local businesses and then secondly in moving students into a smaller footprint of the city. This opens more housing up to families – who would be liable for council tax – and therefore increases revenues as well.
Conclusions
Unfortunately there is not much you can do about these increases – they seem to be just added to your yearly bill. One way around this is to lobby with your local MP or ask for a breakdown of the expenditure in your area. The public sector is a playground for wasting budgets – usually the premise is that if it isn’t spent in the year, the departmental budget is decreased. This leads to extreme amounts of wastage toward the year end and is an extremely wasteful way to manage finance.
Imagine being told that if you didn’t spend all of your budget in one year, you would lose it for the next year. This is the opposite of what occurs in the private sector – which operates in a more logical way.
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