Service cuts or higher Council Tax?

This was the gloomy news from the cabinet meeting.

Director of resources Dr Pav Ramewal says Rother has been unfairly treated by the Government in its grant settlement (see story on right). Strong representations have been made to the Office of the Deputy Prime Minister.

The budget has been prepared in line with Rother's medium-term budget strategy of increasing it resource base annually, through phased council tax increases to secure and maintain a sound financial future.

It has been prepared on a standstill basis.

Commenting on the Government's national grant settlement, Dr Ramewal says: "Overall, it is nationally recognised that this is a very poor settlement for local government."

He says: "For Rother, the Government figures suggest an increase of 2.9 per cent on a like-for-like basis taking into account the transfer of benefit funding to the Department of Work and Pensions. Initial analysis however, suggests that the council may be significantly worse off under this new arrangement.

"A 34,000 increase represents a 0.5 per cent increase in cash for the council. This compares to an increase of 143,000 (or 2.2 per cent) the council could rightly expect under the floors mechanism. Representations have therefore been made to the Office of the Deputy Prime Minister that the Council has been unfairly treated with this settlement.

"It would appear that a number of district councils nationally have feared a similar outcome.

"Nationally, the Treasury has assumed an average increase in Council Tax levels for 2004/05 of seven per cent. If we were to spend at the Government's assumed level.....the council would need to raise 5.6m locally, which would equate to a Band "D" Council Tax charge of 151.

"This represents an increase of around 30 per cent on the 2003/04 Council Tax.

"The Government's assumptions do not take account of the unfunded pressures, such as the transfer of liquor licensing from the Magistrates' Courts, will have on Council Tax levels."

He says there appears to be little recognition of the effect on local taxpayer of shortfalls in Government funding. For every one per cent increase in overall council spending that is unfunded, the Council Tax will have to rise by three per cent to pay for it.

He warns: "It is important that members bear in mind that in recent announcements, the Government has made it clear that it will use its reserve capping powers on councils where it considers their tax increases to be excessive."

No information has been provided by the Government on capping criteria.

"There continues to be a difference of about 1.1m in what the Government thinks we should and actually do receive through the grant system. The Government believes we receive 1.1m per year more than we are entitled to."

The Government cannot withdraw funding in one go but instead may try to claw it back over a number of years through limiting grant payments.This could take anything between 15 and 25 years.

Dr Ramewal says: "If members are minded to sustain existing service delivery and ensure a balanced budget, a Council Tax of 129.81 (13 per cent) is required. However, based on present calculations, with an allowance for essential growth, a council tax of 138.74 for 2004/05 is required. This is an increase of 23.90 (20.8 per cent) which amounts to 46p per week (at Band D).

"The Government's grant settlement is extremely disappointing and depending on the final figures from the Department of Work and Pensions, potentially very damaging for the council's ability to continue to deliver high quality affordable services to the residents of the district.

"Strong representations have been made to the Government asking them to at least ensure they honour the spirit of the floor mechanism that guarantees a cash increase of 143,000 for the council next year...