What should we make of Mr Anderson’s 10% council tax referendum?

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Will Liverpool support Mayor Anderson’s call for a referendum for an additional 10% rise in council tax

First of all let me acknowledge that Liverpool Council is in a difficult place. In 2010 Liverpool was getting approximately 80% of our money from government grant both general and specific. That has been cut by a massive amount to make us ‘self-sufficient’.

But we got the money for a reason. Liverpool, like all Cities, has a large number of neighbourhoods which are amongst the poorest in the Country. In fact more than 60% of our neighbourhoods are in the bottom 10% of England on the scales of deprivation. Only a handful of wards, including my own, are in the top 50%. This deprivation has a double bind on the council. Poverty means that we have to support a large number of services to people in need, many of them in desperate need. It also means that in those areas property prices are very low which means a very low tax base from which we can charge for the services that we provide.

Council tax is a very poor way of taxing for as number of reasons. If you have lots of wealthy people in expensive houses then the average amount you need to collect if you were providing the same services is a lot lower. But of course you don’t provide the same services because you do not need to. A Band A council tax payer in a two up, two down, terraced house in Liverpool pays the same amount as someone in a Mansion flat in Westminster.

There is a basic fault within the system. When the council tax regime was introduced in 1994 it was based on rental values in 1991. A bit out of date but by no means unreasonable. The problem is that in 2016 we are still basing rentals on 1991 values. The assumption as made that there would be regular revaluations, probably on a seven year basis, to ensure that irregularities were ironed. Not just small one but big ones. Some 15% of Liverpool residential properties now lie in areas where previously there was no housing at all. So the council tax valuation there is based not on a 1991 rental value but a theoretical 1991 rental value. There has been no change because every government including the last one refused to undertake a revaluation. This has only been done in Wales where the losers drowned out the winners in what was essentially a no-win result for the Government.

Throughout the Country our funding for adult social care is in a mess. Yesterday I went on ITV to talk about the LGA’s projections that we are currently short of £1.3 billion for social care and that this figure will rise to £2.6billion by 2020. The facts is that we are living longer but not necessarily healthier. The number of elderly continues to rise and the number of ill elderly rises just as fast. They go to hospital and stay there because they cannot be cared for properly in their own home and community. Up to 30% of hospital beds which are very, very expensive are filled by people who do not need to be in them and do not want to be in them. They want to be cared for in a residential care home or even better in their own home. This causes huge problems in hospitals where there are now not enough beds for acute cases or admissions from A & E.

I spoke about this to the Social Care Minister last week. He acknowledged the problem. There is a glimmer of hope in what he had to say. There will be an increase in the Better Care Fund over the next three years and the Government is aware of the problems of places like Liverpool. There will be some recognition of the fact that places like Liverpool have such a low tax base that the ‘normal’ 2% precept makes only a tiny dent in the overhanging social care needs.We all await the forthcoming Autumn Statement with trepidation.

So back to the Mayors’ proposition. Liverpool has raised Council Tax by 4% this year – Lib Dems supported this. Labour’s proposal now is for another 4% next year and then if the referendum is successful 10% a year after. This is an average rise of 6% per year – far in excess of any increases in pensions, benefits or wages that any one in Liverpool will have and especially more than will be available to the poorest of our council tax payers.

I don’t think that the people of Liverpool will back that for two reasons:

Firstly, this is inherently unfair on those taxpayers. You can argue that in the mansion flats of Westminster there is plenty of fat and a real terms council tax increase is overdue. But you can’t argue that for the terraced house taxpayers of Liverpool.

Secondly, given many of the spending decisions of the Labour administration not least the £89,000 that Mayor Anderson claimed for what most believe to be his own legal expenses, people do not believe that the Mayor looks after their money wisely. We are currently contemplating huge traffic schemes in the City Centre costing up to £80million and which do not seem to be very popular. I know it’s a different kind of money but there are consequences of any council spending. You can clearly see that in comment after comment in the Echo following the announcement Liverpool taxpayers are very wary if not outright hostile to any claim about finance made by the Mayor.

I could be wrong but history says I am likely to be right. Every referendum to raise council tax has been lost. Interestingly the last was put forward by Oliver Martins a former Liverpool Labour Councillor who is now the Police and Crime Commissioner in Bedford. His proposal for an increase to protect the police budgets of that area were soundly defeated last year.

Mayor Anderson has actually made the same point himself when year after year he has argued against Green Party amendments which called for a referendum for inflation busting tax increases.

The simple fact is that we need more money. There are only two ways we can achieve this:

  1. Grow our economy. That is working. The massive successes of the Lib Dem council in the 00’s has widened our tax bases and that success carries on to this day.
  1. Get more money from the Government. I was surprised that there was no representative from Liverpool at the meeting with the social care Minister. I was there as an LGA rep and was able to put Liverpool’s case but there should have been a Labour rep there. We will only get money if we are able to work with others to coherently and logically put the case for it.

Of course in the long-term we must change the system of financing for local government. People should be taxed on their ability to pay and not their assets which can often be a sign of prior not current wealth. That’s why Lib Dems have long called for a local income tax although there are other potential measures which would help deal with imbalances.

In the short-term there will be no revaluation or systemic change. There is just Joe’s referendum idea. He told us in council last week that he will be consulting the people on the budget with a view to having a referendum. I personally believe that this is just a short-term proposal to keep the ever growing Momentum off his back. I hope that everyone will respond to the consultation and also to the wider issues of how Liverpool is funded and how local taxation is raised.

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About richardkemp

Leader of the Liberal Democrats in Liverpool. UK representative on UCLG Finance Committee, Executive Bureau and World Council. Deputy Chair and Lib Dem Spokesperon on the LGA Community Wellbeing Board. Married to the lovely Cllr Erica Kemp CBE with three children and three grandchildren.
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