Response to consultation on referendums to veto excessive council tax increases

London Councils has responded to the government's consultation on referendums to veto excessive council tax increases. 

As part of its commitment to devolution and empowering local people, the Coalition Government has published proposals to abolish Council Tax capping and replace it with a system of local referendums to veto excessive Council Tax rises.

Although London Councils supports the Government’s agenda for devolution and the empowerment of local communities, we believe these proposals are not substantially different to the current capping system but rather add a layer of complexity, cost and bureaucracy.

London local authorities have shown that they are responding to the current economic climate via the level of their council tax. Council taxes in London are lower than the England average and have been increasing below the rate of inflation in the last two years.

An initial survey of our member authorities suggests that the costs of holding a local council tax referendum in a London authority could range from £250,000 to £500,000. This would divert resources away from local budget setting and service priorities.

London also faces the possibility of a London wide referendum due to an ‘excessive’ change in the level of the GLA precept. Based on estimates received from boroughs, the cost of a London wide referendum on behalf of the GLA could be in the region of £13m.

Local tax referendums also impose additional burdens on local authorities which could, in the case of a referendum due to the level of the precept, be outside of local authority control. This process would be a serious diversion of attention away from the critical matter of protecting front line services while reducing net expenditure needs.

Ultimately, London Councils believes that the proposals in the consultation paper constitute a symbolic rather than a practical change in relation to council tax, local devolution and citizen empowerment.

All the costs and difficulties associated with the process of holding a local referendum are likely to prove a strong disincentive to local authorities to ever set a council tax increase which exceeds the thresholds set out by Government.

In effect, this would mean that local referendums would centralise control in the same way as capping does currently. This outcome removes the ability of locally democratically elected representatives to properly respond to the needs of their local communities using the financial tools at their disposal.

Please find London Councils' full response below.