Two views on the first budget

IN the run-up to reorganisation, Durham County Council predicted that a new unitary authority would be able to reduce council tax for most of its residents.

Taxpayers could, therefore, be forgiven a certain cynicism when this year’s bills dropped on the doormat with a bottom line showing significant tax rises for the overwhelming majority of homes in the county.

To be fair to County Hall, council tax is far from simple. It is also potential dynamite come election time, and the politicians know that many voters will only decide on the wisdom of the shake-up when they open their annual council tax bill.

Introduced to replace poll tax, it is based on the value of a home as of April 1, 1991, with each dwelling put into one of eight bands, with Band A householders charged the least and Band H charged the most.

Until March, householders in County Durham were charged by both Durham County Council and their district council, as well as the police and fire authorities and parish council if they had one.

As of last month, however, the county and district councils were replaced by one all-purpose unitary authority, looking after everything from schools and highways to leisure centres and refuse collection.

In its formal bid for unitary status, Durham County Council predicted the savings produced by the shake-up would mean its successor “would be able to afford to reduce council tax to the lowest current level in the county (excluding town and parish council precepts), so that most council taxpayers experience an early dividend from council reorganisation”.

In its first budget, agreed on February 27, the new council agreed an average 2.94 per cent tax rise.

To ensure bills were equalised across the county, the council adjusted the charges levied on properties in each of the former district areas to a standard rate.

This meant householders saw varied changes in the amount they had to pay for council services. Those living in the former Easington district saw a 4.75 per cent tax rise, while people in Durham City, Chester-le-Street, Wear Valley, Sedgefield and Teesdale had smaller rises.

Only in Derwentside did the council’s precept go down – by 0.98 per cent. However, by the time householders received their final bills, much of that cut had been swallowed up by the greater demands of the police and fire service, while in the area covered by the new Stanley Town Council, bills increased.

SIMON HENIG, Labour leader of Durham County Council, and Nigel Martin, leader of the opposition Liberal Democrat group, predictably have contrasting perspectives on the budget.

Coun Henig says its was sensible, pragmatic and, in the face of a recession unforeseen at the time of the original bid, the authority did well to hold the average tax rise to 2.94 per cent.

Coun Martin says it was a failure, broke promises made to the people and could cost Labour at the next election.

He insists the unitary bid document committed the council to reducing its tax to the level of the lowest district authority.

The council should have kept this promise, he argues – plugging the hole it would have created in the budget by spending almost £9m of its reserves.

“This was a contract between the government and the people and the new authority failed,” he said.

“In a normal year, I would never think of taking money from reserves. But our argument was we should live up to what’s in the bid document.

“Maybe we would need more reserves now, but the savings are coming through and we would pay it back over a slightly longer period.

“The main benefit of this reorganisation was going to be savings, and council tax was going to be lower. People are seeing it hasn’t happened and they’re pretty fed up”.

Coun Henig said he believes the bid was far from a binding contract – a view that he says was confirmed in writing by John Healey, Minister for Local Government.

“I made it very clear that although we would stick to the framework and the key principles, there may be times when we would have to look at it again,” Coun Henig said. “It’s not The Bible.”

He also believes the bid has been misunderstood, saying it pledged savings would be re-invested rather than used to cut council tax, with the key principle being equalisation, which the authority has achieved.

He says the Lib Dem proposal to draw on council reserves would have been storing up “huge problems” for the future. “We would have needed almost all useable reserves. It was a cheap headline grabber,” he said.

Coun Henig says the authority did well to keep the tax increase to 2.94 per cent because the real rate of inflation for council-run services, including fuel prices and pay awards, was running at more than three percent, well ahead of the Retail Prices Index.

HE also said that the credit crunch and recession meant the council had received £10m to £11m less in interest payments and £2.5m less in payments for services, while, unlike the Government, the council cannot borrow large extra sums of money.

He said: “We wouldn’t have wanted a unitary authority to come into being during a global downturn, but we are where we are and we’ve had to deal with that.

“It would have been nice if more than Derwentside had had reduced tax, but the costs would have been too high.”

• As part of the Acid Test series, The Northern Echo will put readers’ questions directly to the politicians in County Hall. Leave your comments and questions below and we will try to get the answers