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ITEM EX6B - ANNEX 3

EXECUTIVE – 22 JANUARY 2002

REVENUE BUDGET AND MEDIUM TERM FINANCIAL
PLAN 2002/03 TO 2005/06

COUNCIL TAX AND LIMITATION OF COUNCIL TAX
AND PRECEPTS (CAPPING)

1. In order to set its Council Tax, the County Council needs the following information:

1. the County Council’s budget requirement for 2002/03. This is the County Council’s net expenditure to be financed by the Council Tax, NNDR (Business Rates) and Revenue Support Grant (RSG). This is determined by the Council when it formally sets the budget;
2. the amount to be received from Business Rates and Revenue Support Grant. This is determined by Government within the Local Government Finance Settlement. We received provisional figures on 4 December 2001, which were subsequently updated on 28 December 2001. We should receive the final figures at the end of January 2002;
3. any surpluses/shortfalls on the Council Tax collection funds for earlier years and the estimated position for the current year. Each District Council must make this calculation and notify the County Council of its share before 31 January 2002. The County Council must take these adjustments into account in setting its precept and the Council Tax figures for 2002/03. These adjustments only affect the Council Tax, not the County Council’s budget requirement;
4. the Council Tax base, expressed in terms of Band D equivalent properties. Each District Council must formally notify the County Council of the tax base for its area before 31 January 2002. The tax base is determined by adjusting the relevant tax base for estimated losses on collection. The relevant tax base has been used by the Government for distributing RSG.
2. Based on the latest information available and assuming a budget as shown in the booklet the calculation of the Band D Council Tax for 2002/03 is as follows:

Property Band	Property Values	Band D Proportion	2001/02 £ p	2002/03 £ p
A	Up to £40,000	6/9	466.19	484.94
B	Over £40,000 and up to £52,000	7/9	543.88	565.76
C	Over £52,000 and up to £68,000	8/9	621.58	646.59
D	Over £68,000 and up to £88,000	9/9	699.28	727.41
E	Over £88,000 and up to £120,000	11/9	854.68	889.06
F	Over £120,000 and up to £160,000	13/9	1,010.07	1,050.70
G	Over £160,000 and up to £320,000	15/9	1,165.47	1,212.35
H	Over £320,000	18/9	1,398.56	1,454.82

• The County Council’s precept, allocated to District Councils pro rata to their share of the Council Tax base for the County Council;
• The Council Tax figures for the County Council for a Band D equivalent property and a calculation of the equivalent Council Tax figure for all other Bands.

3. The Secretary of State has wide powers to take action against those authorities he considers have set excessive budgets. They allow the Secretary of State to look back over two or more years when deciding if increases are excessive – but not back beyond 1998/99 – and to determine categories of authority.
4. Under the powers, the Secretary of State must first decide if the budget requirement is excessive. He will need to determine a set of principles to decide this, which must include a comparison with the budget requirement for the previous year.
5. If the Secretary of State decides that the budget requirement is excessive, he has four options:

• He may designate an authority in year (i.e. set a maximum amount for the budget requirement for the year in question).
• He may designate the authority for the following year.
• He may set a notional budget requirement which is substituted for the actual budget requirement (i.e. a specific amount as opposed to maximum budget requirement)
• He may designate an authority over a number of years starting in year or the following year (i.e. allowing a phased reduction in the budget over several years).

Experience From Previous Years

6. 2000/01 was the first year of the new capping powers. The principles the Government used in determining whether an authority had set excessive increases were:

• budget requirement increases over 6% and Council Tax increases over 8% for 2000/01; and
• two year budget requirement and Council Tax increases of over 12.5% and 20% respectively.

7. Oxfordshire breached all of the thresholds set and was one of three authorities the Government identified as having made excessive increases in 2000/01. However, the Secretary of State decided in November 2000 to take no action against all three authorities.
8. In 2001/02 the criteria were not released but have been deduced as follows:

• Budget requirement increases over 5.1 % and Council Tax increases over 6.4 % for 2001/02; and
• Three year budget requirement and Council Tax increases of over 20 % and 25 % respectively.

9. Whether an authority is designated or not will in the main be determined by their position relative to other authorities.
10. A preliminary survey undertaken by the Society of County Treasurers in early December indicated that other South East Counties’ Council Tax increases would be in the range 5.0% to 10.0% (with all but one of those responding projecting increases of more than 8.5 %) and budget increases in the range 6.0% to 7.3% (N.B. These estimates were before CTBSL had been abolished). As the survey has been undertaken early in the budget process it can only give a broad indication of likely increases. Members will be kept informed of any further information about the budget and Council Tax increases in other authorities as and when it becomes available.

Conclusions

11. It is up to individual authorities to determine whether the budget they set is excessive and likely to be capped. In light of previous experience and of information on the Council’s position relative to other authorities members will need to decide what increases would be considered acceptable.
    
    
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