Where does it all come from?

Bromley Council brings in nearly £600m from various sources – unfortunately, as we all know, it doesn’t go very far.

But where does it come from? You, of course: the taxpayer. However, only a fifth of it comes from Council tax; the rest of the money takes a very roundabout route to get to the Civic Centre.

Where the money comes from

As can be seen, most of the Council’s funding is paid via central government – over 70%, in fact. This includes direct grants from the Treasury and other departments and Bromley’s share of the Business Rates. When a business pays its rates to Bromley, the Council is simply acting as a collector on behalf of the Government. All the business rates from across the country are actually paid in to a national pool, from which the money is handed back out to councils according to a set formula.

Most of the remainder comes from the Council Tax.

Where does it all go?

A large chunk of the money is “ring-fenced”, most notably the “Dedicated Schools Grant” which is passed on directly to schools. Of the rest, the majority of the Council’s budget is spent on services for older people and adults with learning disabilities. Overall, the money gets divided up as follows:

Where the money goes (click for larger)

Why doesn’t my Council Tax increase by inflation?
The Government says that Councils have received increases in funding in excess of inflation. Hasn’t Bromley?

For 2009/10, for example, Bromley’s general grant from central government has increased by some 1.75% – slightly above real retail price inflation (though this hasn’t always been the case, even in recent years).
Unfortunately, so much of the Council’s expenditure is driven by demand and not just the general increase in prices, which means that government funding is not keeping pace. It also makes it difficult to always raise Council Tax purely by the rate of inflation. For instance, these major drivers of spending do not just change in line with inflation:

• Children going into care
• Children and adults with learning difficulties
• Older people needing care
• Quantities of household waste (and the landfill tax rates we have to pay)

The situation with government funding has become particularly acute with the changes to local government funding made by the Government back in 2002 – with more funding being diverted away from the South East and London to other parts of the country. Also, some smaller grants that are paid alongside the main grant have been frozen, and the government is also in the habit of imposing extra duties on Councils without passing on the necessary funding to deal with them.

Why doesn’t the Council just use the reserves to keep Council Tax down?

It is true that the Council, at the end of March 2009, held reserves of around £45m.

However, the reserves can only be spent once, and our reserves are mainly used to fund investment which produces revenue savings, or capital projects – such as the new Biggin Hill Leisure Centre and Swimming Pool, Concert Hall at Park Langley, and the new Orpington Library to name three examples. Because reducing our reserves also reduces the amount of interest we earn on that money, we always seek to use receipts from the sale of surplus assets to fund our capital spending.

Before 2008, the Council did dip into the reserves to keep Council Tax rises low. However, just as it is not sustainable for an individual or company to use their savings to fund their everyday spending, so neither should the Council if at all possible. Thanks to the tight financial control that Conservatives exercise in Bromley, nowadays we have been able to set a budget that does not require subsidy from the reserves.

Why doesn’t the Council just increase the Council Tax by however much is needed?

There are two main reasons that Conservatives have been unable to increase the Council Tax simply by whatever amount is required to make up the gap between costs and other income – which, in some recent years, would have meant a council tax increase of up to 20%:

(a) Feedback from the taxpaying public indicates that the people of Bromley Borough are strongly against any large rises.

(b) The government closely watches council tax increases with a view to using its “capping” powers to stop excessive increases. The large increases of the Lib/Lab years prompted a strong letter from the Government demanding the reasons for the hikes – such a request is the first step in deciding whether to cap the council – a process by which the Council is forced to redraft budgets to reverse large tax increases. That was the closest Bromley had ever been to being “capped”.