Council Tax referendum – what is it and what happens ?

By | November 10, 2016

Council Tax demand noticeWith the time of local authority budget setting fast approaching the discussions are turning to the level of Council Tax which needs to be raised to support these budgets.

How does the capping work  and what can and can’t the local authority do ?

Council Tax capping

Since 01 April 2013 the government has set a cap to limit how much a Council Tax charge can be increased by in any particular year. For most local authorities this cap limits the rise for the basic Council Tax charge (that without any precepts) to no more than 1.99%.

A district authority, where social care is dealt with by a county authority, will be allowed an increase of up to £5 – the 2% ceiling does not apply in their case due to the low value of any rise.

From 01 April 2016 an additional figure has been allowed for a ring-fenced ‘Social Care’ precept. This will allow local authorities who use the Social Care precept to increase the basic Council Tax charge by up to 3.99% before a referendum would be needed. A referendum would still be needed however if the basic Council Tax limit of 1.99% was exceed, for example:

1.99% basic rise + 2% social care rise – no referendum needed
2.99% basic rise + 1% social care rise – referendum needed

The Policing and Fire & Rescue components of the Council Tax charge are also capped. These precepts also become ‘excessive’ in most cases where they reach or exceed 2%.

Council Tax Parish Charges are not subject to a cap and are not therefore currently subject to a referendum.

What is excessive ?

Excessive is in most cases deemed to be 2% or above – where both the full basic Council Tax rise and the Social Care rise are applied the ceiling can be up to 3.99% rather than 2%.  A rise would still be excessive however if the basic Council Tax limit of 1.99% was exceeded as part of that 3.99% figure

A district authority, where social care is dealt with by a county authority, will be deemed excessive where an increase is greater than £5 – the 2% ceiling does not apply.

Where any part of the Council Tax rise has been deemed to be ‘excessive’ the local authority must hold a referendum before the Council Tax charge can be set at that level.

What is the referendum

When the government put in place limits on how much Council Tax could rise by they gave a local authority the option to exceed this limit. If they exceed this limit however they must take the increase to a public referendum.

The referendum will be held in the Council Tax area(s) which are directly affected by the amounts in question. The list of people eligible to vote will be that held on the register of electors for the area.

If the referendum rejects the proposal then a new Council Tax charge must be set which does not breach the relevant threshold. The rules regarding referendums were set out in the The Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012 (as amended).

Have any referendums taken place ?

So far only one Council Tax referendum has taken place. In 2015 Berkshire held a referendum on increasing the Policing component of the charge by 15.84% – 48p per week on a Band D property . This increase was rejected and new Council Tax demand notices had to be issued showing the adjusted charge. This referendum cost in the region of £600,000 (£350,000 for the referendum and £250,000 for the cost of re-issuing demand notices).

As of December 2016 Liverpool City Council have now rejected proposals that they may ask for an increase of 10%. Surrey County Council however are looking at proposing a 15% increase.

Why is a referendum held only after the higher Council Tax has already been set ?

A Council Tax charge for the upcoming year should be set by 11 March. In the case of an ‘excessive’ amount requiring a referendum this means that the higher charge will be in place to start from 01 April however separate legislation will govern when the actual referendum, which is required to be held, will take place (often not until the following May).

This means that, as is expected to occur in Surrey in 2017, the higher Council Tax charge can be set and put in to payment prior to the vote taking place on whether or not it is to be rejected. If it was to be rejected then the Council Tax charge would have to be lowered back to a level that is ‘not excessive’ and revised Council Tax Demand Notices issued.

Need expert Council Tax help or assistance ?

This article is solely the view of LGFA92, the Council Tax agents and experts, based on our interpretation of legislation. Your local authority is free to dispute this view. A binding decision may require the intervention of a valuation tribunal.

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