London,
05
March
2015
|
12:53
Europe/Amsterdam

City of London Corporation sets ‘Square Mile’ council tax, business rates and its own budget for 2015-2016

At a full meeting of the elected Court of Common Council at Guildhall today (5 March 2015) the following was agreed for the financial year 2015-16:

Council tax Band D

City - £857.31

GLA precept - £86.13

IE Total - £943.44

Business Rates

Non-domestic rating multiplier 0.497 (49.7p)

Small business non-domestic rating multiplier 0.484 (48.4p)

(Both amounts include the City premium of 0.004 (0.4p)

In his annual speech to the Court at Guildhall, Roger Chadwick, Chairman of the Finance Committee, reported on the City Corporation’s Revenue and Capital Budgets. [Note: details of the current year’s sources of finance, including the three funds, City Fund, City’s Cash and Bridge House Estates, are found here.]

Finance Committee Chairman Roger Chadwick said:

"I outlined to Honourable Members in my statement last year, the level of expected government funding reductions, in light of which this Honourable Court agreed to review service activities in order to identify savings. The results of the efficiency gains to date and the further savings identified, have positioned us well with a forecast surplus on City Fund for next year and a balanced position for the year after. When the cumulative impact of the tightening public purse strings starts to bite in 2017-18, I am confident that the measures we are proposing will leave us well placed to address the challenges that lie ahead."

City Fund Finances

As in previous years, my main focus will be our local authority and City Police finances, known as the City Fund, and I would remind this Honourable Court of the main structural features of these finances.

Funding for local government activities ordinarily comes from three main sources.

  • Firstly, from the Government Formula Grant – which is mainly funded from business rates.
  • Secondly, from council tax - although for the City that is very small due to the relatively small residential population; and thirdly through what we are permitted to retain from the business rates we collect – if we can increase business rate revenue above our baseline funding level, we can retain a proportion of that growth.

The Government recently issued the Local Government Finance Settlement for 2015/16 and the Policing Minister published the revenue allocation for police for 2015/16.

The cash reductions for 2015/16 broadly equate to 16% for local authority services and 5% for Police services.

We had anticipated last year that the Local Government Settlement would be based on significantly lower funding levels, and this has already been built in to our medium term financial strategy.

By 2018/19, the cumulative reduction in local government funding from the current year is expected to be over 44%. This Honourable Court will be aware of measures we have taken to review our services and identify further efficiency savings and budget reductions. We have identified c£13m per annum of savings by 2017/18, and this has enabled us to project a balanced budget across the medium term.

For Police, the large deficit in 2014/15 makes a significant call on reserves, and the funding reduction is larger than anticipated. In addition to the main Police grant, the City Police also receives other specific grants, for example the Capital City Grant, but even if grants are maintained across the period, the rate of reduction in overall government funding in subsequent years means that the Police will need to continue to draw on reserves over the next three years, with the Reserve being exhausted early in 2017/18. Such deficits are despite the Force already having delivered savings of £16m from implementing its new operating model ‘City First’.

At the same time the Commissioner continues to have to apply his current resources to meet the ongoing threats of terrorism and economic fraud, whilst ensuring high police visibility throughout the Square Mile. The Force has already secured significant savings through its current reduction and restructuring programme ‘City Futures’, but to tackle the forecast future financial position, the Force will now be working on a supplementary savings plan.

I continue to alert business ratepayers that we might need to increase the Business Rates Premium in future years, to support security work on the ‘Ring of Steel’.

On business rates retention, although there has been growth in the rateable value of new business premises in the City, there is yet to be any tangible result in increased funding. This is because assumptions made in setting the starting point mean that it is unlikely that the City will be able to share in business rate growth in the short term; rather the impact of current and future appeals against the increase in rateable values set in April 2010, means we are more likely to be concerned with the safety net, which limits the City’s share of the losses to £1m p.a. We have already fallen into the safety net in 2013/14 and carried the resulting £1m p.a. loss in funding.

For the City of London, the level of government funding and council tax revenues doesn’t cover the cost of the local authority functions and services we provide. Property rental income and investment returns make a vital contribution to closing the City Fund spending gap. Our Investment income is holding up relatively well, but it cannot compensate for the reduction in government funding.

Reports summarising the revenue and capital budgets for each of the City’s funds have been circulated to each Member. The reports include a comprehensive set of resolutions for the year ahead. All Members have also had the opportunity to attend Finance briefings on the Budget proposals, and I have been particularly grateful for the high level of attendance at these briefings and the usefulness of the discussions.

Your Finance Committee has given careful consideration to the level of council tax and business rates premium, and the government’s grant inducement to freeze council tax. As I have explained the financial pressures on City Fund are considerable, but this is balanced against a desire to minimise the local tax burden on residents and ratepayers within the Square Mile. I am pleased to be recommending, for the sixth-year running, unchanged Council Tax, and for ten years running no change in the Business Rates Premium.

We expect the City’s Council Tax to remain the third lowest in London, and feedback from a public consultation meeting with City businesses in February was supportive of this position.

Before I conclude, I would like to thank Members of the Finance Committee for their hard work and sound advice during the period, and also my fellow Chairmen, who have taken such a constructive approach to identifying the savings that have enabled us to forecast a balanced financial position. Such corporate thinking will be important in the year ahead as we implement the savings programme together.

Conclusion

In conclusion, I hope this brief overview of our financial position, together with the detailed circulated reports, will reassure all Members.

This is a budget which builds on the strategy introduced last year – to enhance the financial strength of the Corporation by effective management of our resources through our service based review.

I believe we are well positioned to face the likelihood of further significant reductions in government funding and I warmly commend this Council Tax Requirement, Budget and the associated

Resolutions to this Honourable Court.

ENDS