What is…South Tyneside Council?

In this series, we're going to be looking at South Tyneside Council - what it is, how it works, how it's funded and so on. This edition: how STC is funded (part 3)

It’s the only tax which is completely retained locally, although it does include a levy towards police funding and is subject to controls set by central government such as:

• there is no flexibility over exemptions/discounts. Discounts such as student exemptions and single person 25% discounts are set by national government which the council has no control over.
• there is no flexibility applying CT. CT bands were set in 1991 however since then house prices have increased significantly with the difference between the cheapest and the most expensive properties greatly amplified. Despite this, the council has no ability to increase the highest rate of council tax on high value properties or to reduce it on the lowest value homes which is why CT is often labelled ‘regressive’ - the wealthiest pay proportionately less, whilst the poorest pay more proportionately more.
• there is no ability to increase the charge beyond a set threshold. Annual CT increases are capped by the government, if the council wants to increase CT tax beyond this set level, they must hold a local referendum for residents to decide. For 2021/22, South Tyneside’s CT increased by 3.95% - 0.95% CT increase plus 3% adult social care levy.
• there is restricted ability to respond to local service pressures. Since 2016, councils like ours with social care responsibilities, have been allowed to increase their share of the CT collected. This social care precept enables the council to raise CT by up to 3% in order to respond to service pressures. Although this extra income is ring-fenced for adult social care services only, it has not solved the substantial social care funding gap. Additionally, it has highlighted the regressive problems associated with CT - the amount each council can raise through the social care precept is directly related to 30 year old property valuations rather than an assessment of local demand for social care.

So what does all this mean for council budgets?

Beyond the three main sources of income we’ve looked at, there are a few other options councils have to access further funding. Although these are more limited and ad hoc, they do have an impact on available spend.

• Councils can put fees and charges on some services, eg. leisure centres but there are strict rules - fees cannot be charged for services they have a legal duty to provide, such as libraries, and any income generated must be spent on that service area, so for example, parking charges must be used for parking services, road repairs or restriction enforcement.
• Councils have access to borrowing at relatively low rates from the Public Works Loan Board
• Council reserves. Although this is not an income per se it is worth mentioning. In the same way as you might think it’s sensible to save a bit of money for a ‘rainy day’, the council need to keep a healthy balance of reserves. You can check out STC’s reserves of £229.691m here

CT now represents a much larger proportion of local authority income, having grown from a third to over half, leading essential services to become more and more reliant on CT revenue. And now, a report from the Institute for Government reveals just how far the severe funding cuts and rising demand for social care have devastated the council’s ability to provide the services taken for granted in the not so distant past.

You can see a breakdown of how your Council Tax is spent here

SERIES CONTINUES HERE: What is the Localism Act and how does it affect STC?