Parish precept - council tax statement differs from PC vote

Question

This appears complicated - but it shouldn’t be.

There are some ‘known’ facts, some ‘assumed’ facts and some assumptions.  There are questions that have been posed and answers provided.  

The answers provided are generally taken as being true and accurate but it is felt that what has NOT been answered is where the truth is actually to be found and that particular care and attention has been paid to avoiding answering those parts.

I observe 1 PC closely and several more casually.

The example comes from the 1 PC I have observed but - as has been stated by the county association of local councils input - the issue affects “…virtually all councils in 2021/22…” (in the LA area)

The scenario:

Nov 20 PC holds budget meeting and agrees by vote a 0% parish precept increase.

Mar 21 council tax summary received from LA shows a 1.3% increase to parish precept.

How is this possible?

The how is this possible question is what has resulted in various answers from various sources - some are patently contradictory, some are so vague as to demonstrate that the person providing the answer is absolutely clueless about the issue, some seem to simply accept that it has happened and offer a shallow reason why - but no questioning of how and whether it is ‘legal.’

The Players:

1 x PC (plus others through liaison)

1 x County association of local councils

1 x County councillor (in liaison with county council finance department)

1 x concerned resident seeking credible answers

The story so far (timeline as pieced together from available information):

Nov 22 county council informs all PCs of a forecast downturn in CT income to county as a consequence of ‘predicted’ increase in council tax support grant claimants (discounts or waivers in CT liability due to pandemic) resulting in a lower grant being available to PCs.  Less Band D paying households equals less money “in” to county and less money “across” to PCs by way of grant.

There is no reason to believe that information was NOT sent to all PCs as has been stated by county council.

There IS a question about the accuracy and validity of the “prediction” of reduced income to county and on what basis this analysis has been made - no supporting data for this has been made available.

The subject PC held budget meeting in Nov 20 and set a 0% precept by vote.

The process of arriving at that is highly dubious - but that’s another story and it is NOT known if the PC received, understood the implication or took account of the correspondence that is believed to have been forwarded to them from county council.

The 0% precept was agreed by vote at a public meeting and was advertised by the clerk on social media.

The minutes for that meeting however were not publicised until Mar 21 when the precept issue was flagged and questioned.

So what we have is a situation which - according to the county association - affects virtually all councils in 21/22.

PC set, agreed, voted and advertised their precept for FY 21/22 at 0% increase.

Council tax summary received county wide Mar 21 with a different precept value than that which was agreed by (apparently many) PCs.

The explanation (in so far as it goes) from county council is that - due to predicted reduced income to county, there will be a reduced grant available to parishes.

That’s all OK, I get that (not sure I believe it in the absence of supporting data but I’ll accept it ‘in principle.’)

The chair of the subject PC has publicly stated that the increase has been IMPOSED upon the PC by county.

The county councillor has stated that (county) "...cannot prescribe the decisions they (PC) make and definitely cannot impose anything on a Town or Parish Council..."

So now we get to the exam questions which still remain outstanding answers from county councillor and county council:

Did county tell parishes that the £s figure demand from parish to county would be unachievable due to predicted reduction in county income?

If yes, did parishes review their forecast 21/22 FY spend (down) in order to reduce spending and keep precept demand to county within the level that would ’fit’ the predicted available grant?

Did county simply ‘adjust’ parish precept %s ’up’ to make up the predicted shortfall in what parishes had submitted as grant demand?

Questions for the esteemed membership of this forum:

Has anyone else come across anything like this?

Am I missing something that is blindingly obvious?

Any ideas / suggestions welcomed - apart from ask the clerk.

Answer 1

The precept and the council tax support grant are two separate issues. The parish council must set its precept and this must be notified as a sum of money, not a percentage change. November seems far too early to be setting a precept, in my opinion. I start the process of preparing the budget in November and set the precept in January. If the council tax support grant represents a significant part of the council's income, the council must seek clarification of the likely grant figure, if it wishes to take this into account in the budget. It matters not whether the county council did or didn't inform the parishes. The parishes have a duty to find out for themselves. If the county provided early estimates that were subsequently revised, that is unfortunate, but surely within the realms of normal fluctuations in income and expenditure. That's why we hold reserves.

If the county council has published precept figures including the CTSG, that is a mistake on their part. Precept is precept. All other monies are unrelated. This would lead to problems further down the line, as the external auditor would be unable to agree the Annual Return.

Comments

I understand some of that Dave.

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Again, understood (somebody else), it all fits with what I have been able to deduce so far.

Absolutely agree, the subject PC's entire financial management and planning process is fundamentally flawed - due to a complete lack of understanding.

It is my (reasonable) assumption that a "cash" sum demand was forwarded from PC to county (acknowledging that the cash sum was, in any event, fundamentally flawed.

The part I cannot get answered though - did county tell parish (parishes) that they may need to adjust their demand or incur an CT increase.

Is the (what appears to be a unilaterally imposed increase at county) legal?

I appreciate county are doing the sums to satisfy the demand but as Dave highlights above - potential problem at audit - PC vote shows 0% CT summary shows 1.3% - explain.

If it can be explained easily, why is nobody able/willing to do so?

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Also,
what I wanted to know from members here, is this scenario exclusive to this county or has anything similar happened elsewhere in UK?

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The problem is two fold:
County or district should tell you how many house of each type and it's bad debt rate which provides a formula of x number of band D equivilent houses. E.g. 1200 and last year might have been 1250, because of discounts and bad debt.

The Parish Council should have voted for a cash amount e.g. £50,000. Instead by voting for 0% the clerk, who submits the demand will have done was copy last year's precept. So the fault is with parish councillors for voting for the wrong thing and the clerk for allowing it, especially without clarity of intention.

Every district I have worked with has always provided the clerk and chair with a spreadsheet in December of the house types, bad debt, discounts and an overall band D equivalent. If this wasn't sent, the Clerk and Chair should have requested it, it is usually sent with the proforma precept demand that is signed by the Chairman, which demands the cash figure.

Again, at this point the error could have been noticed.

The only chance of it not being a Parish error is if, after submission, there was such a significant increase in the houses claiming discounts, which meant December figures could not be relied upon. - but this would have to be massive, our 0% increase changed to 0.01% increase due to new discounted properties.

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That makes sense....  many thanks.

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"...So the fault is with parish councillors for voting for the wrong thing and the clerk for allowing it, especially without clarity of intention..."

I'd take issue with (my interpretation) of the balance of culpability in the statement above.

Councillors may not actually 'know' what they are doing (sad but true) which is why there is a paid (supposedly) professional Responsible Financial officer / clerk.

I will concede that (unless there are notably experienced councillors) in this scenario, the councillors must defer to the clerks professional knowledge and experience.

Councillors absolutely SHOULD know what they are voting for, but if it needs explaining, the person to do that is the clerk.

If the clerk doesn't understand and doesn't explain to councillors - everyone is doomed!

I'd suggest the balance of culpability is actually clerk then councillors rather than councillors then clerk.

Just a view, happy to be corrected.

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"...County or district should tell you how many house of each type and it's bad debt rate which provides a formula of x number of band D equivilent houses. E.g. 1200 and last year might have been 1250, because of discounts and bad debt..."

It is reported that they did - in Nov.
"...The Parish Council should have voted for a cash amount e.g. £50,000..."
Agreed - but that would have required an effective budget reconciliation and forecast which this particular PC are incapable of doing.

They were actually presented with a choice of 3 %s and asked to select 1.  The choices were 0 1.5 or 3 (from memory)

"...Instead by voting for 0% the clerk, who submits the demand will have done was copy last year's precept..."

That is exactly what I suspect happened.

"...So the fault is with parish councillors for voting for the wrong thing and the clerk for allowing it, especially without clarity of intention..."

Already done that bit.

"...Every district I have worked with has always provided the clerk and chair with a spreadsheet in December of the house types, bad debt, discounts and an overall band D equivalent..."

Believe this was sent by county in Nov (twice)

 "...If this wasn't sent, the Clerk and Chair should have requested it, it is usually sent with the proforma precept demand that is signed by the Chairman, which demands the cash figure..."

"...Again, at this point the error could have been noticed...."

"...The only chance of it not being a Parish error is if, after submission, there was such a significant increase in the houses claiming discounts, which meant December figures could not be relied upon. - but this would have to be massive, our 0% increase changed to 0.01% increase due to new discounted properties..."

So I think I have a fair grasp of what actually happened.  The final point is that county have recorded 1.3% increase to parish precept on the county CT summary.

This is the issue that is at the heart of it.

PC voted 0% (we know the errors that led to that but it is, none the less, a statement of fact and in the public record.)

County CT summary shows 1.3% parish precept increase.

What happens next?  (Apart from everyone just ignores it and carries on as if it never happened)

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Just to follow up Dave, county council didn't state what the CTSG (in cash terms) to parish was in their CT summary, they did state that there was a 1.3% increase to parish precept.

So, we know the PC set the precept as a % (incorrectly - because they don't know what they are doing and informed the public)

In order to meet the cash figure that was submitted to county by parish, county had to increase parish precept by 1.3% - that was stated on the summary.

On reflection, I suspect this was the only option open to county because had they NOT separated it out, then they would likely have exceeded the 4% (+2) which would have triggered a referendum.

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But it still begs the question:  Did county inform parish that this would be the consequence of the CTSG demand?

Whether they are 'required' to or not is not the issue, I'm trying to find out how this has happened and so far, ecveryone seems to be trying to duck the question or pass the buck

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The Parish Precept is exempt from the referendum principles as are the Police and Fire elements, only county and districts are limited by referendum.

The support grant is, a bit of a red herring in this scenario, as it is passed directly from MHLC through then district or county down the Parish.

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Maybe my thinking the reason county singled it out is the red herring - I didn't know it was exempt from referendum.  What does MHLC mean?

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MHCL?, ministry of housing, communities and local government. It is the government department that deals with local authorities. The support grant is paid to district or county to devolve down to Parishes, it goes via the the first tier authorities as they have up to date (?) Housing figures so they can distribute the grant fairly across all of the parishes and to the district council for unparished areas.

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Got it thanx

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For those of you still receiving any Council Tax Support Grant (however small this might be)  - think yourselves very lucky - not all Counties are treated the same by Central Government!

Answer 2

Exactly as per DaveTheClerk,

Importantly, the precept isn't (for example) "£15 per band D house", but an instruction to the district council to provide £50,000 to the Parish Council, which the district collects based on the council tax bands.

If you knew there was going to be a reduction in the council tax base (number houses paying in). The only way to maintain a 0% rise, was to cut the precept - which is a cash demand e.g. £50,000 to £46,000 for instance.

By keeping your precept demand at £50,000, but with a reduced council tax base (number of houses paying), you have, by default increased what those who do pay, pay.

We start our budget plans for what we want to achieve in November (inclusing councillors pet projects), we get our statement from district council in December, have a council budget planning meeting following that, and agree a cash amount where councillors argue out what goes into budget, how much to use from reserves etc.

Yes everyone looks at the % increase, but legally you only set a cash budget, not a % rise budget. Equally, it is not (technically) legal to set a precept of £15 and work backwards to set a budget.

This is then formally approved in January for submission to district council.

Comments

Not sure what happened there, I couldn’t put my reply to your comment here so added it above after Dave’s comment

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You learn something every day!

This thread is a revelation as we just set an increase in precept and that's that!

Years ago the increase in precept was massively above what we had voted for and the previous Clerk claimed the County had screwed up

The next year we froze the precept and the Clerk was congratulated for their financial acumen

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My first budget meeting was 2017 (for FY 18/19) Jules.  I was only 5 months in as a Cllr with a clerk of 20+ years, a finance chair of considerable "experience."

It was patently obvious to me as I sat and listened to the collective drivle that none of them knew what they were doing.

Even then they were voting on a proposed %.

Quotes "everything else is going up so we should put the precept up" and "we always put it up , so we should put it up" were trotted out.

With a 6 figure unallocated cash at bank balance and no earmarked reserves I literally had to tell the clerk to add additional columns to the spreadsheet as it was presented on screen and tell them all why it was necessary to move unallocated cash to earmarked reserves.  Beggars belief, but stand by me, true as I tell it.

That year - I took it as a 'win', and settled for the clerks statement that he would "do some figures" and make it a zero increase.

By the next year (2018) I had resigned - but was still watching so they did another zero increase for FY 19/20)

2019 (for FY 20/21)they went mad and set 26% increase.

Nov 2020 for FY 21/22 - well, that's what this story is all about....

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With us the point is made that unlike the other two layers of local Government Parish Councils can raise the amount by any % they want but one day we might get capped so better safe then sorry

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At the risk of telling granny how to suck eggs, the budget process is really simple. List all known liabilities, list all known income (excluding precept), deduct liabilities from income and you're likely to find a shortfall. To balance the budget, that shortfall must be found from either the precept or transfers from reserves or a combination of the two. Simples!

Starting with a percentage and working backwards will inevitably prevent the council from doing anything new for the community. As somebodyelse suggested, start with a brainstorming session where councillors are encouraged to share their dreams about facilities and projects. Some of it will be unachievable, but if the community needs/wants it, it's absolutely OK to double the precept to pay for it. That's why we're (currently!) uncapped.

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Dave, don't worry about starting with basics - I only had about a year in a PC so by no means experienced.

The 'front of house' part of budget planning I am no stranger to having had personal responsibility for multi million £ annual budget over a dozen or more cost centres - but I appreciate others reading the thread might benefit from that part.

What I am 'blind-sided' on is the dark arts of the mechanism AFTER the PC has decided what it needs to function in the next FY.

There has already been some really useful insight to that but any more is most welcome - in layman's terms.  I want to be able to 'do' what nobody has yet been able to do FOR me and that is to explain the after actions post an (effective) PC budget setting debate.
What is the basic walk-through of actions after a financial level of 'need' has been agreed at a PC budget setting meeting.

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Once the precept has been approved by the council, the RFO (usually the clerk) submits a requisition form to the district council (usually late Jan/early Feb). This data, along with similar demands from all other parish and town councils and other precepting authorities (police/fire etc) is keyed into a number-crunching machine that prints all the council tax bills. Everybody pays the same for their property band for county/district/police/fire etc, but the town/parish element varies according to local demands, so Band D in a low precepting parish will be less than in a high precepting parish.

The district council collects the money from council tax payers and pays the precept to the towns and parishes, often in two half-yearly instalments. The sum received is the sum requested, regardless of whether people pay their council tax or not and the district councils must manage the cashflow imbalance of paying it out before it comes in.

Answer 3

Is this a case in which the charge per property, which would be stated on the Council Tax bill, is being confused with the total precept? My understanding is that the billing authority is not able to change the precept levied unless no precept request has been resolved in time. Any Council Tax Support Grant received should be kept separate from the precept on the Annual Governance and Accountability Return and not doing so is likely to be picked up by an External Auditor. Data on the Tax base, Total Precept Value and Band D charge has been released annually in May for Local Precepting Authorities (Parish Councils, Charter Trustees and the Inner and Middle Temples) by the Ministry of Housing, Communities and Local Government and so can be checked as part of the audit process.

While linked the precept can increase/decrease by a different percentage to the charge and probably usually does. As has been mentioned in another answer the tax base can vary. The Tax Base is a Band D equivalence figure and will change for the construction, re-categorisation and demolition of properties and will also account for discounts applied to Council Tax within the Parish. The Total Precept is divided by the Tax Base to calculate the Band D charge. As all Council Tax Band charges are proportional to the Band D figure it is possible to then calculate the other Council Tax charges. A Band C charge is 8/9ths of a Band D charge but would increase or decrease by the same percentage.

A 0% increase in your total precept can therefore become an increase in the Council Tax charge when the tax base decreases. The opposite could also happen in that an increase in the Total Precept results in a lower increase or even a decrease in the Council Tax charge relating to a Parish or Town Council.

Comments

That's a really good point. There are so many different ways of expressing the cost of a parish or town council to its residents.

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I understand much of that.

A neighbouring TC has not seen a % increase recorded on the CT summary due to extensive new build developments.

What I'd like to do (but I don't think the functionality exists on this platform) is present a scan of 2 comparable CT summaries - 1 showing precept increase and the other not.  It is possible that my terminology is inappropriate and potentially confusing rather than clarifying the question.

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You can insert an image into an answer to a question, but not into a comment.

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Right - job for tomorrow