Sam McBride: Prepare for your rates bill to soar... while council services are reduced

But those who like to plan ahead should prepare for a major rates hike in less than a year – and not to pay for more council services, but for less.

Just as this emergency is dramatically reshaping everything from how we shop to how we work, so it will fundamentally alter aspects of how we are governed and taxed.

Although it spends £900 million a year, local government is not sexy.

It is where political careers often start and sometimes end. In council chambers, power is exercised over when bins are collected, the cost of a grave and park opening hours.

But it is those sorts of boringly basic decisions which the pandemic has revealed to be more directly and immediately relevant to our lives than some of the grander ideological arguments which dominate political debate.

Some of the most contested lockdown decisions have been around councils shutting parks, stopping blue bin collections or closing recycling centres.

But what if some councils simply imploded as a result of being unable to survive the financial recession precipitated by the pandemic?

Last week council leaders gave evidence to the assembly’s Committee for Communities. They set out a bleak landscape where councils would be insolvent within months without urgent assistance.

David Jackson, chairman of SOLACE NI, which represents senior council executives, told MLAs that councils together faced a deficit of about £10 million a month.

That has since been reduced by Stormont’s allocation this week of an emergency £20.3 million to councils to deal with the immediate financial crisis, and a further £3.8 million to meet additional costs of waste management.

Mr Jackson knows more than most about a financial mess because his own council – Causeway Coast and Glens, of which he is chief executive – goes into this crisis in a dreadful financial position.

In February, the council confirmed it was £68.7 million in debt. Having had a three-year period of no rates increases (prior to an increase last year), councillors voted in February to increase rates by 7.65%.

Suddenly that figure, which then looked steep, may be superseded by vast rates increases in some areas.

Mr Jackson said that prior to Stormont’s financial injection two councils would have run out of cash within a couple of months.

Even with the executive’s assistance, he said that rates hikes may be “much higher than would normally be acceptable”, with one council having told him of “the potential for a 30% rates increase”.

Several factors are responsible for councils’ immediate financial crisis, and suggest the drop in income is unlikely to recover for years.

Councils get about 75% of their money from rates, with most of the rest coming from grants, rents from property and fees for services such as leisure centres, conference facilities and music venues.

Rates income has been decimated, especially commercial rates where the short term rates holiday paid for by Stormont is only delaying the inevitable – that many of the businesses which pay rates will simply no longer exist whenever lockdown ends.

Of those that do exist, many – such as restaurants which will only be allowed to serve a handful of diners at a time – may be unviable if rates stay at current levels.

Although domestic rate revenues are unlikely to collapse dramatically, one knowledgeable source said that there was already a problem with rates direct debits being cancelled, perhaps because an individual has lost their job – a scenario likely to get worse as furloughing turns into redundancy for many people.

But councils face an even grimmer situation with their non-rates income. Hiring out venues and opening leisure centres will be among the final areas of life to be restarted, largely coming at the final stage of re-opening – and then only on a limited and less commercially viable basis.

Alongside that collapsing income is increased costs to implement social distancing and deal with other Covid-19 costs.

Suzanne Wylie, chief executive of Belfast City Council, argued that lost income should be mitigated by Stormont. However, despite the obvious gravity of the financial situation facing councils, there is an inescapable contradiction in their case.

About 2,000 council staff are being furloughed, with 80% of their wages paid by the Treasury.

Yet Ms Wylie said she expected that the “vast majority of councils will top up [wages] to 100%”.

On the one hand, councils plead poverty and warn of looming insolvency – yet on the other they are voluntarily choosing to make more generous what is already a generous government scheme to support those who temporarily cannot work.

While that is a political choice for which councillors are accountable, it will be difficult to explain to ratepayers at a time when even many of those who remain working every day – including all the staff of this newspaper – have seen their pay cut and have accepted that.

But furloughing will come to an end relatively soon. At that point councillors will have to decide whether to retain all those staff and are likely to face separate pressure to increase pay for some of their lowest paid workers.

This crisis has revealed the crucial value to society of those such as bin men, in contrast to some of the armies of spin doctors or executives with vague job titles who are paid far more handsomely for jobs whose importance is far harder to explain.

When asked by this newspaper on Wednesday if rates increases or service cuts are inevitable, Sinn Féin Communities Minister Deirdre Hargey gave the sort of answer designed to say as little as possible.

But the one clear thing which she did say was that she opposed cutting services and jobs.

For a left-wing party, that is unsurprising – although, with the notable exception of Alliance, most other parties are at heart populists and will not be queuing up to suggest unpopular measures.

It will be hard to blame the Tories for this, given that councils are responsible for their own affairs. And borrowing is restricted to capital expenditure, ruling out one means of masking the scale of the shortfall.

Derek McCallan, chief executive of the NILGA, which represents councillors, said that the crisis is “going to require very difficult political decisions around workforce and service delivery” and that “costs are going to have to be cut back”.

But a crisis allows for overdue reforms to happen suddenly and he said there is an “opportunity for radical transformation”, although that would require Stormont and councils collaborating more closely.

Given that this week Stormont has given councils emergency funding, might that be repeated?

In theory, Stormont could in perpetuity continue to fund these services. But that is highly unlikely.

Not only would that abandon the principle that councils raise and spend their own money, but Stormont itself had huge financial problems even before Covid-19.

The executive parties agreed to re-enter government on the basis of a deal which involved mass spending before tying down who would pay for it.

Even without that additional spending, the new executive was facing a backlog of expensive decisions in areas from health reform to sewerage infrastructure.

Councillors ultimately now face the question of what a council should do. Some of its functions are statutory, such as planning, or so universally accepted, in areas such as looking after parks and leisure centres, as to be beyond debate.

But must councils produce glossy magazines, fund sports officers, run multiple gala dinners or pay huge grants – often in way which appear to represent a sectarian carve-up – for community events.

Ultimately, the public will get what they vote for. Do they prioritise basic financial management, or is the tribal divide of more importance?

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