No such thing as a free lunch (From The Northern Echo)

No such thing as a free lunch

12:29pm Thursday 17th November 2011 in Rob Merrick By Rob Merrick

NEVER look a gift horse in the mouth is tempting advice – but then I peered into the Government’s offer of a council tax freeze.

Chancellor George Osborne has found £675m from “Whitehall underspends” (ahem) to offer town halls the chance to peg bills for the second year running.

They can apply for grants equivalent to a 2.5 per cent increase in council tax in their area, allowing them to freeze bills without being out of pocket.

Ministers are convinced the wheeze is a vote-winner, having persuaded all councils to hold down bills in the same fashion this year, following many years of bashing Labour for inflation-busting hikes.

This week, Communities Secretary Eric Pickles piled pressure on councils to take up the offer, revealing how much extra government grant is up for grabs.

County Durham has been promised a £5m top-up, with smaller sums to tempt Darlington (£1m), Middlesbrough (£1.25m), Hartlepool (£1m) and York (£1.8m), for example.

So, everyone’s a winner, right? Well, it’s not that simple, of course, which means council chiefs have very good reason to be nervous.

First, there’s no such thing as free money, least of all, at a time of severe government cuts, so something has to give to find the £675m.

There are strong suspicions that much of it comes from low take-up of the Treasury’s national insurance holiday for new firms.

Just 449 companies in the North-East applied in the scheme’s first year.

That means funds set aside to fight back against rising unemployment have been diverted to giving everyone a tax cut worth about £1.38-a-week, or less than a cup of coffee.

More worrying is what happens at the end of an offer that Mr Pickles described as a “one-off payment of grant, payable for one year only”.

If Durham takes the £5m and freezes its bills, it will have dug a deep hole in its tax base, and will have to find that missing £5m in every succeeding year.

That would mean either a double council tax rise in 2013, or further painful cuts in services if that proposed rise was capped, which would be more likely.

Furthermore, the grant will end just as councils are coping with the financial uncertainty of big shake-ups to business rates and council tax benefit.

But don’t take my word for it. Consider the cautionary words of the Conservative chairman of the Local Government Association.

Sir Merrick Cockell warned: “If councils are thinking of taking this offer up, they will also need to ensure they are able to manage any future financial consequences.”

A gift horse for town halls?

More like an offer they can’t refuse, which, as fans of Don Vito Corleone will remember, was not necessarily a cause for celebration.

WHEN Conservative MPs, terrified about the Poll Tax and Euro-isolation, knifed Margaret Thatcher way back in 1990, they must have been certain they had forced her out of Downing Street.

However, it has now been revealed that the Iron Lady briefly considered staying on as Prime Minister, even though she was no longer leader of the Conservative Party.

John Whittingdale, her political secretary and now a Tory MP, told a Westminster audience: “She always said she had never been defeated by the people.”