How should you fund new council services?

  • Town, parish and community councils are increasingly taking on a wide variety of services from larger authorities
  • However, they are often given little funding or support to run these new services
  • Raising the council tax precept may not always be the best option – we discuss some of the alternative ways smaller councils can fund services

Across the country, responsibility for running a wide range of non-statutory services has been devolved to town, parish and community council level.

There are some obvious advantages to putting services such as grass cutting or street cleaning in the hands of smaller councils that may have a better understanding of local needs and expectations.

However, smaller councils often take on these services at short notice from larger authorities that are looking to cut costs, and face a stark choice between accepting these services or losing them altogether.

Jonathan Meiseles, Customer Account Manager, Zurich Town, Parish and Community Councils, says: “Town, parish and community councils can feel a sense of panic when faced with that choice. They have to decide quickly if they want to take on that particular service, if they can afford to do so, and if they can afford not to.”

Should your council raise its precept?

If your council does agree to take on a service, raising the precept is one possible way of funding it, but this approach is not without its challenges.

Depending on the nature of the service, a significant increase in the precept might be required. Such an increase would not only have to win the support of councillors, but would also have to be justified to the public.

In addition, the Government has hinted that current rules, which require larger authorities to hold a referendum on plans to increase their precept by 2% or more, may be extended to smaller councils in future. This could force town, parish and community councils to think even more carefully before taking this route.

Meiseles says: “Very few of the town, parish and community councils we work with have raised their precept to fund new services. A precept increase is seen very much as a last resort.”

Alternatives to increasing council tax

There are a number of alternative methods of funding that you may wish to consider (see box out).

One common approach is to increase fees or charges – e.g. for car parking or leisure facilities – thereby targeting only those who use a particular service, and not every taxpayer.

Other methods can involve partnership arrangements between councils. For example, a group of neighbouring councils within a district can team up to set joint priorities, procure services jointly, and make joint decisions about applications for grant funding.

Another arrangement can see a town, parish or community council effectively take on the role of a larger authority by helping other smaller councils to continue running a particular service.

Meiseles explains: “For example, if a district council decides to stop grass cutting, a small parish council might not have the resources to bring that service in-house. However, it might be aware of another town, parish or community council that is already doing its own grass cutting and which would be prepared to run the service or provide equipment for other councils, for a charge.

“The key to this arrangement is to not be afraid to find out what’s available around you or of asking your neighbours for help.”

Risk and insurance considerations

Whatever arrangement you decide on, it is vital you consider the risk and insurance implications.

Meiseles says: “Taking on a new service might not necessarily incur any additional insurance costs, but if you are taking on responsibility for a £2m building, for example, the costs could rise significantly.

“The most important thing is to speak to your insurer as soon as you know there’s a possibility you will be taking on a service.”