Scilly’s Council Tax Frozen Despite Warning Of ‘Serious Financial Situation’

Council Chambers at the Old Wesleyan Chapel

Council Chambers at the Old Wesleyan Chapel

Councillors have voted to freeze Council Tax payments for the coming year at 2012/13 levels.

But head of finance, Iain McCulloch warned them that the authority was facing “a very serious financial situation.”

In the Full Council meeting yesterday, members agreed to take a £12,500 grant from the government for a further two years to maintain Council Tax rates at the same level as previous years.

But this means they could face a serious shortfall in income if and when the grant is removed in 2015.

The new Police and Crime Commissioner for Devon and Cornwall has refused the grant and approved a 2% rise in the Police element of the Council Tax, which means bills will actually rise by around £3 a year.

Mr McCulloch said a recent survey showed that 41% of local authorities were considering raising Council Tax to avoid having to take the grant. But any authority raising their rates by more than 2% would now have to hold a local referendum under new government rules.

A 2% rise on a Band D property in Scilly would be £24 per year.

Iain said the Council estimates it will need to draw £374,000 from its reserves this year and a further £608,000 next year. “We have a big shortfall that needs to be dealt with,” he said.

The Council’s latest budget estimates show they’ll run out of reserves by 2015 if the present situation continues.

Cllr Dudley Mumford said they had to be “mindful of problems coming up in two years.”

And Council vice chair Amanda Martin said there had been a lot of discussion recently about the need to save money and generate income. “It’s got to be our mantra for the future,” she said.

But Cllr Richard McCarthy pointed out that an extra £40,000 per year will be raised by recent changes to Council Tax for second homeowners. And he felt that with elections coming up in May, it should be up to the new Council to decide what to do.

The head of finance also pointed out that the authority was heading for “uncharted waters” over changes to business rates.

From April, the government is altering the way business rates are collected and redistributed to councils to more closely reflect local income.

The impact on Scilly, with a relatively small number of businesses, could be severe and Iain said with the recent news that a large hotel on the islands was closing, that “could have a big hit on us.”

“We’re facing a very serious financial situation’” he said. “Our expenses are too high, our income is volatile and we’ve got a real problem that needs to be tackled.”

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