Council and democracy

Council Tax and Budget - Frequently Asked Questions

Where does the money come from?

Each year the amount of "Formula Grant" the government gives to every local authority is announced in the Local Government finance settlement. The Formula Grant takes into account factors like population, social structure and the number of residential properties.

The amount of Formula Grant for Hertfordshire in 2008/09 was set at £170.825 million. This represents an increase of £3.4 million or 2% on a like-for-like basis after taking account of changes in function and funding. This is significantly less than the average increase of 5.3% received across all county councils.

The difference between our net expenditure and the Formula Grant received from government is £485.9 million. This is funded from council tax and by using available reserves. This year we are using £6.7 million from our general reserves and funding £479.2 million from council tax.

Why has revenue spending increased?

This year Hertfordshire County Council will spend £650.0 million compared to £603.3 million last year.

The reasons for this increase of £46.7 million or 7.7% are:

Growing demand for our services will increase costs by £12.1 million. For example:

• an ageing population means more elderly people require help and support;
• increasing numbers of clients with learning and physical disabilities and mental health needs; and
• increasing number of looked after children.

Inflation will increase costs by £19.3 million.

Other unavoidable costs including changes in the law and regulations will increase costs by £15.8 million. For example:

• the increase in landfill tax from £24 per tonne in 2007/08 to £32 in 2008/09 means we will be paying £3.8 million more for disposing of household waste in landfill sites;
• the Working Time Directive has increased the holiday entitlement for temporary staff, payments for night duties and associated additional staff costs;
• an Independent Support Service will be developed to meet statutory responsibilities for young care leavers; and
• Home to School Transport costs are increasing as a result of the rising costs of the private hire market and increased vehicle regulations.

Changes to services we are responsible for and the way in which they are funded will increased costs by £27.7 million. The main changes relate to grants which were previously funded through a specific grant but will now be provided via formula Grant. The additional amount Hertfordshire is receiving through Formula Grant to fund these changes falls short of the additional cost to the authority by approximately £0.4 million.

Increased investment of £7.3 million to improve our services including:

• £6.0 million to be spent on highways maintenance;
• £1.0 million to accelerate the pace of improvement in services for children and young people; and
• £0.3 million to support a number of fire safety initiatives.

The impact of the above costs has been reduced by

£18.3 million of efficiency savings which we have identified through measures such as absorbing the impact of demographic change on services for adults with a mental health problem; streamlining our support services; and seeking help from our independent providers of social care to reduce their costs and therefore the charges we pay.

Further savings of £0.4 million have been made through changes to services including reduced spending on school uniform grants and library materials fund.

The use of £6.7 million of reserves.

Why has council tax increased?

The level of council tax is determined by the level of formula grant distributed to the county council by central government and the level at which the authority sets its budget. This year the council has chosen to use reserves to fund additional investment in roads.

After taking account of savings from being more efficient and changes to services, it has not been possible to cover all of our extra costs in 2008/09 from the increase in Formula Grant received from government and the balance must be met by council tax, giving rise to a 4.5% increase.