The requirement to hold a council tax referendum

Ballot iStock 000006080605XSmall 146x219The prospect of local authorities holding a referendum on an increase to council tax is becoming more likely. Frances Woodhead and Clare Hardy consider the legal background.

Recent press reports have shown that Brighton and Hove City Council is expecting to set a level of Council Tax which will require the authority to hold a referendum.

Whilst this is one of the first local authorities to confirm publicly its expectation of a referendum, it is likely that others will need to consider the possibility as they seek to set budgets which will enable them to deliver effective services in challenging financial times. This note summarises some of the main points to be aware of when considering a referendum over council tax. 

The provisions requiring local authorities to conduct referendums over the setting of excessive Council Tax were introduced through amendments made by the Localism Act 2011 to the Local Government Finance Act 1992. These provisions replaced  powers previously held by the Secretary of State to set limits for Council Tax.

Section 52ZB of the Local Government Finance Act 1992 requires a billing authority to determine whether its relevant basic amount of council tax is excessive. If the amount is excessive, the billing authority is required to hold a referendum, with a view to applying an alternative amount if the excessive amount is rejected in a referendum.

The determination of whether a relevant basic amount of council tax is excessive must be made in accordance with principles determined by the Secretary of State and approved by resolution of the House of Commons.

The Department for Communities and Local Government (CLG) has already made it known that for the 2014-2015 financial year it is expected that an increase of more than 2% will be regarded as excessive. Therefore, local authorities which expect an increase of more than 2% should expect to be required to hold a referendum [1]. However, they still need to make the required determination once the principles have been approved by the House of Commons.

Usually any authority which does need to hold a referendum must do this by no later than the first Thursday in May. The Secretary of State is able to specify a different date as the latest date for a referendum and in 2014 the latest date is 22 May. This is also the date of the local and European elections. It is possible for an authority to hold a referendum earlier than that but it would need to work out a timetable that allows it to make the required determination and comply with the notice requirements. If a billing authority that is required to hold a referendum does not do so when it is required, the authority’s substitute calculations will come into effect.

The Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012 impose various requirements as to the conduct of the referendum. These include the following:

  • A notice must be published no later than 28 days before the date of the referendum.
  • The notice must contain a statement, setting out specified details. These include: the date of the referendum and the referendum question.
  • The question asked in the referendum must be in the form specified in the Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012. This is along the following lines: “Part of the council tax in your area goes to [name of authority].  For the financial year beginning on 1st April [relevant financial year] [name of authority] has set an increase of [percentage change in relevant basic amount of council tax from preceding financial year to the relevant financial year] in the amount it charges. If most voters choose “yes”, the increase will be [percentage change in relevant basic amount of council tax from preceding financial year to the relevant financial year]. If most voters choose “no”, the increase will be [percentage change in relevant basic amount of council tax from preceding financial year to the relevant financial year if the authority's relevant basic amount of council tax is not approved] instead. Do you want [name of authority] to increase the amount it charges by [percentage change in relevant basic amount of council tax from preceding financial year to the relevant financial year]?”   
  • There are restrictions on the material which may be published by or on behalf of an authority between the date when the authority determines that its relevant basic amount of Council Tax is excessive and the date of the referendum.
  • There are restrictions on referendum expenses.

Any authority which does find itself required to hold a referendum over Council Tax will need to ensure that it deals with all the necessary details and complies with the required timescales.

Frances Woodhead is a
Partner
and Clare Hardy is an Associate at Eversheds. Frances can be reached on 0845 498 4305 or This email address is being protected from spambots. You need JavaScript enabled to view it., while Clare can be contacted on 0845 498 4355 or This email address is being protected from spambots. You need JavaScript enabled to view it..

[1] Since this briefing note was written, it has been suggested in the press that the threshold for triggering a referendum is expected to be announced as an increase of 1.5% and not 2% as previously expected.