Cllr Bobbie Dove is the Deputy Leader of the Conservative Group on Bournemouth Christchurch and Poole Council.
Bournemouth, Christchurch and Poole Council (BCP) is facing an increasingly alarming financial position. The situation has become considerably more urgent following the council’s Quarter 1 financial monitoring, which forecast a £27 million General Fund overspend. The council itself described this as being “of a level unseen at the Council” and a “real threat to the financial sustainability of the council.”
Yet its response from a left-leaning Liberal Democrat led administration appears familiar; tax, tax and more tax.
The fundamental question is whether continually extracting more money from residents, businesses and visitors can solve BCP Council’s underlying financial problems, or whether higher taxation and charges eventually weaken the very local economy upon which the council depends.
Residents have been asked to pay more through an inflation-busting 6.74 per cent council tax increase, fees, parking charges and the introduction of a new council tax precept for the newly formed town councils.
The justification is that additional revenue protects essential services and financial stability. But that argument becomes harder to sustain when substantial increases are followed almost immediately by a £27 million forecast overspend.
At some point the question must change from “How can the council raise more money?” to “Why is the council unable to live within the budget it has set?” Residents, businesses and visitors cannot be treated as infinitely expandable sources of revenue.
BCP Council’s Quarter 1 figures show parking income approximately seven per cent below budget, creating a £3.2 million shortfall, while seafront income is £1.1 million down. And all this following an exceptionally favourable summer, where conditions that might normally be expected to benefit the beaches, seafront, hospitality businesses and visitor economy.
There may be several explanations, and it would be wrong to claim that higher parking prices alone caused the shortfall. But the figures challenge the assumption that increasing charges will continually increase revenue. It appears as if the Lib Dem-led administration has failed to take into account sound economic principles including the law of diminishing returns and the lessons deriving from the Laffer Curve. Namely, that tax rates and revenues do not necessarily rise together indefinitely because taxation changes behaviour.
Initially, increasing a charge may generate additional revenue with little effect on behaviour. Repeatedly increase it and eventually people may respond. Consumers may visit less frequently, shop online or as we have seen, park for free on yellow lines given that the cost of a parking ticket is equitable to a day’s parking on the seafront.
Nobody can credibly identify precisely where BCP’s taxes may change behaviour. But ignoring behavioural responses would be equally misguided. Businesses respond to costs. Consumers respond to prices. Investors respond to expected returns.
The greatest danger in the 26/27 budget may therefore be not one individual charge but the cumulative burden in using increased charges to balance the books. Increases can each be presented individually as modest or manageable, however, households and businesses experience the total
This is particularly important for Bournemouth, Christchurch and Poole because of their dependence on tourism and hospitality.
The leisure and hospitality sector provides both direct and indirect employment. Yet these businesses have faced substantial increases with higher minimum wages, increased employer National Insurance and a lower threshold at which those contributions become payable.
Labour-intensive businesses cannot simply eliminate staff. They instead face limited choices: accept lower profits, increase prices, reduce staffing or ultimately, close. Against that background, proposals for a tourism levy require particular caution.
A visitor levy can appear attractive because the direct payer is supposedly the visitor rather than the resident, and relatively small nightly charge multiplied across many stays could generate substantial revenue. But visitors have choices.
Bournemouth competes with destinations across Britain and affordable overseas alternatives. Families do not consider a visitor levy in isolation. They evaluate the total cost of visiting. A few pounds may make no difference to many visitors. But where economic policy operates at the margin, the important question is how additional cumulative costs affect price-sensitive visitors. If parking and seafront income has decreased, surely the first priority should be understanding why visitor-related revenues have underperformed.
A credible administration and Government should publish economic modelling addressing not simply “How much could this tax raise?” but “What economic activity might we lose as a consequence?”
The £27 million forecast overspend should fundamentally change the political conversation. If residents pay more council tax but the authority still substantially overspends, the answer cannot automatically be another tax increase.
BCP ultimately needs a larger and healthier economy, not merely a larger collection of taxes and charges. Successful businesses create employment. Visitors spend money. Thriving town centres attract investment. Investment creates jobs and economic activity generates revenue.
The alternative risks becoming a vicious circle: higher costs discourage spending, weaker businesses invest less, town centres deteriorate and the local tax base becomes less productive, prompting the centre left administration to increase charges on those who remain.
BCP therefore faces a choice. It can continue treating residents, businesses, motorists and visitors as cash cows. Or it can recognise that long-term financial sustainability requires genuine expenditure control alongside policies designed to expand the local economy.
You cannot continually increase the cost of an activity and assume people’s behaviour will remain unchanged.
There is, ultimately, a political problem as well as an economic one. The instinct of the left is too often to treat higher taxation as the solution to financial pressure: when the numbers do not add up, reach again into the pockets of residents, businesses and visitors. It is the easiest option because it avoids the far more difficult task of exercising the financial competence required to control expenditure, improve productivity, reform services, encourage investment and grow the economy from which sustainable revenues ultimately come.
BCP Council’s own figures should be warning enough and should not produce yet another search for pockets to raid.
Taxing people more requires little imagination. Controlling spending, reforming an organisation and creating the conditions for economic growth require considerably more. The question for BCP Council’s politicians is whether they have the political courage, and the financial acumen, to do the difficult one.