FOOL'S EYE VIEW
Beating Council Tax Rises

By Jane Mack (TMFJane)
March 16, 2004

Have you received your council tax bill for 2004/05 yet? Mine arrived yesterday and I was thrilled to find a bill for £1,524 (a 7.9% increase on last year). I say 'thrilled' not quite as sarcastically as you might think - until the government threatened to cap my local authority's spending, I was looking at an increase of 12.9%.

Even so, it's still higher than the average rise predicted across the country by the accountancy body the Chartered Institute of Public Finance and Accountancy (CIPFA). According to them, council tax bills will rise on average by £62 to £1,142 for a "Band D" category property with the following regional variations:

As you can see it's more expensive to live in England with the highest rise expected to be in the South West (6.6%), and the lowest in the North West (4.8%).

Admittedly, an extra fiver or tenner a month won't break the bank for most people but, for many of us, the council tax is one of our largest expenses. In fact, in some parts of the UK, the council tax and other bills are so high that they are having an impact on retirement patterns. According to a recent survey (PDF file) from the Prudential (LSE: PRU), almost three million pensioners - 1 in 4 - have returned to work, partly because they cannot make ends meet on their pensions.

So, what can you do to reduce the impact of these rises? Firstly, check out EntitledTo, a free website that works out which benefits you can claim. For example, if you live alone, you can claim an automatic 25% discount on your council tax. And even if you don't live alone, discounts can be claimed if the other members of the household are, for example, full-time students or are giving or receiving long-term care in the home.

Also, if you have a low income, you may be entitled to Council Tax Benefit. The Department for Work and Pensions estimates that two out of five elderly people are not claiming this benefit, which means that they are missing out on around £750 million a year. Single parents and those on some form of income support may also be entitled to some help.

Even if you're not entitled to benefits, here are a handful of ways to reduce your expenditure elsewhere to cover the increase:

Sweat the small stuff

You can save money by making even very minor changes to your lifestyle. For example, if you're paying the full whack for your satellite or cable package, are you getting your money's worth? You might find there's a cheaper package available that simply cuts out the channels you don't watch anyway. And what about books, CDs and DVDs? You don't have to own them to enjoy them - try your local library where you can probably find what you want for free. And at least you'll be making use of what your council tax is actually being spent on! There are more of these sorts of ideas here.

Change your credit cards

If you carry a balance and you've got a credit card with one of the main High Street banks, you could be paying around 17% in interest. And yet, the last I heard, there are at least 60 credit cards on the market that charge no interest at all on transferred balances (usually for a six month period) and some even offer interest-free benefits on new purchases as well. By switching to an interest-free card and paying off as much as you can every month, you can really chip away at your expensive debts. When your six months is up, switch your balance to a new card and repeat. Obviously your main aim is to use the opportunity to get rid of your debts altogether but the interest you save will help you afford your council tax bill too.

Change your bank account

It is said that people are more likely to change their spouse than their bank account. While both actions may be troublesome I know which one is likely to be easier! It can be a bit of a pain to switch but some current accounts now pay interest close to the base rate of 4% a year. If you can time your outgoings so that your monthly salary stays in your account for as long as possible before the next pay cheque arrives, you could well make enough to offset your council tax increase. Check your charges too - some banks will offer you a free overdraft facility up to a certain amount and their overall charges may be lower than those of your current bank.

Change your mortgage

There are potentially much bigger savings to be made from getting a better mortgage deal. Mortgage providers know how lazy we are so they'll typically offer a low rate of interest to entice you to take out your mortgage with them in the first place and then replace it with an uncompetitive rate later on. If your mortgage has been running for a few years, then you could be a ripe candidate for a change of lender. In this instance you could save much more than the extra tenner a month your local council is planning to charge you and, over the term of the mortgage, it could be many thousands.

Of course, you have one final weapon in your power if you're not happy with how much you're being charged for local services or the way your money is being spent. You've got a vote - so make sure you use it the next time you get your invitation to the local polling station.

Find out more about Credit Cards; Banking; Mortgages and check out this alternative way to Save Money On Your Council Tax.