Increasing fees is not the answer

It is only half true that the real recession in local government will only bite next year.
For those councils, especially districts, relying for part of their income from fees and charges, the private sector recession which struck in late 2007 saw a sharp downturn in residents’ spending. Westminster City, for example, estimated a drop of £50m in parking charges alone.
The property collapse meant a slump in planning applications and land search income. Cash-strapped residents cut back on swimming or gym use. One district chief executive told me two days after the CSR last month: ‘Two-thirds of my district’s income is in fees and charges, and we were badly hit by the recession.’
The economy remains fragile, the housing market has declined again, disposable income is squeezed by static wages, price rises in petrol, food, energy and clothing, and public spending cuts are giving people the jitters. In short, there is no evidence that residents are any more inclined to shell out more for local services.
So, the survey reported on page one finding that a more than two-thirds of council chiefs expect to see rises in local charges with one-third expecting them to be substantial reveals either naivity about consumer spending or desperation. Unless you are a monopoly, it is difficult to put up prices when there is already price-resistance. Consumers do not have to go swimming, attend adult education classes or park cars in the high street, and nor are they moving house. Jacking-up charges to the point where users simply walk away will only lead councils down the road of withdrawing altogether from such services, leaving pools, gyms and libraries for the private sector to provide or not at all. Maybe then it will dawn on the public that local services they have taken for granted have ceased to exist.
Increasing fees to bring in other income is, like salami-slicing services, only a short-term solution. Councils, aided by new powers of competence, will need to be entrepreneurial, if they are to meet the downturn.