Consultants suffer in Tory council tax freeze

The Tories' latest tax wheeze would be good news for homeowners, but not for management consultants...

Last Updated: 31 Aug 2010

Shadow Chancellor George Osborne used his party conference speech today to propose a two-year council tax freeze if the Tories win the next election – and he intends to pay for it by cutting the amount of money the government spends on consultants and advertising. For the last decade, the public sector has been pretty good to advisory firms, who have enjoyed a fee bonanza as the Government expanded in size and shelled out billions on strategy and process ‘improvements’. Now it looks like the gravy train may be in danger of hitting the buffers...

The Government isn’t actually allowed to set council tax levels – that’s a decision for the local councils – but Osborne said that any council that managed to limit its spending rises to 2.5% will be able to reclaim that amount from Whitehall. He reckons this will cost about £500m in the first year and £1bn in the second year – so to foot the bill, he plans to cut the Central Office of Information budget by £230m a year, and cut spending on consultants by £270m in year one and £770m in year two. That amounts to a lot of highly-paid analysts left ‘on the beach’, as they say in the trade...

Labour immediately claimed that councils would only be able to manage this by cutting public services – and the new set-up would indeed appear to incentivise this. On the other hand, we doubt many council tax payers reckon they’re getting value for money as it is, so the prospect of paying less – over £200 less, according to Osborne – is likely to go down well in Middle England. That’s certainly what the Tory faithful appear to think, judging by their delighted reaction today, and many commentators too (given the column inches it’s already received).

Either way, we can’t imagine many people will be shedding tears for the poor consultants – despite the useful work many of them have undoubtedly done in Whitehall. Although the lack of money in the public coffers is a convenient stick with which to beat the Government, Osborne knows the party faithful expect tax cuts – so he’ll have to find the money somewhere, and these consultants represent a pretty easy target.

Still, although the Tories are desperately trying to dissociate themselves from the rapacious tendencies of the City at the moment – hence Osborne’s strong words for the banks today – it can’t afford to alienate its traditional business support base completely, as shown by him emphasising his party’s commitment to ‘the free-market economy that has made our country more prosperous’. So a Tory victory wouldn’t be all bad news for consultants – except for the public sector specialists, perhaps…

In today's bulletin:
FTSE up despite US bail-out flop
Tesco beats crunch with big sales hike
Sky gets regulatory double whammy
Consultants suffer in Tory council tax freeze
You can't trust les rosbifs

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