Councillors and money: allowances, expenses, tax and benefits

In recent times issues around money, pay and expenses for elected representatives have received much national publicity – most of it not good. The press reported expenses by some mainly Labour and Conservative MPs which the public rightly saw as unacceptable.

Although the amounts of money involved with Councillors are significantly less, we must all ensure that we operate with the very highest standards for public office at all times.

None of us have come into this to become rich, and we give generously of our time, expertise and money to the party and the communities we serve.

However, it is not wrong to think about the financial aspects of being a Councillor and it is correct that elected officials are appropriately remunerated and recompensed.

Allowances

All principal authorities (i.e. higher than town and parish) have some sort of allowances scheme (a small number of town and parish councils do as well). These vary widely across the country and between types of authority.

The average basics in 2008 were:

• London Boroughs:  £9,739
• Metropolitan Boroughs:  £9,766
• English Counties:  £9,978
• English Unitaries:  £8,076
• English Districts:  £4,194
• Scottish Unitaries:  £16,234
• Welsh Unitaries:  £13,868

Source: LGA Councillors Census 2008, The Scottish Government 2009, Bridgend Council 2010

In addition, Councils provide Special Responsibility Allowances for particular offices – e.g the Council Leader, Executive, Scrutiny and Committee Chairs, Opposition Leaders and the Mayor/Chair/Provost.

Councillors appointed to joint authorities will normally also receive an allowance from that authority. Councillors on two authorities (e.g. District and County) will receive both.

Councils set the level of remuneration themselves. It is one of the few things that Councillors vote on that is exempt from declaring an interest. In most cases Council’s have established Independent Remuneration Panels to recommend levels to the Council, increases are often linked to local government pay awards (i.e. to the staff).

In our submission to the Councillors Commission in 2007, ALDC recommended that there should be national schemes and recommended levels for councillors allowances to make it fairer overall, and avoid abuses.

Receiving your Allowance

Your allowance will be paid to you by the Council in a similar way to any other wage. Tax and National Insurance are deducted in the normal way.

One thing to watch out for is that if you lose your seat or retire, or lose your SRA the Council will (understandably) want any overpayment back (normally just that month) – so best not to spend it first!

Contributing to the Party

ALDC recommends and the Party is beginning to insist that Councillors contribute to their local Party. This is NOT giving a part of their Councillors Allowance – but is a personal donation which is often based on a percentage of that allowance.

ALDC produces separate guidance on Councillors financial contributions.

Other Paid Employment

Many Councillors also have other paid employment. This is perfectly normal, and it’s up to you to balance the different time commitments and responsibilities.

Some Councillors go part-time (for example to 4 days a week) to make it easier being a Councillor – especially Executive Members or similar.

Other Councillors give up their paid job to be a full-time Councillor – particularly Council Leaders and Deputy Leaders and some Executive Members. It is great that you are able to do this, but please remember that being a Councillor is not a permanent job – it’s one we need to be re-elected to every four years and you need to think about your long term wellbeing. If you’ve given up your job to be an Executive Member or Council Leader – again great, but this job can be taken away by your group colleagues next year.

Pensions

All of us want to enjoy our retirement and older years. The income you receive from being a Councillor is no different from other income. You need to consider putting some of it aside for your retirement. Some Councils operate pension schemes which we would encourage you to join.

Remember personal pension contributions are net of tax so it can be personally beneficial to contribute – An independent financial advisor can advise you on this.

Tax

Council allowances are just the same as other income and are subject to income tax and National Insurance payments.

The Council will deduct these at source before you receive your allowance – they’ll be shown as deductions on your payslip.

If you have another job (which earns more than being a Councillor) then this is normally your ‘principle employment” as far as taxation is concerned. This means that the tax-free element of your pay is “used” there, not the Council and 100% of your Councillor allowance is subject to taxation.

It is a good idea to talk to your take office and tell the Council they are not your principal employer – otherwise, you’ll end up having a big tax bill at the end of the year.

If you earn from your day job, and being a Councillor combined more than £38,000 (in 2009) then you will be paying 40% tax on income above this. For some people, this means that all other their Councillor Allowance is taxed at 40%.

National Insurance is not payable over £22,00 (2009) so income above this level is not subject to NI. There are different NI rules for people over 65.

You can offset a part of your pay as Councillor.

This includes;

• an allowance for using your home as your councillors office
• any office related expenditure (not refunded by the Council) that you incur as a Councillor
• any travel expenses (Not refunded by the Council) e.g. driving around your ward on Council business
• publicising surgeries etc

It does not include:

• a donation to the Liberal Democrats or your council group
• ALDC membership (unfortunately!)
• Campaigning

This is not a simple tax, so many people use an independent tax advisor to help them with this. They will typically take 25% of that you receive back – though please note you can go back five years on reclaiming tax.

Please note claiming tax back is particularly sensible if you’re into the 40% tax bracket. An independent financial advisor will be able to advise you on these issues.

Benefits

To follow

Expenses

Most Councils will agree on a scheme of expenses for Councillors in addition to their allowance scheme. This is normally agreed at the same time as the Allowances Scheme.

This will include:

• travel to Council meetings or other Council Duties
• a subsistence scheme if you are representing your council away from home
• regular expenses such as telephone, broadband bills – perhaps dealt with as a standard sum each month
• other items such as childcare costs.

Expenses exist to make it “fair” for people to be elected members. Obviously, it costs more to travel to a Council meeting if you are 50 miles from County Hall than if you live in the next street. If you are a single parent then you will most likely incur childcare costs that other councillors do not incur.

Thankfully we have moved on, as a society, from a time when only rich people (and men) could hold elected office!

We recommend that you do claim sensible and reasonable expenses. The system exists for a good reason if you don’t need the money we can think of a good cause that does!

Do claim for:

• travel to Council Meetings (get the correct mileage from a website like www.theaa.com)
• essential expenditure such as phone expenses that you have incurred as a result of being a Councillor
• reasonable and sensible travel expenses if you are representing your councillor away from home.

Do not claim for:

• any party political expenditure
• something that has not been incurred as a result of you being a councillor
• something stupid! – do not claim for the remembrance day wreath or the raffle ticket at the Mayors Ball!!

As a rule,  what would an ordinary resident think was reasonable for you to claim.

More Information

The Government can provide up to date information on tax, national insurance and benefit rates  – a good starting point is www.direct.gov.uk

You Council (either Democratic Services (or similar) or payroll should provide advice to you on basic financial issues if you ask.

The Local Government Information Unit (LGiU) produces the publication Councillors Tax and Benefits 2009 available directly from the LGIU.

Help us improve this Advice

If you have suggestions for improving this advice from ALDC or ideas for other advice that could be useful to Lib Dem Councillors please let us know.