Minister warns councils over ‘excessive’ tax hikes
Local authorities have no excuse to introduce excessive increases in council tax next year. That’s according to Local Government Minister Nick Raynsford following the announcement that councils will receive an average increase in government grant of 6.5% – taking it up to a total of £54.1bn.
And he claimed that councils would have more freedom to decide how they spend their money following complaints that too many funding streams are ring-fenced for specific purposes.
The announcement follows an average increase of 12.9% in council tax charges for this year, which was heavily criticised by the office for the Deputy Prime Minister in the light of the above-inflation increase in central funding for all councils.
Mr. Raynsford commented: ‘This is a good settlement for local government. There is a double boost for authorities – increased funding and the removal of ring-fencing from £750m of grant. This gives increased flexibility to people who make frontline decisions.’
He went on to claim that council tax increases of the levels seen this year were ‘unsustainable’, adding: ‘We do have targeted capping powers and we are prepared to use them. But with this settlement there really should be no need for excessive increases.”
The announcement follows complaints from the Local Government Association that the current funding system is forcing councils to implement large tax increases. LGA chair Sir Jeremy Beecham wrote to the Deputy Prime Minister at the start of the month claiming that local authorities faced a funding shortfall of £800m in 2004 because of rising costs.
The LGA has pointed out, however, that the Government has significantly increased local authority funding, which has gone up by nearly 30% in real terms according to government figures.
But Sir Jeremy has claimed that the present local government finance system ‘multiplies the effect on council tax of expenditure increases by councils’. He explained that this meant a 12% increase in tax, for example, would only represent a 3% increase in expenditure.
The removal of some ring-fencing is likely to take the pressure off councils, but whether £750m out of a budget of more than £50bn is enough remains to be seen.
