Cash injection aims to block council tax hikes

11 Dec 03
Local authorities pledged to do their 'level best' to keep council tax rises to a minimum after Gordon Brown unveiled a £406m cash injection in his Pre-Budget Report this week.

12 December 2003

Local authorities pledged to do their 'level best' to keep council tax rises to a minimum after Gordon Brown unveiled a £406m cash injection in his Pre-Budget Report this week.

Town hall leaders heralded the news as evidence that councils are at last beginning to convince ministers that there is a need for extra money to meet new responsibilities.

Local Government Association chair Sir Jeremy Beecham said he was 'optimistic' that the announcement, made to Parliament on December 10, would mark a change in the way that local government is funded.

'The money is more than just a sticking-plaster measure,' he said.

'It points the way to a more fundamental change in local government finance to a fairer, more transparent and accountable system which will allow people to better understand the relationship between council spending decisions and the local tax they have to pay.'

Beecham said the new money would not be enough to avoid above-inflation council tax rises in many areas, but said that it would 'certainly help'.

He urged ministers to ensure that the money was directed at authorities that need it most, particularly district councils, which are due to receive a grant increase of 2.2% to 2.8% next year. Details of how the money will be distributed were due to be released on December 11.

English authorities will receive £340m. That, taken with the extra £420m announced last month, means that the LGA's members have now been given almost all of the extra £800m that they were seeking for next year.

It comes just a week after the Audit Commission published a report that laid the blame for last year's council tax hikes firmly at the feet of the government.

In his statement the chancellor made clear that the money was intended to avoid another council tax rise like last year's average 12.9% increase in England.

'The government will, to ensure next year reasonable levels of council tax, be prepared to use capping powers where appropriate and necessary,' Brown said.

The money will come from government borrowing, which Brown predicted would reach £37bn by the end of 2003/04, £10bn higher than originally forecast.

But he indicated that he wanted to see financial discipline maintained in relation to public sector pay deals, announcing that he had written to all the pay review bodies to tell them that the inflation target had been reduced to 2%.

This follows the decision to use the harmonised consumer price index to measure inflation, instead of the retail price index.

The T&G issued an immediate warning that it should not be regarded as a prescription. Deputy general secretary Jack Dromey said: 'That should not of course be interpreted as a benchmark for public sector pay settlements. That would be unacceptable.'

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