05 March 2004
The stage is set for a showdown between ministers and town hall leaders after authorities defied government orders not to set council tax increases above 5% and issued warnings that budgets could not be squeezed any further.
They came as CIPFA's annual survey of council tax increases revealed that, although authorities have heeded threats from ministers to avoid 'excessive' rises, many have not met the government's target of restricting them to 'low single figures'.
Local government leaders are now watching closely to see whether ministers will act on their repeated pledges to slap down councils deemed to have overstepped the mark.
The biggest increase so far confirmed, 9.8%, has been set by Leicester City Council. Its Liberal Democrat leader, Roger Blackmore, told Public Finance that the authority had been forced to set it at that level to rectify the 'deficiencies' of the previous administration and there was no scope to reduce it.
'We inherited sizeable problems from the previous administration, including unacceptably low levels of reserves and other needs that had not been provided for,' he said. 'We have already worked extremely hard to get where we are.'
Blackpool Borough Council was second in the survey, posting an increase of 9.3% including precepts from other bodies. Its chief executive, Stephen Weaver, told PF that the figure was based on a 'standstill' budget that would meet 'unavoidable' demands.
'We have made every effort to get the figure down and we have a clear strategy to reduce it further in future years. Despite this increase, it will still be the lowest council tax in Lancashire.'
The CIPFA survey, published on March 2, revealed that the average council tax for a band D property in 2004/05 would be £1,142, a rise of 5.7%. This is the lowest for nine years and less than half of the12.9% hike in 2003/04.
Local government minister Nick Raynsford said he was 'encouraged' that authorities seemed to be heeding ministers' 'exhortations to lower their council tax increases'.
But he reiterated the government's willingness to cap councils. 'There is no room for complacency. There are still authorities that are significantly above this average,' he said. 'We will not cap for the sake of it, but we will cap to avoid taxpayers being subjected to excessive rises.'
English authorities are imposing the highest increases, averaging 6%, to make the average bill £1,168. In Wales, the figure is 5% (£879) and in Scotland, just 4.4% (£1,053).
But the survey shows that police authorities are increasing precepts by well into double figures, averaging 14.4%, even though the Audit Commission identified these as a major reason for the rocketing bills in 2003/04. Fire authorities are following a similar pattern, averaging 17.1%.
CIPFA chief executive Steve Freer said the government now had to get to grips with how to improve the funding regime. 'Despite this year's better figures, no change is not a credible option,' he added.
Local Government Association chair Sir Jeremy Beecham said councils had worked hard to keep bills down in 2004/05. But he blamed year-on-year rises in council tax bills on central government for placing 'unfair burdens' on local taxpayers. 'The trend has to stop once and for all with a fundamental reform of local taxation that restores responsibility and accountability to town halls,' he said.
The survey was published shortly before a Balance of Funding review meeting on March 4, which was due to discuss a report by CIPFA on local income tax. The paper describes it as a 'realistic option' and says the 'most promising model' would be for individual authorities to set the tax and the Inland Revenue to collect it.