By Richard Johnstone | 14 November 2011
Councils have been warned to make sure that they can manage an effective cut in their finances in 2013/14 before accepting the government’s offer for next year’s council tax freeze.
Local Government Association chair Sir Merrick Cockell has urged councils to ‘ensure that they are able to manage any future financial consequences’, after the government today announced that the money for the 2012/13 freeze will cover only one year.
Ministers said £805m will be provided to freeze council tax in 2012/13, equivalent to a 2.5% council tax increase for each authority.
This is the second year in a row that the government has offered local authorities money to freeze council tax. All councils signed up to the deal to halt this year’s increase.
However, unlike this year’s freeze, the funding for 2012/13 will not be repeated in subsequent years to ‘lock in’ the money in the funding baseline.
Cockell warned that councils must decide if they can live ‘within their means’ under the new deal.
He said: ‘Local authorities provide vital services that people rely on.
‘To carry on doing this effectively, councils need to carefully consider their ability to plan for future years’ council tax and spending levels, as well as whether this serves the long-term interests of residents, before deciding if they will take the offer up.’
The Department for Communities and Local Government announced the funding plan, which forms part of more than £3bn in total to pay for the two years. But only the 2011/12 freeze will be ‘locked in’ to councils’ baseline funding.
As well as funding to councils, the Greater London Authority and the City of London have been offered funds equivalent to tax increases of 2.75%.
Local Government Secretary Eric Pickles said that the proposals would allow town halls to ‘keep a lid on bills for another year’.
He said: ‘Our two-year freeze promise, potentially worth up to £72 each year to Band D residents, is in stark contrast to the years before when council tax was allowed to double.
‘Today, every local authority can see how we’ll back them to hold council tax steady for another year and leave millions of taxpayers with more of their hard earned cash in their pockets.’
The amount each council will receive from the deal will be confirmed in March 2012, once authorities have confirmed their tax base, but indicative grants have been published today. These are calculated by averaging the growth in council tax base in the last three years, based on the increase of taxable homes.
The biggest indicative grant provided to a council is £14.5m to Essex County Council, followed by £14.4m to Kent and £13.9m to Surrey.
Among other large grants is the £8.3m provided to Birmingham City Council, and Leeds City Council’s £6.7m.
