03 August 2001
Transport, Local Government and the Regions Secretary Stephen Byers has already ruled out in-year capping for 2001/02. But in an indication that ministers are prepared to use their reserve powers to limit tax and budget rises next year, the 15 authorities have been asked to explain the reasons for their recent increases.
In a statement to Public Finance this week, the Department of Transport, Local Government and the Regions said: 'Authorities that we have spoken to in recent years should not be surprised if they are still being looked at closely, especially if they are continuing to set high tax and budget increases.'
The exercise may be little more than sabre-rattling. Ministers are certainly stepping lightly. The letters sent to authorities have indicated that the 'department does not intend to make any public announcement' about the information-gathering exercise – implying it is keen to avoid naming and shaming councils.
The department this week confirmed it did not want to 'act prematurely without knowing the background behind the increases'.
Councils, and their representative body the Local Government Association, were this week being similarly coy about the demands to explain tax rises. But Public Finance understands that four counties are included among the 15 authorities: Oxfordshire, East Sussex, Essex and Worcestershire – all of which have had high cumulative tax rises over recent years.
Oxfordshire this year increased its precept by 7.2%, less than one percentage point above the average tax rise. But its cumulative rise over the past three years exceeds 30%.
Mike Petty, principal finance manager at Oxfordshire, said the council had been the victim of poor settlements in previous years and had received a 'sympathetic hearing' from ministers following last year's 10.4% tax rise. Although Oxfordshire received the best settlement of all counties this year, the effects were reduced by the imposition of a ceiling on government grant, which cost the county £1.5m and added 1% to the local tax.
Ministers want to see evidence of taxpayer support for the high tax rises. Although no council will be capped this year, they are looking at two possible options for restraining future tax rises. These include setting budget limits for future years or setting a notional base budget for 2001/02 against which future increases could be measured.
PFaug2001
