28 March 2003
Local government leaders hit out at the government this week after Nick Raynsford demanded an explanation from authorities for the 'excessive' council tax increases that some have levied.
The local government minister made clear his displeasure and said the government would now consider on a case-by-case basis whether increases were 'reasonable'. This followed the release of figures on March 25 showing an average near-13% hike in bills.
'Councils are benefiting from an average increase in government funding of 5.9% this year,' Raynsford said. 'Against this background of sustained increases in funding from government it is very difficult to see any good justification for excessive council tax increases.'
His comments drew immediate fire from the chair of the Local Government Association, Sir Jeremy Beecham, who blamed the big rises on the balance of funding, and in particular, the gearing effect.
'If a council wants to increase its spending by 1%, this causes a 5% increase in its council tax level. So this year's 12.9% average increase in council tax rates reflects less than a 3% increase in the level of spending which councils themselves control,' he said. This underlying problem in the local government finance regime had been exacerbated by a number of financial pressures in the coming financial year.
The 'passporting' of education funding to schools, shortfalls in social services budgets and the rise in wage bills caused by above-inflation pay awards and higher National Insurance contributions had all contributed to higher bills.
'People should be entitled to vote on higher or lower levels of public spending, but before they can do that there needs to be a clearly understandable link between local taxation and spending,' Beecham said.
Ministers are dismayed by the jump in council tax for 2003/04 that will take the average bill for a Band D property past £1,000, to £1,102, for the first time.
Around two-thirds of authorities have levied increases of 10% or less, but many others have imposed huge hikes in bills. Sixteen authorities have put up council tax by 20% or more, and Tory-controlled Wandsworth in London has chalked up the biggest increase of all, a massive 45%.
Raynsford hinted he would not use his powers to cap council tax increases this year, probably because the bills have already been sent out and would therefore have to be reissued if the government intervened.
But he made it clear that he would not be afraid to do so in future. 'Councils must be clear that continued year-on-year increases of this scale will not be acceptable,' he said.
But Dennis Reed, director of the Local Government Information Unit, said the government should accept responsibility for the rises.
'Councils do it with a heavy heart to protect services and, often, to meet Whitehall diktats about spending on schools that central government has not fully funded,' he said. 'Ministers should stop the distasteful point-scoring at local government's expense.'
PFmar2003
