Councils to set record low tax rise

25 Feb 10
Local authorities in England and Wales are set to impose the lowest-ever council tax rise this year, according to CIPFA – although experts are warning of financial trouble ahead
By David Williams

25 February 2010

Local authorities in England and Wales are set to impose the lowest-ever council tax rise this year, according to CIPFA – although experts are warning of financial trouble ahead.

The institute’s annual survey shows that the average bill for a Band D property will increase by £25.71 to £1,420.17 in 2010/11. This is a rise of 1.8% on 2009/10.

With inflation currently calculated at between 3.5% and 3.7%, it means that many households will enjoy a real-terms council tax cut this year.

Last year’s 3% rise had been the lowest since 1994/95, when council tax went up by 2.1%.

In London, the average increase for 2010/11 is an estimated 0.1%, with many boroughs following the Greater London Authority’s lead in opting for a tax freeze.

The highest rise is in Wales, where council tax is set to go up 3.6%. However, that is still the smallest Welsh increase on record, and the Band D average bill of £1,125.77 is the lowest in the UK.

A Department for Communities and Local Government spokesman said that government grants had increased by 45% in real terms since 1997. He argued that this year’s restraint would not have been possible without the investment from Whitehall.

The biggest rises were all imposed by police authorities, led by Greater Manchester Police Authority, which will raise its council tax precept by 7.5%. However, it does not expect to be capped by the DCLG as the increase is the final instalment in a three-year deal with the Association of Greater Manchester Authorities, with extra funds ring-fenced to pay for more neighbourhood policing.

CIPFA policy and technical director Ian Carruthers said the data, published on February 24, suggested that councils have heeded the call from the DCLG to keep taxes as low as possible.

However, he warned: ‘There’s big uncertainty about what happens after 2010/11. All the evidence is that the government is going to have to make significant cuts. Councils need a steer from government about the sorts of services that should be provided, but frankly that’s not coming… nobody is debating the specifics at the moment.’

The New Local Government Network warned that 2010/11 could mark the last low increase for at least five years.

‘In our antiquated system of local government finance, the “gearing ratio” means that for every pound of grant withheld, council tax needs to rise by £4 to compensate,’ said director Chris Leslie.

He said a DCLG grant freeze could result in proposed council tax rises of 16%, while a fall in the DCLG grant of 6% could cause councils to raise taxes by 40% to maintain funding levels.

A separate survey released on the same day by the Local Government Association predicted an even lower 1.6% rise in council tax. The LGA said this was in spite of a £4bn loss in income since 2007/08, caused by a drop in land values and a decline on interest accrued from cash deposits.

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