Headlines: November 29th, 2006



Local Authorities have again been warned that the Government is ready to cap any councils judged to have proposed an excessive increase in Council Tax. The clear message came from Local Government Minister Phil Woolas when he announced a 4.9 increase in the funding settlement for councils next year. Meanwhile Local Government is warning ministers that they have some important decisions to make on the future funding of local authorities.

Mr. Woolas confirmed to MPs that the under the settlement for 2007-08 local authorities in England would receive more than 65 billion pounds, a 3.1 billion pound boost, he said, compared with the 2006-07 figure. Now he expects council tax rises to be below 5 per cent.

The overall increase would include a floor to ensure that all councils get an increase of at least 2.7 per cent in their formula grant. The Government says this deal confirms the increased investment in local services set out in the first multi-year settlement in January this year and it marked 10 successive years in which local government had been given a grant increase above inflation. In real terms, it claims, there has been an increase of 39 per cent in Government grant for local services since 1997.

Mr. Woolas said this continued investment would allow authorities to continue to provide effective local services at an affordable cost, in line with their own local priorities. Referring to the recent Local Government White Paper that proposed devolving more power to local councils, he challenged them to use the stability of multi-year settlements to plan better, to publish three year council tax projections, and provide more stable funding for partners in the voluntary and community sector.

He warned that there was no excuse for excessive council tax increases and he again expected the average council tax increase to be below 5 per cent. “Local government should be under no illusions; if there are excessive increases, we will take capping action – as we have done over the last three years. Councils know that we are prepared to take even tougher action if that proves necessary,” he said in his statement.

The Local Government Association stressed that authorities were determined to provide an ever better deal for the taxpayer and were leading the public sector in efficiency gains, making around 3 million pounds of savings a day. Given this, said the chairman, Sandy Bruce-Lockhart, there was little room for many authorities to manoeuvre between higher council tax and service cuts.

He said there were crucial decisions that Ministers had to make within the next few months about how local government services would be funded in the coming decade. “Government must be honest and decide if it is serious about meeting the demographic, social, environmental and economic costs of the future. If it is, investing in local services is crucial and local government is ready to play its part. If not, local councils and local taxpayers need to know, so they can prepare for the consequences. “We look forward to a vigorous debate on the way in which local government is financed once Sir Michael Lyons delivers his long awaited report,” he added.