Government considers new council tax cap

SHAUN LOWTHORPE Key public services face a massive spending squeeze as ministers look to limit council tax rises, it was claimed last night.


Key public services face a massive spending squeeze as ministers look to limit council tax rises, it was claimed last night.

The EDP understands that Whitehall is considering cutting the current cap on increases from 5pc to 3pc amid further indications that Gordon Brown is to put the brakes on spiralling price rises as he embarks on his Premiership.

The Chancellor is already insisting pay deals for public sector workers should not rise above 2pc. And as he prepares to move into 10 Downing Street this month council chiefs fear a “disaster scenario” when the comprehensive spending review is announced in the autumn of a zero increase in government grant plus a cap cut, while departments will also have to make more savings.

Such is the seriousness of the capping cut that Norfolk County Council is building the 3pc assumption into its budgeting plans for the next financial year. Police chiefs have also been advised to do the same.

Last night the government dismissed a cap cut as speculation.

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But Bob Summers, director of finance at Norfolk County Council, said there were growing signs that spending increases would be reined in at 3pc.

“I am sufficiently concerned from what I have heard from Whitehall to advise the cabinet that it would be prudent to base its budget and service planning for next year around this maximum level of increase,” he said.

“Capping at this level - if it was to come about - would be difficult to work within. That's why prudent planning now is a sensible course of action.”

And there is suspicion that the government wants to revive plans to force local authorities to set Band D rises over three years as part of a plan to stem unpopular inflation-busting council tax hikes and build long term planning into local government finances ahead of the next General Election.

“I think there is a good chance that the government will require councils to do it,” Mr Summers added.

Daniel Cox, leader of Norfolk County Council, said: “We are looking at a 3pc government cap, but at the same time we also have to deliver 3pc cashable efficiencies, so you have got a real terms increase of zero - that is the disaster scenario.

“The Local Government Association has produced evidence that councils need an average real terms increase of 4.2pc for each of the next three years to meet increasing demand, new policy commitments and additional burdens placed on them by the government. Pressures on social service authorities are particularly intense and in counties like ours, where we are seeing a sharp rise in the number of very elderly people requiring support, we are feeling them strongly.”

But Corinn Taylor, research director at the Taxpayers' Alliance said tax increases should be curbed, but he feared the shortfalls would be made up by increased charges for council services.

“Council tax has doubled over the last 10 years, they have had huge increases in funding from central government albeit with more responsibilities,” he said. “It's about time that these increases slowed down and started to reverse themselves. I imagine councils will find the extra 2pc through things like bin charges so the poor old council taxpayer is no better off than before.”

This year overall council tax increases in Norfolk were just shy of 5pc - with the county council setting a 4.75pc rise for its share of the bill, and Norfolk Police Authority agreeing a 6.9pc hike.

Finance chiefs insist it's too early to say precisely how the cuts would bite, but admit that a 3pc council tax cap would have far reaching implications for services

Two years ago when the Tory administration canvassed views on a 3pc rise it warned it would lead to £1.1m in cuts to children's services posts, £2.9m cut in road repairs, and radical cuts to funding for the voluntary sector. Instead the council opted for a 4.9pc rise after an outcry at the proposed cuts.

A spokesman for the Department for local government and communities said no decisions had been made.

“These are just rumours,” he said. “The comprehensive spending review is going to happen in the autumn. At that point we will be setting out how much money there will be for local authorities as part of the three year settlement. Until that happens it is simply speculation as to what the capping level might be.

“All that we have said is that we are committed to using capping if it's necessary to keeping bills down.”