Early indications show council tax pegged to RPI

LGA news release - 24 January 2008

The first indications are that council tax in England will rise by around 4% this year, on a par with the latest Retail Price Index (RPI), according to a new snapshot survey of over one hundred draft budgets published today by the Local Government Association.

The survey reveals that inadequate government funding is forcing many councils to make massive efforts to keep council tax rises below 5%. Funding problems are likely to deepen in the following two years with lower anticipated increases in government grant from 2009 to 2011.

A 4% increase on the 2007/08 average council tax bill per household would bring the average bill for 2008/09 to £1,145. The increase would be 85p a week.

The LGA is also renewing calls for a shake-up of the council tax system that would make local authorities much less reliant on government grant. Around 75% of all council funding comes from central government, with just a quarter of town hall budgets coming from money raised by council tax. 

Sir Simon Milton, Chairman of the LGA, says:

"Nobody likes paying more council tax but this year town halls are making enormous efforts to keep bills down. It is a testament to the determination of councils that the average rise is likely to be close to the rate of inflation.

“Keeping council tax down has been made harder by several government departments shifting extra costs onto councils whilst limiting funding from central government to a real terms one per cent increase. Council tax would have been a lot lower with a more realistic central government grant. The toughest financial settlement in a decade has left councils with difficult decisions to make locally.

“Councils that provide social care have found themselves in particular difficulties, whilst there are real concerns in district councils about government funding for free national pensioner and disabled bus travel. Some areas have found themselves shortchanged because flows of migration have been underestimated, leaving them poorly equipped to deal with significant numbers of migrants coming to the UK.

“The only way to get local government finance on a stable footing would be root and branch reform of how councils are funded so that they are less reliant on money from the Government. Being allowed to keep more money that is raised locally would give councils much greater control over their budgets and make them genuinely answerable to voters.

“Residents should also make the most of council tax benefits. For households entitled to Council Tax Benefit, town halls can guarantee that their bills won’t go up if their income doesn’t.

"Councils are now the most efficient part of the public sector providing an ever better deal for the taxpayer. Town halls are making savings of almost £100 million a month and will continue to make almost £5bn more savings over the next few years. Local government will also ensure that pay claims are affordable to the council taxpayer as well as being acceptable to staff.” 

The main pressures facing local authorities are:

• An extra 400,000 people over the next three years who will be over 65, many of whom will require social care from their council.  Councils that provide social care are having to consider tightening eligibility criteria. In a worst case scenario, lower level care to elderly people could be withdrawn by 2009/10.
• The rising costs of landfill. Despite councils' success in increasing recycling and reducing amounts of household waste that has to go to landfill, massive hikes in the rate of landfill tax that the Government charges could result in councils paying nearly £2bn in tax over the next three years. 
• The introduction of free England wide bus travel for over 60s and some disabled people.  Although the Government has provided extra money to introduce this scheme, many councils believe that they will have to divert substantial resources from other services to pay for it.
• Additional burdens placed on councils. These include new alcohol licensing laws, which, despite government assurances that all costs would be reimbursed, has left councils nearly £100m in the red and the costs of family court hearings, estimated at £40m a year, which have been shifted from the Ministry of Justice to local councils.

  

Notes to editors:

1.The survey is of 102 local councils and 21 police authorities (anonymous) and 32 fire authorities (anonymous) in England. Retail Price Index, the Government's measurement of choice for council tax, is running at 4%.

2. In October, the Government announced that in the next three years councils would receive an increase of 1% real terms in 2008-09, 0.1% in 2009-10 and -0.1% in 2010-11once earmarked resources for PFI schemes are excluded.

 

Author: LGA Media Office
Contact: Nick Mann, Tel: 0207 664 3187