Councils warn of funds black hole

Council tax has become an increasingly hot issue

Council taxes will rise steeply again next year unless ministers plug an £800m funding black hole, local government leaders have warned.

The leaders of all three main party groups on the Local Government Association say the situation is acute.

Their fears come in a letter to Deputy Prime Minister John Prescott, who has threatened to cap big tax hikes.

The government says it is premature to discuss next year's finances.

Schools worries

Shortfall in education funding have caused controversy this year and the Local Government Association says the extra money announced by the education secretary does not cover that £300m overhang.

Police authorities are also short by £200m, it says, while new responsibilities in social services, licensing and the environment will bring the total funding gap to £800m.

LGA chairman Sir Jeremy Beecham said: "Whilst there has been a significant and welcome growth in government funding for local services, this has not matched the additional spending commitments government has made on behalf of the people who receive council services.

"Schools, children's and adult social services, traffic management and cleaning up the environment are only some of the many areas where spending has to rise.

"The problem for this coming year is the perception that council tax levels have already reached the heights of acceptability, but most councils have nowhere else to go to raise income.

"I hope - in the spirit of co-operation that means the government can agree with us as to the problem - we can find a short-term solution.

"Unfortunately for now, that solution isn't in local authorities' hands, but in the hands of the government."

Announcement due

This year's 13% average rise in English and Welsh council tax bills have provoked anger.

The government is preparing to announce the funding settlement for next year at the end of this month.

A spokeswoman for the Office of the Deputy Prime Minister said it was too early to speculate before that announcement.

"The government has been considering the pressures faced by authorities as we finalise our proposals for the provisional settlement which will be announced shortly," she said.