Page last updated at 15:01 GMT, Wednesday, 25 February 2009

English council tax 'to rise 3%'

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Ministers have urged councils to make increased savings

Council taxes are forecast to rise by an average of 3% in England - the lowest rise in ten years but still set to be higher than the inflation rate.

Ministers said there was "no excuse for excessive rises" and costs could be cut elsewhere to protect core services.

The rise is equivalent to 79p a week on average bills.

Councils predict their incomes will fall by 2.5bn due to lower income from investments, services and from selling off land amid falling house prices.

Inflation is currently 3% when measured by the official Consumer Price Indexes measure, but is expected to fall further.

And the Retail Prices Index, an inflation measure which includes mortgage costs and is often used in wage negotiations, has already fallen to 0.1%.

More demand

Local authorities are having to revise their budgets because of the downturn which is reducing the amount of income they can raise through services like car parking and leisure centres, reducing interest on investments and the income they would usually get from selling off land.

At the same time, increased demand for housing benefits and other services for those with low incomes has been putting pressure on their finances.

Councils understand people are suffering
Margaret Eaton, Local Government Association

A survey of English councils in December found that the average rise in council tax bills in 2009-10 was expected to be 3%, down from a forecasted 3.5% increase.

If correct, this would mean the average annual bill this financial year rising by 41 a year to a total of 1,414.

Ministers said in October that they expected average annual rises to be below 5% and that they would not hesitate to cap individual increases if they were excessive.

'No excuses'

"Councils are responding to the fact that people are feeling the pinch and are revising down this year's council tax rises," said Margaret Eaton, LGA chairman.

"Councils understand people are suffering and they are working flat out to keep council tax down, to keep local businesses afloat and help people deal with the impact of the recession."

Local Government Minister John Healey said councils had the budgetary stability to plan ahead.

Council tax and inflation

He said: "Next year, they will receive a 4.2% increase in grants, with more funding strings removed so that money can be used as they see fit to meet local needs and priorities."

"So there is no excuse for excessive council tax rises or service cuts, and I have made clear that we will take capping action where necessary to protect council taxpayers."

The state pension is due to increase by 5% from next April - campaigners have often complained that council tax rises have outstripped pension rises for years.

But Gordon Lishman, head of Age Concern, said pensioners would still struggle, as council tax was charged on the basis of their homes, not their income.

"Although this year's state pension uprating might seem generous, many older people are still dealing with the fall-out of last year's inflation rise and will be struggling to make ends meet," he said.

'Tough decisions'

The Conservatives say they would fund a two-year freeze on council tax by cutting spending on government consultants and advertising.

And council tax bills in Scotland have been frozen for the year.

Shadow local government secretary Caroline Spelman said taxpayers were "already feeling the pain of council tax having doubled under Labour".

She said: "Now council tax bills are to rise by a further 41 this April, at a time when people are losing their jobs or being hit with pay freezes.

"By contrast, residents in Scotland will benefit from another council tax freeze this year."

The Liberal Democrats said councils were making "tough decisions".

"The government should follow their example and do more to cut the tax burden on those on the lowest incomes," local government spokesman Julia Goldsworthy said.

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