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Council tax to rise

The Deputy Prime Minister, John Prescott, told the House of Commons that Treasury grants to councils are to increase by 3.8%.

This represents a real rise, after inflation is taken into account, of around 1%.

But a relaxation of capping limits, which place a ceiling on council tax rates, mean councils could put taxes up by a greater amount.

Mr Prescott said the local government review is examining ways of changing the council tax system. He said he would not make any recommendations before then.

Ministers said earlier the average band council tax rate would rise by 7% but some could go up by 9% or 10%, according to a Government source.

The notional council tax level for the average band D property for 1998-99 will be set at £635, Mr Prescott said in Parliament.

Mr Prescott said extra money for services such as education means local authorities will not face an increased burden in coming years.

"None of the cost of extra school spending will fall on the council tax payer as so often happened under the previous administration," he said.

• Other key increases announced included:

• £1.06bn for education, including £835m for schools announced in the July Budget

• £350m extra for community care

• £70m for children's social services

• £20m in support grants for the Private Finance Initiative.

In relaxing capping limits, Mr Prescott hoped to give local authorities what they wanted.

He told the House: "Many authorities have budgeted below their capping limit in the past.

"I have given local authorities extra room within which to exercise their discretion. I expect them to do just that."

But some councils are already saying the figures on which the Government's has based its calculation are flawed.

Council taxes, they warn, will have to rise to meet the shortfall.

Mr Prescott added: "We were elected on a manifesto which pledged us to a renewal of local government. We aim to achieve reinvigoration of local democracy, a commitment to best value, a prospect of greater fairness and increased local discretion, allied to greater local accountability.

"This new relationship follows many years when the previous governments did not listen to local authorities and squeezed their funding year after year."

But the Shadow Environment Secretary, Sir Norman Fowler, said Mr Prescott had "opened the way for major over-inflation increases in council tax next year which will affect millions of ordinary council tax payers."

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