Blair pledges local authority freedom, but no more cash

A renewal of local government but within extremely tough financial constraints was promised yesterday by Tony Blair as council leaders warned that an incoming government is poised to face deteriorating services and significantly higher council tax bills.

Local authorities will today tell John Gummer, the Secretary of State for the Environment, that councils need a pounds 2.3bn (5 per cent) spending increase next year against the 1.5 per cent or pounds 680m for which ministers have planned.

That "no-frills" demand comes against "a bleak picture of increasing inadequacies in services", Sir Jeremy Beecham, chairman of the Local Government Association warned. The Government's plans would produce "unacceptable consequences" for services locally. In addition, he said, their assumptions already indicated an 8 per cent council tax rise in April, and a double- digit increase just ahead of the election "cannot be excluded".

The warning came as Mr Blair told local authorities bluntly that there would be no spending spree under a Labour government. "The future of local councils will not be based on spending an increased share of the national cake," he told the first assembly of the new shadow Local Government Association in London. Instead "there will be greater freedom for local authorities, greater competence to act on behalf of the people, greater flexibility in managing partnerships with the private sector". Local government needed to be "reinvented for a different world" - acting as an enabler and a partner but "not necessarily delivering the whole range of services" itself.

The crucial thing, Mr Blair added, was that "the public interest must come first", not "ideology or any producer interest". The compulsory element in competitive tendering will go, he confirmed, but councils will have a duty to secure best value with the Audit Commission and ultimately the Secretary of State able to step in where services fail. Councils will also be required to produce and strive for performance targets.

The Labour leader also underlined his determination to pursue the idea of elected mayors for major cities, despite accepting that the idea was "controversial". Citing a recent survey showing only 16 per cent of councillors but 70 per cent of the public in favour, he said: "It cannot be enough to reject the idea on the basis that councillors do not want them when there is such a large degree of public support."

Sir Jeremy said Mr Blair's tone appeared "warmer" than in the past, but he added: "We are approaching the last chance in local government" and the new association "had to get its message across".