Councils could be forced to increase tax by 7%

COUNCIL TAX bills in many parts of England could rise by up to 7 per cent next April under the cash settlement for local authorities, set out by the Government yesterday.

But even after levying larger bills, many authorities will have to impose cuts in education and other services. Including an increased sum of pounds 736m for community care, the global figure councils will be allowed to spend will be pounds 42.664bn. That is a 2.3 per cent increase on last year, but most authorities view it as a 1.2 per cent cash cut in real terms.

The Government has assumed a council will raise a tax of pounds 468 on a Band C home, a rise of 7 per cent on last year's notional pounds 438.

The expected increases in council tax help to explain how in Tuesday's Budget Kenneth Clarke, the Chancellor, was able to slice pounds 860m off the Environment department's 1994-95 local government spending. Central support for that outlay will be pounds 34.3129bn, a 1.7 per cent increase. But councils will still have to raise more of their income from their own rather than central government resources.

Details released to MPs by John Gummer, Secretary of State for the Environment, also show a change in the formula for calculating councils' standard spending assessments (SSAs) - the ceiling on expenditure deemed necessary.

Environment ministers were quick to point out that the spending limits were less severe than many councils had feared, while the capping regime has not been tightened.

The Government calculates that 386 authorities will be enabled to increase their budgets and 26 obliged to freeze them. Seven - Labour-controlled Basildon, Derwentside, Harlow, Ipswich, Leicester and Watford, plus Elmbridge, which has no overall control, will have to make cash reductions or risk capping.

Ministers accept privately that some bills will outstrip inflation, expected by Mr Clarke to remain within 1 to 4 per cent over the coming year.

Jack Straw, Labour environment spokesman, said Mr Gummer's calculation meant a pounds 526 charge in the central Band D - 'a 6.8 per cent increase'.

While final council tax bills will depend on factors such as collection rates, the use of reserves and asset sales, it is virtually inconceivable that any council will budget to spend less than its SSA in order to keep bills low.

A special pounds 280m 'damping' grant will be distributed among councils that will lose under a review of the social and economic criteria for calculating their SSAs But transitional relief to cushion the impact of the replacement of the poll tax will be cut.

In general, taxpayers benefiting last year will receive up to pounds 67 a year less for Band A and up to pounds 137 a year less for Band H.

Jeremy Beecham, chairman of the Association of Metropolitan Authorities, said that local government services were being 'forced to bear the brunt of the Government's desire to cut public spending'.

The Association of London Authorities said that councils in the capital would lose around pounds 200m.

Letters, page 19