Council tax bills could soar after grants fall short

Council tax bills were predicted to soar above the rate of inflation yesterday despite a 6.5 per cent increase in local authority grants and threats that ministers would cap excessive increases.

Early predictions suggested average bills could rise by 10 per cent, local government sources said. Nick Raynsford, the minister for Local Government, insisted that most demands for extra cash had been met, and warned that "large council tax increases are simply not acceptable".

In a clear threat to council leaders aimed at heading off a repeat of this year's record 12.9 per cent average council tax rise, he said the public "would not wear" increases approaching 10 per cent. He insisted that authorities could follow the example of the 100 councils that limited rises to 5 per cent last year.

Mr Raynsford told MPs: "We expect authorities to come up with a low or no increase. We are clear that the current trend in council tax rises is not sustainable.

"Every local authority, including fire and police authorities, must be in no doubt that we are prepared to use our capping powers to protect council tax payers."

But the Local Government Association (LGA) said many authorities would have no alternative but to increase council tax. The majority of district councils had funding cut in real terms, with some getting only 2.2 per cent more.

The LGA said 13 county and unitary councils would be forced to spend all their grant increase on schools, while 18 more had been left with little or no room for manoeuvre once increases had been "passported" to education. Police authorities raised the prospect of an increase of up to 15 per cent in their demands on council tax payers.

They insisted they needed a 6 per cent increase in grant to maintain services, warning that their 3.3 per cent settlement would be swallowed by inflation, pay increases and pension costs.

Sir Jeremy Beecham, chairman of the LGA, warned that "many councils have a serious shortfall in budgets and council tax for the coming year".

He said: "Strong words and capping threats from government will simply cause weary bewilderment. If your grant is less than inflation or you are forced to pass any increase you have to schools, where else are you expected to go?"

David Curry, the shadow Secretary of State for Local and Devolved Government, said council taxes would soar and warned that services would be damaged.

He said: "I think it's going to be the humble services which suffer, pavements, streetlights, potholes, recreation and parks.

"Those are the services which are often the closest to the citizen. This is the settlement which could mark the year that the streets could really begin to crumble.

"The citizen has been stuffed. Bad news for taxpayers, bad news for pensioners, bad news for people on low income, bad news for communities, bad news for people."

Edward Davey, the Liberal Democrat local government spokesman, told MPs: "You know that council tax is set to soar again, you know that this statement will do nothing to stem the seething unrest and unease about this spiteful council tax."