Councils capped as Labour tightens screw

Fourteen local authorities were threatened with council tax capping yesterday as ministers imposed a limit on council budgets for the first time since Labour came to power.

Fourteen local authorities were threatened with council tax capping yesterday as ministers imposed a limit on council budgets for the first time since Labour came to power.

The announcement, with seven authorities facing an immediate cap and a further seven warned to expect budget limits next year, represents the largest round of capping since the power to impose a ceiling on local spending was introduced.

Conservatives said the announcement was "fiddled" in a desperate attempt to limit soaring council tax increases, while furious local government leaders vowed to appeal against the decision, arguing that in some cases ministers were demanding cuts worth only a few pence a year to council tax payers.

But Nick Raynsford, the Local Government minister, insisted that the cap was essential to limit excessive increases in council tax bills.

Councils facing capping this year are Herefordshire, Nottingham, and Telford and Wrekin unitary authorities, along with Torbay, Fenland and Shepway district councils. For the first time a fire authority, Hereford and Worcester, was also singled out for capping.

In an unprecedented move, another seven fire and police authorities face possible curbs on spending next year. Cumbria, Northamptonshire and West Mercia police are all included, along with Bedfordshire, Durham, Essex and Nottingham fire authorities. Ministers will either cap their budgets next year or limit spending by using a low estimate to calculate their government grants in next year's settlement.

All the authorities have 21 days to argue against the decision, which will not be announced formally until after the local elections on 10 June. They can either press for the cap to be lifted altogether or argue for action to be postponed until next year's budget settlement.

Senior local government figures accused ministers of "tinkering around the edges", arguing that Telford and Wrekin had been asked to cut £31,000 from their budget, a move that would cost around £100,000 to implement. The Labour-led Nottingham City Council faces sending out new bills to impose a cut of just £180,000 on a budget of £330m. "It's ludicrous and ridiculous. We're talking about shillings and pence here," said one source.

But Mr Raynsford insisted that all authorities had been given ample warning that ministers were prepared to cap budgets to keep council tax rises below the average rise of nearly 13 per cent recorded last year.

He said: "We have always said we would use our capping powers if authorities set excessive budgets. Today we are keeping that pledge.

"This is not a step we are taking lightly. First and foremost it is for authorities to set their own council tax, but we have a duty to protect taxpayers from excessive council tax rises."

Mr Raynsford said the Government had limited council tax rises to an average of 5.9 per cent and insisted that ministers would not allow excessive increases next year. Ministers are anxious to avoid high council tax rises next spring, with a general election widely thought to be planned for May.

Philip Hammond, the shadow Local Government minister, said: "What the Government has done is apply a sticking plaster to a gaping wound. The capping process, which the Government promised would be a lifeboat for pensioners and those on fixed incomes, has ended up as a shipwreck of a policy: unfair, un-transparent and ineffective."

Ed Davey, the Liberal Democrat Local Government spokesman, added: "How can the minister pretend to be the friend of local government and local democracy when he reverts to the old Tory tricks he used to vote against?

"Ministers are capping councils like Shepway, Torbay and Telford, not because it makes sense for local people, as they will now be hit by Labour cuts, but because capping will give a desperate government some short-term friendly headlines."

Sir Jeremy Beecham, the chairman of the Local Government Association, said: "If the cap is confirmed, and this won't be before the local elections in June, then bills will have to be re-calculated and re-sent, paid for by council tax payers. Spending on specific services will need to be cut mid-year.

"This is not a recipe for good government."