Council tax set to rise again

HOUSEHOLDERS have been warned to brace themselves for another major rise in council tax this year. Political Editor GRAHAM DINES investigates the background and looks at how Suffolk and Essex county councils are attempting to lessen the impact.

EVEN before last week's revelation that there's a black hole looming in Chancellor Gordon Brown's Budget calculations, the omens were not good for next year's council tax prospects.

Hidden in the Chancellor's Budget book was a warning that Government support for council spending – or locally financed expenditure in Whitehall jargon – will fall in real terms.

The Treasury this year provided an extra £2.7bn, but next year there will be a rise of just £1.6bn – that's £1.1bn lower that in the current 12 months. In 2005-06, the rise will be cut to £1.5bn.

So unless councils start drastically cutting their spending, there is every likelihood of further massive rises.

The Government's policy of squeezing local government is exacerbated by a deliberate decision to discriminate against councils in the south and east and favour those in the north and midlands.

This year, the Government had no qualms in giving extra resources to councils north of the River Trent, and paying for this policy by giving less money to the shire counties around London.

The result was an 18.5% rise in Suffolk council council's tax and 16.7% in the Essex tax figure.

The increase for the average Band D council taxpayer imposed this year by Suffolk county council was £138.87, taking it to £890.28. On top of this, householders also had to fund a 33.4% increase in the Police Authority tax and around 10% for the district council spending.

Essex county council's tax rose 16.7% to £896.40, the county's police spending was up 19.7% and district taxes rose around 9%.

Council tax redistribution cost Essex £30million in Government grants and the authority has been told to expect a further reduction of £45million over the next three financial years.

Any chance of a change of heart by the Chancellor evaporated last week when more than 30 independent economists anticipated that Government borrowing next year will be almost £10bn higher than Mr Brown's forecast because he had been over optimistic about tax revenues.

Lord Hanningfield, Leader of Conservative-controlled Essex county council, is sanguine over the future. "All the indications are that there will be a substantial rise in council tax, especially if we have to fund the education increases the Government has promised.

"Once again, it will be the south and east of England that will bear the brunt. Essex is expecting to lose £45m in Government grants over the next three years but we still have to provide the services people want.

"We have already taken major steps to try to look at our spending. All service departments other than education, children's and highways have been told to expect a standstill budget next year."

Lord Hanningfield added rather gloomily: "I fully expect Essex to be the worst hit shire county in England."

Meanwhile in Suffolk, the public's reaction to this year's 18.5% rise – nearly seven times the rate of inflation – left the controlling Labour and Liberal Democrat group with some hard thinking to do.

Council leader Bryony Rudkin said the leadership was "mindful" of the outcry, especially among those on fixed incomes. She promised a major consultation exercise to ask voters to tell the council which services should have priority.

"We are looking to save money on procurement, the outside goods and services which we buy. We have ordered a review of our property portfolio – that's not selling off the family silver but trying to maximise our revenue."

Mrs Rudkin added: "We are, of course, dependent on central government for support and we are working closely with the Local Government Association to ensure that Suffolk's voice is heard."

West Suffolk Tory MP Richard Spring believes the future is bleak and that any double figure rise "will stretch taxpayers' resolve to breaking point."

He said: "Swingeing council tax increases – a true stealth tax – are having a devastating effect on people on fixed incomes, notably pensioners.

"It is a truly disgraceful that in Suffolk, the elderly are subsidising richer folk in the north of England because we are not getting a fair deal from Whitehall."

Colchester's Liberal Democrat MP Bob Russell, whose party is the only one to advocate the introduction of local income tax to finance council spending, said central government's control of finance

"The average council tax rise nationally this year was 12.9% – the year before Labour gained power it was 6.1% and last year it was 8.2%. The Labour government cannot escape from the truth that it is responsible for the massive increase in taxes.

"Essex is Tory controlled, Suffolk is in the hands of Labour and the Liberal Democrats, yet both have been forced to raise taxes through the deliberate action of Tony Blair's government," said Mr Russell, a former leader of Colchester borough council.

The long-term prospects are not good either. The Government is committed to providing extra resources for health, education, trunk roads and law and order.

Other spending departments face big cuts. Defence is expected to be a major casualty, as is the budget under the control of the Office of the Deputy Prime Minister.

And as most of John Prescott's spending is on support for local government, householders face a reduction in services and above-inflation council tax increases for years to come.