Leader welcomes council tax report

THE leader of Essex County Council yesterday welcomed a watchdog report blaming the local government funding system for this year's record council tax rises.

The independent Audit Commission concluded in a report that "fundamental flaws" in the current system of funding local government contributed to this year's record council tax increases.

Council tax rose by an average of 12.9% across England for 2003/2004 – the biggest annual increase since the tax was introduced 10 years ago. In Essex, the rise was 16.7%.

In its eagerly-awaited report, the Audit Commission noted a direct correlation between lower Government grant increases and higher council tax rises.

Regions in the South with lower grant increases had higher council tax rises, while those in the Midlands and the North with higher grant increases had lower council tax rises.

One of the dangerous effects of the Government's grant system - which accounts for 75% of local council funding - was that 1% of spending above the grant translated into a 4% rise in council tax.

Commission chairman James Strachan said the problem lay in the dispute between local and central Government over how much money should be spent by local councils.

He said: "The balance of the funding - with only 25% raised locally - amplifies the effect of any disagreements over local budgets between central and local government."

Lord Hanningfield, leader of Essex County Council, one of the councils worst hit last year, said: "The report clearly recognises central government responsibility for the high council tax rises that hit Essex residents this year.

"I trust the real value of this report will be seen in the next two or three years as the government develops the next series of local government financial settlements.

"No-one in local government, or central government for that matter, wants to see 16% council tax rises in the future."

The report said council tax rises were "exceptionally high" because councils faced unusual spending pressures, such as increased National Insurance contributions and funding for schools, and chose to meet them by increasing local taxes rather than making cuts elsewhere in their budgets.

But the report predicted council tax will go down again in 2004/2005.

Debate has raged about who is to blame for this year's rise in council tax, with the Government and local authorities blaming each other.

Essex County Council was hoping for a rise in its Government grant of 7% for next year, but has been given 5.5%. It is not known how much council tax will be, but other councils have estimated increases including at least 30% in Tendring and 7.8% in Colchester.