Average council tax rise dips to 4%

Average council tax will rise by 4% in England this year, the lowest percentage increase since 1994, the Chartered Institute of Public Finance and Accountancy (CIPFA) has reported.

CIPFA research predicted that council tax bills would rise by an average £45 to £1, 187 for a "band D" property in 2005/06 in England. In Scotland and Wales, rises of 3.9% and 4.3% respectively, were predicted, a decrease from 4.4% and 6% rises the previous year.

CIPFA said that the smaller increases were due to more grant money being supplied by the government as well as further threats to use capping powers to help limit council tax increases. The government's capping powers were first used last year when six English councils were told to lower their budgets.

CIPFA calculated that the government's grant settlement had provided English authorities with an extra £3 billion. However, CIPFA said that the 2005/06 budgets relied heavily on special one-off funding which was announced by Chancellor Gordon Brown in his Pre-Budget Report last December. If the funding was not repeated in 2006/07, CIPFA warned, higher council tax rises could return next year.

CIPFA Chief Executive Steve Freer said: "It is now more important than ever to address the question of how a better system for funding for local services can be developed. We believe that the root problem is that councils are far too dependent upon funding from central government. We need a stronger local tax base incorporating either the return of business rates to local government control or the introduction of a new local income tax, alongside an improved council tax."

Conservative Shadow Secretary of State for Local and Devolved Government Caroline Spelman said that Labour had "hammered" people with council tax rises of 70% since they came to power, saying they were just one of "66 stealth tax rises". Ms Spelman said: "This year's rises are a cynical attempt to try to limit council tax in an election year. It's a trick Labour has used before - only to then drive rises up again afterwards. The year's rises are double the rate of inflation, and with revaluation next year and plans to introduce new higher council tax bands, there is no doubt we would see even further hikes in any Labour third term."

(KMcA/SP)