NLGN welcomes low council tax figures but warns they could be “last of the low rises for many years to come”

February 24, 2010

With CIPFA predicting a 1.8% average council tax rise and the LGA echoing this prediction with an estimate of 1.6%, it is clear that local authorities are bearing down on council tax levels for financial year 2010/11. But Director of think tank New Local Government Network Chris Leslie argues “this may be in part because of the pre-election period, but is more likely made possible because of the generous 4% increase in local authority grant from central government for 2010/11, the last such generous rise probably for at least the next five years.”

Mr Leslie said: “Because council tax raises barely a quarter of total council spending, the level of central grant is the key determinant of how high or low council tax increases will be. If central government grant is high, then councils do not need to raise as much through council tax. But if grant is frozen – or cut as predicted in the years ahead – then councils have little choice but to place this burden disproportionately on the shoulders of the council tax payer”.

“In our antiquated system of local government finance, the ‘gearing ratio’ means that for every pound of grant withheld, council tax needs to rise by four pounds to compensate[1]”.

“So if next year the Treasury decides to freeze central grant to councils, we might be facing council tax increases of 16% in that single year to counteract the loss of revenue, unless councils act decisively to generate further internal efficiencies to compensate”.

“Worse, the predictions by others of a cut in central grant of the order of 6% annually for the three years to 2014 could see council tax rising by 40% a year in some cases, a scenario which would surely provoke the Government of the day to revise its plans or reform council funding further”[2].

“We urge the political parties and general public to recognise that grant to local authorities is a key priority in future Spending Reviews, and that across the board reductions could have serious ramifications for the council tax payer”.


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