Minister expects council tax rises of 'no more than 3%'

Council tax bills should not go up by more than 3%, ministers told town halls today as they set out the cash local councils will get from Whitehall next year.

Local Government minister Barbara Follett said a 4% boost in central funding meant increases in England should be the lowest for at least 16 years.

The £76.3 billion settlement, the final tranche of a three-year deal with authorities, had been protected from recession-fuelled cuts, Ms Follett said.

And she warned the Government remained prepared to impose a cap on any councils which attempted to impose "excessive" council tax rises and demanded further efficiency measures.

"As a result of the extra £8.6 billion made available in this settlement I expect to see the average council tax increase fall to a 16-year low next year while councils protect and improve front line services," she said.

"Already many councils are predicting freezes or cuts, so this can be done.

"In the current economic climate, the public expects Government to be acting smarter with their money. Keeping council tax under control is a top priority for Government, which is why it will not hesitate to use its capping powers again to protect taxpayers from excessive increases.

"But we and the public also expect councils to play their part and find efficiency savings that make each taxpayer's pounds work as hard as possible.

"Local government has an excellent record, saving £1.7 billion this year, and next year I want to see them build on that. We are helping them maintain high quality local services in a time of public expenditure constraint through our Total Place pilots and Smarter Government initiatives."

Margaret Eaton, chairman of the Local Government Association, said: "Councils are working hard to cope with a perfect storm of falling income and increased demand for services brought about by the recession.

"Despite the tough economic outlook, town halls are ensuring that as much money as possible is spent on the frontline services that millions of people depend on. The fact that the three-year settlement for formula grant has not been changed does give councils more ability to plan ahead.

"Money is tight for everyone and nobody likes paying more council tax. Town halls have already delivered the lowest council tax increase for more than a decade and are making enormous efforts to keep next year's bills down.

"Councils understand that people are feeling the pinch and are determined to keep council tax down, ensure local businesses stay afloat and help people deal with the impact of the recession.

"Local government is the most efficient part of the public sector, and made savings of more than £3 billion between 2004 and 2007. Councils will not rest on their laurels and are looking to make even more efficiency savings, but are being held back by the costs of centralised regulation, inspections and bureaucracy. This is taking resources away from frontline services."

Shadow communities and local government secretary Caroline Spelman said: "Even a 3% rise compounds previous hikes and will add £42 to the bill for a Band D home, taking bills close to the £1,500 a year mark.

"From April, hard-working families and pensioners in England face council tax demands of £120 a month thanks to Gordon Brown, whilst Scotland benefits from yet another council tax freeze.

"Only a Conservative Government will work with councils to freeze council tax bills south of the border."