Referendums before council tax rises

The Times ^ | 22 September 2003 | Rosemary Bennett

[Tomalak]

LOCAL authorities will be forced to hold referendums before imposing a council tax rise of more than twice the rate of inflation, under plans being considered by Downing Street.

The move would place the problem of local government financing firmly in the hands of councillors and residents who would be faced with the stark choice of backing higher charges or cutting key services.

Officials, alarmed at the ferocity of opposition to this year’s record increases, are also considering changing the structure of local government elections, forcing all councils to go to the polls every year, in line with Britain’s big metropolitan local authorities.

Research shows that council tax increases are much more volatile when elections take place only once every four years, falling dramatically in the run-up to polling day and soaring the year after.

Big metropolitan councils, such as Leeds and Manchester, have one third of their councillors elected every year which has resulted in a much more stable pattern of charges.

The plans are being drawn up by Stephen Byers, the former Secretary of State for the Regions. He, and the former Health Secretary Alan Milburn, have been asked to come up with fresh new Labour ideas for a third term.

Blairites have been horrified by talk of capping local councils which have this year imposed double-digit rises, even though the steep increases have triggered threats of civil disobedience by pensioners who feel unfairly penalised.

Capping was introduced by Margaret Thatcher in the 1980s to keep Labour councils in check and will revive memories of the party’s poor record in local government.

They also believe that capping runs contrary to new Labour’s promise to devolve power to local government, especially the top performers who provide good value for money.

However, ministers have admitted things have got out of hand this year, with the average increase in charges running at 13 per cent.

Londoners’ bills rose by 17.9 per cent, with one borough, Tory-controlled Wandsworth, increasing its council tax by 45.1 per cent — the largest rise in the country.

Another Conservative council, Westminster, imposed a 28.1 per cent rise while Croydon set a 27.3 per cent rise.

According to the Conservatives, the bill for band-D homes has risen by 60 per cent since Labour got to power.

Nick Raynsford, the Local Government Minister, has said this year’s increases were at the “limit of acceptability” and threatened to cap excessive rises.

Councils have blamed the Government for the problem, saying it changed the allocation formula to benefit poorer areas in the Midlands and north of England.

A shortfall in government funding for schools, because of increased costs for teachers’ salaries and pensions, has left other authorities strapped for cash.

Although Mr Byers’s plans will have no immediate impact on this year’s crisis, one Downing Street source told The Times that they could help to build a long-term solution to the problem and were “a runner” for the manifesto.

“It would not help this year but could help prevent problems like this arising in the future,” the source said.

“It would also give a clear sign that we intend to pursue our goals of decentralising and empowering local communities.”