'Generous' government grant up four per cent, as pressure grows for low council tax rises

Final confirmation that English councils will receive a 4 per cent cash increase moves councils one step closer to setting low council tax increases for next year, Local Government Minister Barbara Follett announced today.

Ms Follett has published the final Local Government Finance report for 2010-11 following full consultation with local authorities. She said the Government expects the average Band D council tax increase to fall to a 16 year low, following on from this year's council tax increase of 3 per cent which was the lowest since 1994-95.

Despite pressure on the public purse councils will receive £76.2bn in 2010-11.

This means over the three year settlement period Government will have given councils £8.6bn more. This is further recognition of the important role councils have in providing quality local services to their communities in the current economic climate.

In the ten years from 1997 total Government grant increased by 39 per cent in real terms providing, over the decade, above inflation increases for authorities overall.

In March councils will publish their annual budgets and council tax levels. Already many have indicated they plan to freeze or cut council tax.

The Government expects councils to play their part in delivering a low average level of increase.

Ms Follett said today she was putting all authorities on notice that the Government will not hesitate to cap excessive council tax increases where necessary.

Capping action has already been initiated against three police authorities in advance to limit their council tax increases to around 3 per cent. The Government has maintained the three year settlement in challenging economic times and there can be no excuse for any authority setting excessive council tax increases next year.

The Government's efficiency drive expects councils to make every pound work harder. By March councils are already saying they expect to have made savings of £3.1bn over the last two financial years - which they can reinvest to improve services or to reduce council tax pressures on the public.

To support those efforts the Government last month announced radical changes in its Smarter Government paper to the way local services will be delivered. This will reduce Whitehall red tape to free up councils to put their local residents first and focus their resources on delivering high quality frontline services. Communities and Local Government also launched the Local Government Task Force which is also looking at ways councils can deliver efficiency savings and protect frontline services.

Ms Follett said:

"Four per cent is a generous cash increase from Government that further demonstrates our commitment to providing the public with high quality local services without facing excessive council tax levels.

"In our first 10 years of Government we gave councils above inflation increases every year - 39 per cent in real terms - and next year every council will get more than last year thanks to the extra £8.6bn we have given them in this three year settlement.

"As a result of our financial commitment I expect to see councils make decisions that protect front line services in their March budgets and cut the average council tax increase to a sixteen year low next year.

"If they can't, we will not hesitate to use our capping powers to keep council tax under control and protect taxpayers from excessive increases. Many councils are already stepping up and predicting council tax cuts or freezes next year.

"By working smarter and making the right kind of savings this can be done. But local government - like national government - will have to make tough choices in the years ahead to enable us to reduce the public deficit, restart economic growth and to protect the frontline services that matter most to people."

Ms Follett published the final Local Government Finance report following consideration of the views of local authorities and their bodies on the provisional settlement. It confirms the proposals set out in November for the distribution of formula grant for 2010-11. MPs will debate the report in early February.

The statement also confirmed that no council will receive less formula grant than last year as the Government's damping mechanism that creates fixed 'grant floors' has been retained.

These grant floors are:

• for authorities responsible for education and social services - 1.5 per cent in 2010-11
• for police authorities - 2.5 per cent
• for fire and rescue authorities, and for shire district councils - 0.5 per cent.

Notes to editors

1. The £76.2bn Local Government Settlement for 2010-11 is made up of various grants from central government that deliver an overall increase of 4 per cent on last year's £73.3bn settlement. The 2010-11 grants include:

• A 2.6 per cent increase for total formula grant to £29bn
• Area based grant of £5bn - this includes, for example, Supporting People, Working Neighbourhoods Fund and Rural Bus Subsidy
• Specific revenue grants of £42.2bn - this includes, for example, Dedicated Schools Grant.

2. The Government has already given councils greater stability, freedoms and flexibilities. Almost £6bn has been moved into budgets with no spending strings attached; the performance framework for councils has been radically slimmed down from 1,200 to less then 200 targets; and a smarter and cheaper inspection regime led by the Audit Commission has been established. Next year, councils will also gain responsibility for commissioning education and training for 16 to 19 year olds - funding worth a further £7bn a year. And this year councils were given the power to raise a supplement on the business rate to support local projects that underpin long-term economic development.

3. The Smarter Government paper sets out the vision for streamlining Government and transforming frontline services to put local people first. Putting the Frontline First: Smarter Government - http://www.communities.gov.uk/news/corporate/1405708.

4. CLG statement on the pre-budget report - http://www.communities.gov.uk/news/corporate/1408857.

5. Putting the Front Line First: Local Government Task Force - http://www.communities.gov.uk/news/corporate/1423047.

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