Barbara Follett predicts a 16-year low for council tax increase next year

Published 26 November

English councils will get a four per cent funding increase for next year thanks to the government's continued commitment to high quality services even in a time of constrained public expenditure, confirmed Local Government Minister Barbara Follett today.

Ms Follett said that given the current level of inflation and resources made available in the settlement, the Government expects the average Band D council tax increase in 2010-11 to be the lowest for at least sixteen years.

However, the Government remains prepared to take capping action on excessive increases set by individual authorities if necessary.

The average Band D council tax increase has been steadily falling in recent years and this year's average increase of three per cent was the lowest since 1994-95. Ms Follett expects to see it fall further next year while councils protect and improve front line services. Already many councils have indicated that they plan to freeze or cut council tax next year.

Despite the pressures on the public purse, local authorities will still receive £76.3bn in 2010-11 - an increase of four per cent in their final year of the first ever three year settlement, which delivers on the Government's promise to provide financial stability to local government and recognises the important role of councils in providing real help now to communities in the current economic climate.

Over the ten years to 2007-08 local government has received above inflation increases every year, which has meant a real-terms increase in grant of 39 per cent. There is an extra £8.6bn from the current three year settlement.

The Government has already given councils greater stability, freedoms and flexibilities. Almost £6 billion has been moved into budgets with no spending strings attached; the performance framework for councils has been radically slimmed down from 1200 to under 200 targets; and a smarter and cheaper Audit Commission inspection regime 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.

As well as giving councils increased budget certainty around spending priorities, the Government has also commenced reforms through Total Place and Smarter Government to identify new ways of maintaining high quality local services.

And the Government's efficiency drive expects councils to make every pound work harder. This year they reported savings of £1.7bn - equivalent to nearly £100 off the average Band D council tax bill. These savings can be reinvested to improve services or reduce council tax pressures.

Barbara Follett said:

"At a time when prices are falling nationwide this settlement for local government has made sure councils get a four per cent increase in government grant next year. Over the ten years from 1997, the government's local authority grant has increased above inflation every year - a real terms increase of 39 per cent overall.

"As a result of the extra £8.6bn made available in this settlement I expect to see the average council tax increase fall to a sixteen year low next year while councils protect and improve front line services. 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 £1.7bn 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."

Importantly, no council will receive less formula grant than last year as the Government will be keeping the vital damping mechanism that creates fixed 'grant floors' next year. Those grant floors will be:

• for authorities with responsibilities for education and social services, 1.5 per cent in 2010-11
• for police authorities, the floors will be 2.5 per cent
• for fire and rescue authorities, and for shire district councils, the floors will be 0.5 per cent .

Notes to editors

1. The £76.3bn 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 years £73.1bn settlement. The 2010-11 grants include:

• An 2.6 per cent increase for total formula grant to £29bn.
• Area based grant of £5.1bn - this includes for example Supporting People, the Working Neighbourhoods Fund, and Rural Bus Subsidy.
• Specific revenue grants of £42.2bn - this includes for example Dedicated Schools Grant.

2. Full details of today's Local Government Finance settlement can be found at: www.local.communities.gov.uk/finance/1011/grant.htm.

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