Council tax set to rise by '1.6%'

Council tax bills in England will rise by an average of 1.6% to £1,194 per household in 2010/11, according to analysis released today.

If confirmed, it would mean the lowest increase since the tax began in 1993 and an effective reduction once inflation is taken into account.

The Local Government Association calculated the figure from a survey of the draft budgets of more than 100 councils, police and fire authorities.

With RPI (retail price index) inflation running at 3.7%, a 1.6% increase represents a real-terms cut of 2.1% in the tax, said the LGA.

For councils outside London, the average increase is 1.9%.

The hike, which comes into effect in April, will add 36p a week onto the average household's council tax bill, compared to 2009/10.

LGA vice-chairman Sir Jeremy Beecham said the real-terms cut came despite a sharp fall in income and an increase in demand for councils' services as a result of the recession.

Councils have been hit by a £4 billion deficit in income over the past two years - the equivalent of losing almost £11 million a day - due in large part to a decline in sales of land and buildings, lower interest rates on cash deposits and reduced revenue from planning applications, car parking and leisure services.

Sir Jeremy said: "Everyone is facing a squeeze on their finances in the current economic climate and no one likes paying council tax. That is why councils have been doing all they can to keep council tax rises to a minimum.

"Councils have had to take tough decisions to carefully balance the need to protect essential frontline services while providing value for money for the taxpayer."

The Chartered Institute of Public Finance and Accountancy (Cipfa) calculated the average council tax rise at 1.8%, with councils in inner London freezing or even reducing their bills.

Elsewhere in England, Cipfa predicted a 2.1% hike, with the highest rises of 2.5% in the South West. Scotland is set to continue its freeze, while average rises in Wales are forecast to be 3.6%.

Cipfa's technical director Ian Carruthers said the average rises are "unprecedentedly" low and smaller than in any year since the tax's introduction in 1993.

Mr Carruthers told BBC Radio 4's Today programme: "This is unprecedented in terms of the history of council tax but it also follows a trend of declines in the cost for years."

Councils are following a signal from central government that hikes in bills should be kept low, following a 4% increase in the Government grant which makes up 75% of their income, he said.

A spokesman for the Department for Communities and Local Government said: "Councils would not have been able to deliver low council tax increases without the above inflation grants they have received every year from Government since 1997 - a 45% real-terms increase for councils.

"The Government continues to give this support and in April councils will get £76.3 billion or an additional 4% for next year.

"The rate of increase in Band D council tax has been steadily falling in recent years. The Government expects the average Band D council tax increase to fall to the lowest rate for 16 years and will not hesitate to take capping action against excessive increases set by individual authorities.

"The Smarter Government reforms being introduced like 'Total Place' are making it possible to create radically leaner local government and public services.

"Next month, as part of the Government's £5.5 billion Comprehensive Spending Review 2007 efficiency drive, councils are expected to reach £3.1 billion savings - equivalent to nearly £100 off the average Band D council tax bill. Importantly councils can reinvest these savings to improve services or reduce council tax pressures."

Shadow local government secretary Caroline Spelman said: "Thanks to Gordon Brown, council tax bills have doubled while frontline services like weekly bin collections have halved. A fourth term Labour government will make further cuts by imposing fortnightly collections for all and hike bills even more through an intrusive council tax revaluation.

"As Scotland benefits from yet another council tax freeze, hard-working families and pensioners in England face council tax bills of £120 a month from April. Only a Conservative government will work with councils to freeze council tax bills south of the border, which Labour have refused to do."

Liberal Democrat spokeswoman Julia Goldsworthy said that increases could be expected to be much higher in future years, as the "gearing system" which sees councils receive most of their income from the government means that any cut in central funding produces a dramatic additional burden on local tax bills.

"Councils are planning for the worst, for real-terms cuts in funding, and the gearing system is going to make it worse, because as central government grants get cut back, it is going to put even greater pressure on council tax," Ms Goldsworthy told Today.

"For a lot of councils, what we will be expecting in future years is cuts in services while council tax continues to go above inflation."

She noted that the lowest rises were in London, where all councils are facing local elections on May 6: "Maybe the most interesting thing is to look at the London figures where there are all-out local elections as well as the general election, and I think it is very interesting to see that they have the lowest council tax increases in the country. I think that speaks for itself."