Councils say tax will rise despite funding increase

Large council tax rises, with cuts to services for vulnerable children and the elderly, were predicted after the Government unveiled its annual funding for town halls.

Stephen Byers, the Secretary of State for Transport, Local Government and the Regions, announced that total support to councils would rise to £47.3bn, an increase of 7.4 per cent and the highest since Labour came to office.

Mr Byers said the new local government settlement would give extra help to education and there was "no reason" why council tax bills should rise. Local government relies for its revenue on a combination of a central government grant and council tax receipts.

But his remarks were immediately undermined when the Local Government Association (LGA), which represents councils run by all parties, criticised the level of support for services for children and the elderly. Social services, traditionally the "Cinderella" of public services, would be particularly hard hit, it said.

The Tories and Liberal Democrats also warned that councils would be forced to push up council tax bills by more than six per cent, three times the rate of inflation.

In his statement to the Commons, Mr Byers said this year's deal was one of the most generous since 1997, including a four per cent rise in grant for education and social services.

To Labour cheers, Mr Byers announced this would be the final settlement based on the present funding regime and would be replaced from April 2003 with a system which was "transparent, fair and just".

More importantly, he also said that the recent move to ring-fence funding for schools and other services would be reversed from next year. Councils have been furious that the proportion of Government aid dictated by Whitehall has increased to 15 per cent this year.

However, Theresa May, the shadow Transport, Environment and Regions Secretary, said that this year's deal would leave "many local authorities struggling to maintain services" and some council taxpayers facing rises "well into double figures".

Mrs May said the guaranteed 4 per cent increase for councils responsible for social services and education would "leave schools with budget cuts and social services underfunded".

Don Foster, for the Liberal Democrats, said that social workers were under enormous pressure and warned that more child abuse cases were likely to go undetected if funds were not increased dramatically.

Sir Jeremy Beecham, the Labour chairman of the LGA, said he was pleased with the overall increase of 7.4 per cent in funding. "However, I am sure our local authority members will be extremely disappointed that there is no new money for personal social services," he said.