Grants deal could lead to surge in council tax

Council tax bills could rise by an average of 66 for a band D home from April, taking the overall bill to 1,387 a year, following a tight settlement on government grants to town halls.

The Local Government Association (LGA) said many councils particularly in shire districts and London would see their real-terms funding decline between 2009 and 2011. It said councils were having to cope with additional pressures on services from migration, the growing number of pensioners, the rising costs of landfill and free bus travel for the over-60s. The LGA chairman, Sir Simon Milton, said it would be "the worst settlement in a decade" for some.

Councils were warned that the Government will cap increases of more than 5 per cent but the Tories said it would still lead to soaring council taxes. Rises of 5 per cent every year over the three years of the local government settlement would push the average bill to 1,529 on band D by 2010, said the Tories.