Council Tax Bills Up 4.5%

On average, council tax bills are set to increase by £53 to £1,250 for a “band D” property in 2006/07, according to the most comprehensive and independent survey of local authorities in England and Wales. The analysis has been undertaken by the Chartered Institute of Public Finance and Accountancy (CIPFA) on behalf of the Radio 4 Today programme. The forecast predicts a 4.5 per cent rise over 2005/06.

Although this year’s increase is above inflation (currently 2.4 per cent), it ranks as the second lowest increase of the past decade. Only the 2005/06 increase of 4.0% is lower.

Factors which have helped to contain the increase in England include:

• The effective removal of the education budget as a burden on the Council Tax, through the introduction of the dedicated schools grant (DSG).
• An additional £722 million formula grant for 2006/07.
• An additional £476 million in special and specific grants (excluding DSG) for 2006/07.
• Efficiency savings as councils implement the Gershon agenda.
• The threat of ‘capping’ if local tax increases exceed 5%.

The average all-inclusive “band D” increases for all authorities (i.e. including police, fire, county and parish amounts) vary in a narrow band. This is shown in the figure below.

Steve Freer, CIPFA’s Chief Executive, said:
“These are fascinating results. They show both Government and local authorities working hard to manage and contain local tax increases.

“Increasingly the level at which the Local Government Minister threatens capping intervention – this year a tax increase of more than 5% - appears to be the dominant influence shaping local budgets. In that sense we are back to universal capping.

“Government policy appears to be moving in the direction of greater devolution to local authorities (and from local authorities to their communities). But in sharp contrast the central grip on local government funding is tightening. If a much stronger sense of localism is to emerge over the next two or three years, it clearly will be necessary to make significant changes to councils’ current funding arrangements.”

At this stage it is not clear what budget decisions imply in terms of service levels for next year. Councils with responsibility for social services are particularly concerned about their ability to maintain current services in the face of demographic pressures including increasing numbers of frail elderly people in the population.

In 2005/06 households which included at least one person aged over 65 were entitled to a special subsidy of £200 against their council tax bills. This arrangement operated for one year only and is not continued in 2006/07.

Notes to Editors:

1. The survey results, upon which this release is based, will be updated daily on our website. The site also contains further information to assist in understanding the Council Tax increase: www.cipfastats.net

2. The average Council Tax demand on a “band D” property comprises three basic elements:

• Local demands of the billing authority;
• Major precepts (e.g. County Councils, Greater London Authority, and Police & Fire Authorities);
• Parish / Community Council precepts.

These elements are made up as follows:

3. These analyses are based on responses received from 57 per cent (215) of billing authorities (58 per cent in England and 50 per cent in Wales) and 97 per cent (103) of precepting authorities. When all councils have set their budgets, (by the 11 March) the final outcome is not expected to change significantly.

4. This Government used their capping powers for the second successive time last year when 8 English councils were instructed to lower their budgets. This year the Local Government Minister has made clear the Government’s expectation that the average Council Tax increase in England should not exceed 5% in either 2006/07 or 2007/08 and that it will not hesitate to use capping powers if that proves necessary.

4. Rounding errors, which sum to no more than one unit, may occur in the tables.

5. Where figures are confirmed in the analyses, it should be noted that the ODPM could still cap individual authorities at a later date.

6. Full survey results will be available at the end of March. For advance copies telephone: 020 8667 1144. Ask for “Council Tax Demands & Precepts 2006-07” price £85.00.

The Chartered Institute of Public Finance and Accountancy (CIPFA) is one of the leading professional accountancy bodies in the UK and the only one which specialises in the public services. It is responsible for the education and training of professional accountants and for their regulation through the setting and monitoring of professional standards. Uniquely among the professional accountancy bodies in the UK, CIPFA has responsibility for setting accounting standards for a significant part of the economy, namely local government. CIPFA’s members work (often at the most senior level) in the public service bodies, in the national audit agencies and major accountancy firms. They are respected throughout for their high technical and ethical standards and professional integrity. CIPFA also provides a range of high quality advisory, information and training and consultancy services to public service organisations. As such, CIPFA is the leading independent commentator on managing and accounting for public money.

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