Government gets tough with town halls over driving down council tax rises

Councils will be forced to keep tax rises in low single figures next year under tough measures being prepared by the government to drive down town hall bills.

With inflation-busting local taxes certain to be a big issue in the run up to a likely general election next May, the local government minister, Nick Raynsford, yesterday warned authorities they must make multi-billion pound savings.

After pensioners protests around the country this year, leading to hundreds withholding payments in a campaign of civil disobedience, Downing Street is concerned that the debate over high local tax levels could become a sticky campaigning issue.

Town hall bills will be landing on doormats a month before scheduled county council elections in May, which are widely expected to coincide with a general election.

Although shadow ministers have claimed that council tax bills will soar if Labour is returned to power, the Tories have so far developed no alternative to the council tax - which they introduced to replace a short-lived and discredited poll tax. But they say detailed proposals will be developed before the election.

This year increases in England fell from a record 13% in 2003-04 to 5.9% - still over twice the rate of inflation -bringing the average annual payment to around £1,168. By contrast, Scotland, where public spending is higher, recorded a 4.4% average rise - although councils are warning of higher bills next year as a result of tighter funding from the Scottish executive.

But days before council leaders meet ministers at a summit in Leeds Castle, Kent, Mr Raynsford made clear yesterday that the government is looking for increases much lower than 5.9% in England next year, with the prospect of more councils facing government intervention to force down bills.

Last year six councils and fire authorities had their budgets capped, in the first action of its kind for seven years, while eight were put on notice for next year. But Mr Raynsford indicated that more could be in the firing line. "We are looking for significantly lower council tax levels next year - it is going to be tougher."

The government has demanded economies of £6.4 bn for the next three years, with authorities expected to chop £2bn from their budgets as a first instalment in 2005-06.

Many councils, particularly second-tier district councils, are being accused of waste. Mr Raynsford said it made no sense for districts to employ their own revenue collection systems, when services should be merged across districts to provide economies of scale.