Shadow chancellor George Osborne’s plan to ‘freeze’ council tax for two years has been dismissed as flawed, unaffordable and likely to damage local services.
Local government minister, John Healey, attacked the plan, and challenged the Conservatives to produce a breakdown of how they intended to fund the scheme.
Reaction to Mr Osborne’s speech to the Conservative party conference in Birmingham on 29 September also left local government policy experts scratching their heads.
Mr Osborne promised to ‘freeze… council tax for at least two years’, if the Conservatives won the next general election. While a government could not impose local tax freezes, Mr Osborne said he intended to encourage it by promising to fully fund the first 2.5% of a council’s annual spending increases.
Mr Osborne’s advisers later told The MJ that ‘should encourage many councils to keep local tax levels at current rates’.
The Conservatives estimate the plan could save the average Band D taxpayer £210 over two years.
Mr Osborne intends to pay for the programme – estimated to cost £500m in the first year and £1bn in the second – by slashing the use of ‘wasteful’ private consultants and reducing advertising across the public sector.
‘The country may not be able to afford upfront tax cuts, because borrowing is too high, but families facing the squeeze cannot afford tax rises either,’ Mr Osborne said. ‘We are going into partnership with local councils. If they find matching savings in their town hall, we will give them these savings from Whitehall.’
Mr Healey seized on Mr Osborne’s inference that councils were likely to receive tight annual spending settlements. ‘This is a back-of-a-fag-packet policy – and a con. If Mr Osborne is saying local councils should increase their budgets by only 2.5%, where will that leave a Conservative Government as regards grant funding? There are only 57 councils this year with 2.5% rises. Current government grant increase is 3.5% so, if 2.5% was a target at a stroke, there would be a gap of £300m this year alone, meaning serious cuts.’
One senior Whitehall finance official said: ‘Civil servants will want to see much more detail for this policy.
‘It seems quite unaffordable for most local authorities facing severe cost pressures, such as soaring energy costs and rising social care bills.’ But David Hass, Mr Osborne’s senior adviser, told The MJ: ‘The funding to help a council tax freeze would be in addition to, and separate from, the funding for councils in the RSG. RSG decisions will not be impacted.’ LGA’s Conservative group leader, David Shakespeare, said that ‘would be welcome at this time of the current credit crunch’. He added: ‘There is no financial straight-jacket and no cuts in services proposed.
‘This is localism, councils deciding themselves what route to take.’
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