News

The government has announced a one-off increase of £637m for local authorities for 2005-6.

The investment - including £125m of new money from the Treasury and £512m redirected from other government departments - is being seen as a pre-emptive strike to avoid council tax hikes in the run-up to an anticipated May general election.

Announcing the money alongside the relaxing of targets aimed at freeing up a further £333m of council funds, local government minister Nick Raynsford linked the move to councils keeping tax rises in 2005-6 to below 5 per cent. "We used our reserve capping powers for the first time last year to deal with excessive increases," Raynsford reminded councils. "We are prepared to take even tougher action next year."


The Local Government Association welcomed the money but warned it would not tackle underlying funding pressures and could lead to even larger council tax increases in future.

LGA chair Sandy Bruce-Lockhart predicted that, with the enforced 2.5 per cent efficiency savings across the board, some councils would still be forced to cut services to avoid capping. However, he welcomed the government's removal of grant "ceilings", which in the past had put a maximum limit on grant increases, disadvantaging councils in areas with rapidly growing populations.

Grant "floors", however, will remain. Liverpool Council, set to receive the minimum 4 per cent rise for councils with education and social services responsibilities for 2005-6, expressed disappointment at being promised less than cities such as Birmingham and Manchester "despite having the same challenges".


The Local Government Information Unit warned that failure to meet in full the £1bn cost of additional pressures imposed on councils by government departments identified by the LGA in October would still leave some councils in a dispute about capping next spring.

The Office of the Deputy Prime Minister also published last week its amendments to councils' 2003-4 budgets, taking into account revisions to population data and errors.

The result is a significant shift in funding away from the shire counties towards inner and outer London boroughs. The ODPM plans to add in or deduct any differences in councils' 2005-6 allocations in April. Among the hardest hit will be Surrey and Lancashire, which stand to lose more than £2m each.