ROOF Blog

Council taxes will rise in the next financial year by 1.8%, the lowest figure since the levy was introduced nearly two decades ago. John Denham, communities secretary, claimed that the slightly below-inflation rise had been made possible by a 4% increase in central funding for councils from next month. But he acknowledged that there would be growing pressures on town hall budgets in the coming months against the wider backdrop of the UK’s large deficit. ‘Local people will rightly be intolerant of any council if they are told that care, libraries or youth services will be cut because they have not followed our radical reforms to protect the frontline services, which matter most to people,’ he said. The increase, the most modest since the tax was introduced in 1993-94, brings the bill for an average band D property to £1,439, from £1,414 this year.

Councils are considering plans to reduce their spending including by cutting up to 170,000 public sector jobs in anticipation of a dramatic downturn in their budgets. Dame Margaret Eaton, chair of the Local Government Association, said that local authorities were being hit by a ‘perfect storm’ in the recession with increased pressure on their services and a squeeze on their budgets. Privately, councils are looking at how to slash their budgets by 15% over the next three years, using projections on the cuts necessary to reduce the £178m public deficit drawn-up by the respected Institute for Fiscal Studies.

The true extent of the financial pain that will be felt by households and public services over the next few years has been laid bare by the Institute for Fiscal Studies (IFS).

Even those on half typical earnings will see their living standards suffer as a result of the Chancellor’s policies, the think-tank warns. 

To protect the ‘ringfenced’ areas of hospitals, schools and the police, there will have to be savage cuts to defence, housing, transport and higher education budgets.

Cuts of almost seven per cent a year, 20 per cent over three years, mark the severest squeeze since the Second World War, tougher than anything in the austerity years of the 1970s or early 1980s.

The IFS analysis of the Chancellor’s pre-Budget report also shows a £76bn ‘black hole’ in the public finances; that fixing it will cost every family £2,400 a year; and that only those on less than £14,000 will be better off as a result of the changes.