Government threatens limit on city's council tax

Local Government Minister Phil Woolas told the House of Commons that York was one of only two authorities in the country which had set "excessive budget and council tax increases".

Along with Medway Borough Council, in Kent, York has now been "designated" for capping and has 21 days to respond before a Government limit on its council tax and budget is imposed.

"These are powers of last resort and we would prefer not to have to use them. But the public has the right to be protected from excessive council tax increases," Mr Woolas told MPs.

But Coun Galloway branded the Government's decision "perverse, "unnecessary and heavy handed" and warned it could put in jeopardy "the care services which we value highly in York".

An explosive confrontation could take place later this week when Coun Galloway meets the minister.

In Parliament, Mr Woolas said the overwhelming majority of councils had responded positively to Government calls for restraint in council tax increases.

The average council tax rise in England for 2006 to 2007 was 4.2 per cent.

"Regrettably, however, there remain a very small number which have set excessive budget and council tax increases," Mr Woolas said.

For the forthcoming financial year, councils were judged to have "excessive" budgets if they increased by more than six per cent on last year and the council tax rose by more than five per cent in the same period. Council chiefs in York today urged residents to continue to pay their council tax, as bills which landed on doors last week, and come into force on April 1, are still legal. But at worst, the Government could force the council to re-bill residents, a decision that alone could cost £120,000.

Coun Galloway said leading councillors and Guildhall officers were "furious" at the Government's announcement.

This year's budget process saw the authority make £5 million of efficiency savings, at the cost of funding to organisations and 100 authority posts. Now, Coun Galloway said, there was the prospect of more belt-tightening to meet Government demands.

He said he was not, at this stage, in a position to say how many jobs or services could be lost. "They (the Government) seem to have got themselves locked into kicking someone," he said.

"It is a kind of 'macho-control' attitude to local government. We are a long way from the days where council tax bills went up by ten to 15 per cent.

"We will be making the strongest possible representations to the Government against any requirement to rebill. We estimate that rebilling could cost between £73,000 and £120,000. This would be a waste of time and money."

Peter Steed, the council's head of finance, said: "We are disappointed with the Government's announcement. The council has tried very hard to keep the council tax rise within the Government's guidelines.

"It is unfortunate that due to the rigid criteria that the Government uses, that a council that has the lowest expenditure per head of population is likely to be penalised, especially when it has been independently assessed as providing good quality services.

"The cost of re-billing will be approximately £120,000 - that's a cost of £1.50 per council tax payer, or 3p per week. To meet the Government's requirements, we would need to reduce the budget by approximately £280,000 - a reduction of 7p per week."

York MP Hugh Bayley said he would "move heaven and earth" to save the council from capping, but warned the Lib Dem leadership it would have to "change its extravagance with taxpayers' money".

He said he had asked to meet Mr Woolas "as a matter of urgency" to find out how the council could avoid being capped. He said: "The council did not need to impose these whopping council tax rises. Every year since the Lib Dems took over the council, the Government has increased its grant to York by more than inflation."

Council Labour group leader Dave Merrett said although he believed the Lib Dems had "brought this on themselves" he hoped the Government would not be too draconian by forcing a rebilling.

"Whatever happens, they should see this as a clear warning that they cannot continue to operate in this highhanded manner," he said.

Steve Galloway reveals that the council is furious with the announcement

"I BELIEVE that the announcement by the Government, that City of York Council could be subject to council tax capping, is perverse.

"City of York Council has the tenth lowest council tax level of any of the 352 billing authorities nationwide. It has the lowest expenditure per head of population of any council in the country.

"I personally wrote to Minister Phil Woolas two months ago explaining the difficulties faced by the council as a result of central government withholding £1.25 million of grant to which we were entitled.

"It was this action which resulted in a 3.3 per cent council tax increase becoming a 5.5 per cent increase.

"It is extraordinary that in a year when average council tax increases are below the government target of five per cent, they are still apparently determined to punish residents living in low council tax areas.

"In my letter to Phil Woolas, I suggested that if he still found it necessary to introduce capping for 06/07, then he should graduate any cap based on actual council tax levels rather than single year percentage increases.

"The Government announcement suggests that the high spenders are, once again, being let off by the government. We will be making the strongest possible representations to the government against any requirement to rebill. We estimate that rebilling could cost between £73,000 and £120,000, although this includes some software update costs.

"This would be a waste of time and money. It is wholly unnecessary and heavy- handed. It is significant that locally Labour councillors failed to propose any amendments to the Lib Dem council budget.

"They were unable to find any further economies. Yet Labour centrally apparently claim to know York's priorities better than democratically-elected local members.

"It is apparently okay for Londoners to pay excessive amounts from council tax to fund the Olympics while the provision of social services for elderly people in York must be cut. If we have to reduce the council expenditure by £280,000 then this will mean that average council tax bills in York would be reduced by about 7p per week.

"Finding the further savings could add to job losses in the authority while putting in jeopardy the care services which we value highly in York."

How they reacted

Steve Galloway: "I believe that today's announcement by the Government, that City of York Council could be subject to council tax capping, is perverse.

City of York Council has the tenth lowest Council Tax level of any of the 352 billing authorities nationwide. It has the lowest expenditure per head of population of any council in the country.

York MP Hugh Bayley: "This is a self-inflicted wound caused by the council's spendthrift Lib Dem leaders. Last year they imposed an unreasonably large council tax increase, and came within a hair's breadth of ratecapping. I warned them then to get the council's spending under control but they didn't listen."

Dave Merrett, council opposition leader: "The Lib Dems have brought this situation on themselves by their decision to blatantly ignore clear guidance from the Government about what would be an acceptable council tax rise this year. They have wasted council resources since they took control in 2003."

Selby MP John Grogan: "I don't think it is unexpected that York has been nominated. I would prefer this to be a yellow rather than a red card from Government. The prospect of issuing new bills would be horrendous in terms of cost and waste."

The complicated financial process

THE Office of the Deputy Prime Minister (ODPM) states that authorities which have been "designated" for in-year capping now have a statutory period of 21 days in which to respond.

The Government will then consider in the light of their responses whether to:

- Set a maximum budget for 2006 to 2007 and if so at what level

- Withdraw the "designation" and "nominate" them instead for action against to restrict future budget increases.

Unless "designated authorities" accept their maximum budgets, an Order will be placed before Parliament setting out the terms of the final designation.

The Office of the Deputy Prime Minister said it expected this would happen before Parliament's summer recess in July. Once the Order is approved by Parliament, designated authorities would need to re-bill their council taxpayers for a lower council tax amount for 2006 to 2007.

An Office of the Deputy Prime Ministerspokesman said it had announced its intention to cap York because the authority's budget requirements had increased by six per cent for 2006 to 2007, compared with the previous year, and that council tax had increased by more than five per cent a year in the same period.

How the cap threat turned real

December 6, 2005 - Council leader Steve Galloway reveals a difficult choice between cuts in services or 7.5 per cent council tax rise after the Government's £36 million grant to the city withholds an extra £1.25 million from changes to the calculation formulas

January 6, 2006 - Council reveals more than 100 posts are to be lost as the authority looks to balance the books

January 7 - Safer York Partnership faces budget cuts as council reveals it must make £5 million in efficiency savings to balance its budget

January 25 - Local Government minister Phil Woolas warns the council a 7.5 per cent rise would leave it "at risk" of capping

February 11 - Evening Press reveals council tax rise is likely to be 5.49 per cent - an extra £55 a year on Band D homes

February 21 - Evening Press reveals the city's proposed council tax rise is one of the highest in the country

March 1 - 5.49 per cent council tax increase agreed at a full council meeting

March 27 - Mr Woolas reveals in the Commons the intention to take capping action against the council

Updated: 10:04 Tuesday, March 28, 2006