Councillor David Stevens is Reading Conservatives spokesman on finance.
The Chancellor’s announcement on 3rd October that local authorities will be funded to extend the council tax freeze for a second year presents a significant challenge to Reading’s Labour minority administration.
Last year the local Conservative-Liberal Democrat coalition quickly announced their intention to freeze council tax for Reading residents. The freeze was to be funded from local savings. We then learned that central government were also keen to support hard pressed council tax payers and so a national scheme was announced. The key point was that if local authorities froze their council tax, central government would provide a grant that equated to a 3.5% increase. If a local authority raised council tax by only a penny, they would lose this grant. Given that the maximum local authorities can only increase council tax is 5% before they are capped for most, the decision freeze it was not difficult.
So after more than 15 years of annual council tax increases under Labour, Reading residents experienced their first council tax freeze under the Conservative led coalition. The move was clearly popular and so on 3rd October this year the Chancellor, George Osborne, announced that he would continue the freeze grant for a second year. If a local authority freezes it council tax in 2012/13 they will receive a grant equivalent to a 2.5% increase. In real terms this will save the average family £72 next year, on top of the £72 as a result of this year’s freeze grant. If taken up by each local authority, it means council tax will not rise before April 2013 at the earliest.
This presents a real dilemma for Labour. Their natural instinct is to raise council tax as much as they can, especially as they won’t face local elections in 2013. But if they do that, they will lose the grant from central government. So if they are going to forego the grant, they may as well increase the tax by well over 2.5% to make it worth their while.
So what is it to be? Raise council tax by say 4.9% or freeze it and take the grant from Central Government. Without hesitation if the coalition were in control locally, council tax would be frozen again in Reading. But under Labour? We’ll get to know next February.
If they do decide to go for a big increase, you can be sure that Labour will blame it on the Coalition. It won’t, of course, be anything to do with their ability to manage the finances in tough times.