Ministers call for council cap on tax increase

Cash-strapped local authorities planning to hike council tax bills are today facing a further financial headache – as ministers want to reduce the amount by which they can raise the rates.

Some Black Country councils are considering putting council tax up by two per cent in April, the maximum they are allowed to do so without holding a referendum.

However, leaked cabinet papers reveal that Local Government Secretary Eric Pickles and Tory party chairman Grant Shapps want to cap the rise at 1.5 per cent.

Assuming councils went ahead with the 1.5 per cent rise, the ministers’ move would save most taxpayers less than £10 a year but would cost councils dearly at a time when they are slashing services to cope with government funding cuts.

Wolverhampton City Council has already warned it will be insolvent in a year without cuts. It has to save £123 million over five year and has budgeted for a two per cent rise. Sandwell Council is also looking at a council tax increase, while Dudley Council has not ruled it out.

Walsall Council is planning to freeze council tax this year.